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Question 1: What is the difference between a Will and A Revocable Living Trust?

Answer:  Simply stated, a Will only becomes effective at date of death. It does nothing for you during your lifetime. As a general rule, a Will only governs assets in your name alone, and will usually go through probate at death. By comparison, a Revocable Living Trust is a separate legal document from your Will. It is effective immediately when signed. If you retitle assets into your Trust during your lifetime they will avoid probate and remain private. By comparison, a Will becomes public record at death and is generally filed in The County Clerk’s Office for all to see.

Question 2: What is probate and by having a Will can I avoid probate?

Answer: Probate is the process of retitling assets following the death of an individual who has assets titled only in the decedent’s name alone. It is an estate settlement process entirely controlled by the state Courts. The Courts even set the fees that are to be charged in a probate estate administration. You do not avoid probate by having a Will. By comparison, if you have a Revocable Living Trust, and you have retitled your assets into the Trust during your lifetime, you will avoid the cost  and the delays involved in a probate administration. The typical probate estate administration may take anywhere between two (2) to three (3) years to settle. If you have a properly drafted Revocable Living Trust , and it is funded with all of your assets, the estate settlement period may be as short as three (3) months.

Question 3: What is the difference between community property and joint tenancy?

Answer: Community property as a general rule is the most tax advantageous way for a married couple to own assets. Community property only exists in eight (8) states primarily following the border of The United States from Louisiana to Washington, taking in Nevada as well as Idaho but skipping over Oregon. At the death of the first spouse the entire asset is appraised and its new “fair market value” is the new federal income tax cost basis for the surviving spouse. The surviving spouse may avoid all capital gains taxation if the asset is sold and can also avoid all probate if the asset is titled as community property in the couple’s Revocable Living Trust. By comparison, joint tenancy is not limited to just a married couple. Two (2) or ten (10) individuals may be joint tenants. However,  all joint tenants must have an equal share of the asset. At the death of the first joint tenant only his or her share of the asset receives a new step up in federal income tax cost basis. Joint tenancy also defeats a Will or Trust, because the distribution of the asset is determined by how it is titled. Joint tenancy while sounding advantageous can have some very undesirable outcomes. In a second marriage, suppose each spouse has a Trust which says that his or her separate assets will be equally divided between his or her children at date of death. However, if the couple has all assets titled in joint tenancy each Trust has no control and the children of the first spouse to die are disinherited.

Question 4: If I have a Revocable Living Trust, do I need a Will?

Answer: Yes! You still need a Will if you have a perfectly drafted and funded Revocable Living Trust, because there are certain issues that are not contained within a Revocable Living Trust. For example: Who will be appointed as Guardians for minor children? Do you desire to make bodily organ donations? Do you desire special burial instructions? All of these issues are generally contained in a Will.

Question 5: Who or what is an Attorney In Fact?

Answer: An Attorney In Fact is the person appointed in a Durable Power Of Attorney to manage assets not titled in a Revocable Living Trust. A Durable Power of Attorney may be effective immediately, or it may become effective upon incapacity of the creator (i.e. principal) of the Durable Power Of Attorney. What must be remembered is that an Attorney In Fact does not hold legal title to any assets, but simply has the authority in most cases to retitle assets into a Trust. However, please remember a Durable Power Of Attorney terminates immediately at the death of its creator. A Revocable Living Trust by comparison transcends death if properly drafted. Finally, an Attorney In Fact is not the same thing as an Attorney At Law.

Question 6: Is estate planning only for “wealthy” individuals?

Answer:  No! It is an important issue for every competent individual.  Do not confuse estate planning with federal estate taxation.  In 2019, the federal tax laws allow a single individual to pass at his or her date of death $11,400,000.00 worth of assets to anyone free of all estate taxation.  An  inheritance as a general rule is not subject to income taxation.  An exception to this rule applies to distributions from Individual Retirement Accounts. (i.e., IRA’s).  Estate Planning and estate taxation are two entirely different topics.  The size of an estate is not synonymous with its complexity. For example, a single Mother may have several minor children, and one (1) child may have a learning disability.  This may require the establishment of a “Special Needs Trust.”  In addition, the client must determine who shall serve as the Trustee and the Successor Trustee. Likewise, this single Mother must also decide who will administer her estate, (i.e. appointing an Executor of her Will).  Finally, that Mother may find it more advantageous if she establishes a Revocable Living Trust and has contained within it a “Special Needs Trust.”  Please remember this Mother will also need a separate Will to appoint the Guardian for her minor children.

Question 7: How do I begin to create an Estate Plan?

Answer:  For clients who work with me, I have them complete a Personal Estate Planning Questionnaire and Financial Statement in advance of an initial conference.  The purpose of the Questionnaire is to cause both married as well as single individuals to think about issues they have never given a great deal of thought to.  For example, should my assets be divided equally between my children?  In addition, should my assets pass outright to my children or should they remain in Trust?  If assets are retained in trust when should they be distributed to my children?  Also, who should be the Trustee as well as the Successor Trustee.  Simply put, there are no right or wrong answers to any of these questions, because they are all personal in nature.  Therefore, it becomes my role in a conference to help clients carefully sort out these issues in an organized manner.

Question 8: Are community property laws and trust laws new concepts in California?

Answer:  No! The community property law concepts which govern the titling of most assets between a married couple can be traced back to Spain, since California was a former Spanish colony.  In addition, Spain inherited its laws from Rome by the codification of property laws by the Emperor Justinian during the Fourth Century A.D. By comparison, our trust concepts have been inherited from Great Britain and can be directly traced back to the reign of King Henry VIII during the Sixteenth Century A.D. Estate Planning is not a new concept.  It simply has become more well-known due to the transfer of significant amounts of wealth from the generation that fought the Second World War as well as the fact that our population is now aging and living longer.