Estate Planning - Getting Organized

Just as we organize other parts of our lives, we need to make plans for the distribution of our property upon our death - estate planning. This is a tremendously important facet in the overall picture of our financial planning. One of the central documents for this planning is a valid will/trust.

As we go through life, we grow in our financial responsibilities, and, as we near retirement, many individuals have amassed a substantial amount of property and worth.

Our estate plan organizes the disposition of this property and our will or trust directs this distribution by carrying out our wishes.

Estate planning can be viewed as the final chapter in our financial planning, which includes both accumulation and management of property during our life and its distribution at the time of our death.

What is a Will?

A will is a memorialization of your wishes, which, if prepared according to state law requirements, will be enforced by the courts. A will is necessary for any individual who:

• Wants to designate the person(s) to act for his/her estate.
• Wants to waive the posting of a bond by his designated choice.
• Wants to leave specific property to beneficiaries.
• Wants to leave a donation to a charity.
• Has minor children/dependents.
• Owns property or investments.
• Wants to disinherit a family member.
• Has children from another marriage.

This legal document will represent all the instructions of the deceased for the distribution of the estate. It is usually drawn up for you by a lawyer and signed by two disinterested witnesses. This process helps assure that the document conforms to state law, and your wishes will stand up to any challenge after your death. Both your executor and attorney are compensated from your estate for services provided.

What are Advance Directives?

There are two basic kinds of advance directives for people to declare their health care wishes: Living Will and Durable Power of Attorney for Health Care.

• A living will allows a person to direct the withholding or withdrawal of life-sustaining procedures if he or she becomes incapacitated and unable to communicate instructions.
• Durable power of attorney for health care sets forth the desires of a person regarding his/her health care and designates someone to carry out those wishes and to make those decisions based on an incapacitated person’s expressed wishes when he/she is no longer able to make his/her own desires known. That designated person also typically has the power to enforce his/her decisions as long as they are consistent with the previously expressed desires of the incapacitated person.

What is a Living Trust?

A living trust allows you to preside over your assets and properties in the trust while you are still alive and well. Management of the trust is transferred to a trustee you have preselected if you become incapacitated or when you die. A living trust, which contains all of your assets, may avoid the need to go to court to have someone appointed as a conservator of your estate if you are incapacitated. Because the assets and properties in the trust do not pass through probate, your family will have access to money for funeral expenses, household bills and income after your death. And with a living trust, your assets will be transferred to your heirs typically without court supervision.

There are two basic kinds of living trusts to consider: revocable and irrevocable:

• In a revocable trust you can act as your own trustee while you are healthy and change the trust as circumstances warrant. The assets in the revocable trust are subject to real estate and inheritance taxes upon your death.
• In an irrevocable trust, you sacrifice the ability to change the beneficiaries with changing circumstance, or to dissolve the trust.

A trust may be quite simple or extremely complex depending on the purpose for its creation. Trusts should be designed to meet an individual's specific goal and purpose. The rules and tax ramifications governing trusts are complex.

Selecting an Attorney

Once you decide you need an attorney, how can you find one that meets your needs? Here are some suggestions:

• Ask friends, neighbors, or co-workers for references.
• Contact the State Bar of California, 415/561-8250, for a referral.
• Check with a local law school, contact the dean's office, briefly describe your problem, and ask for a referral.