1. What is an estate? It sounds fancy.

Your estate is simply all the property that you own or control.  Almost everyone has an estate, whether large or small.

Your estate can include tangible property, such as your home, investment properties, jewelry, and family heirlooms.  It can also include intangible property, such as financial investments, business interests, life insurance policies, and intellectual property.

2. What is estate planning?

Estate planning is the art or discipline of helping individuals and families to plan for the transfer of their wealth and assets to loved ones or cherished causes.

A good estate plan strives to balance three very important, but at times competing, goals:

  • To maximize the use and enjoyment of your property while you are alive
  • To ensure the effective and orderly transfer of your wealth and property to your loved ones and cherished causes
  • To preserve your wealth and property by minimizing taxes, fees and costs in the process
3. What is the difference between a Will and a Trust?

Both Wills and Trusts are commonly used to plan estates.  Aside from the fact that both allow you to leave instructions for who is to receive your assets, they are entirely different legal documents.

Wills and Trusts differ in the following key respects:

  • ProbateWills by operation of law must go through probate, which is a court process for distributing your assets.  Probate can be lengthy, expensive and burdensome in California.  In contrast, Trusts are designed to circumvent probate and allow you to distribute your assets by contract.
  • PrivacyWills are public documents.  Once filed, anyone obtain a copy of your will and see your most personal wishes.  Trusts, on the other hand, are private documents.  Unless there is a dispute, no one will see your trust, other than your trustee or your beneficiaries.
  • Mental incapacity. Wills only allow you to leave instructions for how your assets are to be handled after you pass.  Wills have no legal effect on how your assets are to be handled while you are alive.  This can be a problem if you face mental incapacity due to stroke, dementia, accident or any number of other conditions.  In contrast, Trusts allow you to name a trustee to manage your affairs if you are unable to do so yourself.
  • ExecutionTo be legally effective, Wills must be witnessed by two, non-interested adults.  Notarization alone is not effective.  Trusts, on the other hand, can simply be notarized.
4. What exactly is a Revocable Living Trust?

A revocable living trust is a legal agreement or arrangement that you enter into to plan for the management and distribution of your assets.  The trust is called “revocable” because it can be modified or revoked and “living” because it is created during your lifetime.

There are typically three parties involved in a trust:

  • Settlor. This is the person creating the trust, also known as the “grantor” or “trustor”.
  • Trustee. This is the person or entity appointed by the settlor to manage the trust assets.
  • Beneficiary. This is the person who is to benefit from or receive the trust assets.

Under a trust agreement, you transfer assets to your trust to be managed by a trustee if you are incapacitated and upon your death.  The trustee has a fiduciary duty to manage the trust assets in your best interest while you are alive and to ensure that the beneficiaries are properly provided for.

5. Do I need a Trust?

A trust is recommended if one or more of the following factors apply to you:

  • You own a home or other real estate.
  • You have minor children.
  • You have more than $150,000 in assets.
  • You own a business.
  • You are concerned about mental incapacity issues.
  • You are concerned about the costs and lack of privacy associated with probate.
  • Your estate is large enough to incur liability for federal estate taxes.
6. What happens if I die without an estate plan? Does it go to the state?

Dying without a formal estate plan is called dying intestate.  It means you have died without testifying or stating how you want your assets to be distributed.

If this happens, California has a default distribution that it will apply to your estate.  These laws, known as intestate laws of succession, are set forth in California Probate Code sections 6400 to 6414.

Your assets would only go to the state in the very rare circumstance that no heirs could be found.

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