Estate Planning Questions

Below are frequently asked estate planning questions about trust litigation, probate, and conservatorships. Find out the answers to questions for your estate planning lawyer.

Estate planning is the process by which people prepare their assets to be transferred to another person or institution during their lifetime or upon their death. An estate plan also determines who makes financial and healthcare decisions on behalf of an individual who may become incapacitated. It can also determine guardianship for any minor children. A typical estate plan may involve a trust, will, power of attorney for financial matters, advanced healthcare directive (commonly known as a living will) and asset transfer documents.

Simply put, a trust is a legal entity which can hold title to property. The person who creates a trust is commonly known as a grantor, trustor or settlor. All trusts are managed by a single “trustee” or multiple “co-trustees” and exist for the benefit of certain individuals (or charities) known as “beneficiaries.” Many different types of trusts exist ranging from “revocable” which may be changed and/or amended, to irrevocable, which cannot. Trusts may also exist for specific family and charitable purposes.

There are many positive reasons why people create trusts, but the most common reasons are:

  1. To avoid the probate process;
  2. To allow for the management of their assets should they become incapacitated; and
  3. To specify who should benefit from their assets upon their death.

A will is a legal document that contains specific instructions as to how a court is to distribute assets following the death of the creator of the will, also called the “testator.” Upon death of the testator, a will must go through a series of legal steps, or “probate” in order for assets to be passed on.

The term probate is Latin for ‘to prove’ and involves a court proceeding where a judge determines the validity of a will and orders assets to be distributed to beneficiaries. The probate process has many requirements including written and newspaper notices to creditors, waiting periods during which creditors can file claims, and notices to everyone named in the will including those who would inherit if the will was found to be invalid.

Probate is determined based on a percentage of the estate. The current probate fees in California are:

Estate ValueStatutory Fee
The length of probate proceedings varies depending upon the specifics of the situation. It typically takes a minimum of 8 months to complete probate with the current California average time at approximately 16 months. However, a probate proceeding may be entirely avoided when assets are transferred to an expertly drafted trust.

A person who passes away without a will is said to have died “intestate.” When a person dies intestate, their assets are distributed according to the following order as found in the California Probate Code as follows:

• If not married, the estate is distributed:

  1. To children equally.
  2. If there are no children or surviving grandchildren, to parents.
  3. If there are no parents living, then to siblings.
  4. If there are no siblings, then to grandparents.
  5. If there are no grandparents, then to aunts and uncles, or cousins.
  6. If there are no cousins, then to “next of kin.”

• If married, the estate is distributed:

  1. All community property goes to the surviving spouse.
  2. Separate property is distributed as follows:
    1. All to spouse if no parent, child, grandchild, niece or nephew survives.
    2. ½ to spouse if only one child, or grandchild survives.
    3. ½ to spouse if there is no child or grandchild, but a parent, sibling, niece or nephew survives.
    4. 1/3 to spouse if more than one child survives.
    5. 1/3 to spouse if one child and one grandchild survives.
    6. 1/3 to spouse if issue of two or more deceased children survive.
A power of attorney (“POA”) for financial purposes is a document signed by a “principal” that authorizes an “agent” to act on the principal’s behalf should he or she become incapacitated. It is important to keep in mind that this type of POA is for financial matters only and does not give an agent any power over healthcare decisions. The POA can be effective immediately or upon a future event such as an incapacity.

Also referred to as a “living will,” an advanced healthcare directive is a document that allows for a “principal” to appoint an “agent” for healthcare related decisions only. The principal can also include instructions relating to their healthcare, including decisions relating to any variety of scenarios including end-of-life treatment.

A conservatorship is a legal proceeding whereby a court grants authority to a “conservator” to make certain financial and/or healthcare decisions for the “conservatee,” due to a mental or physical incapacity. A conservatorship proceeding involves testimony before a judge and can be a time consuming, expensive and embarrassing process. However, all of that can be avoided with a simple power of attorney.
No. A trust is only as good as the assets transferred into it. If an asset is owned in an individual’s name, rather than placed in trust, it may be subject to a probate proceeding. Therefore, it is imperative for the individual who creates a trust to work closely with their attorney and financial advisor in order to make sure the trust is adequately funded.
The federal estate tax is a tax imposed on the estate at the death of an individual. Current federal law effective January 1, 2014, exempts estates worth $5,340,000 or less from tax. Therefore, in an estate valued at more than $5,340,000, the excess amount is taxed at 40%. Estate tax liability can be greatly reduced, or even eliminated, with careful estate planning by qualified professionals.
No. Transfers between spouses are not subject to estate tax. However, without proper estate planning, a large estate tax liability may be due upon the death of the surviving spouse. The new estate tax law, however, does offer permanent portability between spouses. This allows the surviving spouse the opportunity to take advantage of any unused estate and gift tax exemption left by the first spouse. The portability option must be selected when the estate tax return of the first spouse is filed, even if no federal estate tax is owed.
Yes. Each year an individual can give an amount known as the “annual exclusion” free from tax. The annual exclusion for 2014 is $14,000, which may be made per person, per year. Gifts to charities are not subject to the annual exclusion limitations. Annual exclusion gifts can be an essential part of any estate plan to reduce potential tax liability and transfer wealth to the next generation free of tax.

In addition to the annual exclusion amounts, you also can give the following without triggering the gift tax:

  • Charitable gifts.
  • Gifts to a spouse.
  • Gifts to a political organization for its use.
  • Gifts of educational expenses. These are unlimited as long as you make a direct payment to the educational institution for tuition only. Books, supplies and living expenses do not qualify.
  • Gifts of medical expenses. These, too, are unlimited as long as they are paid directly to the medical facility.

Yes. The maximum amount an individual can give during their lifetime is known as the “unified credit.” Effective January 1, 2014, the unified credit is $5,340,000 per individual.

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