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Frequently Asked Questions

Estate Planning Frequently Asked Questions

Below are questions we frequently receive from clients that concern estate planning and the administration of estates. If you have further questions, we encourage you to contact an Orange County estate planning lawyer from our firm. We can thoroughly discuss your situation to determine the best course of action. Click on any question below for in-depth answers to these common questions. Many questions can be answered on our “Do I need an estate plan?” article.

Why do I need an estate plan?

You may become incapacitated. Your estate plan can provide for management of your financial affairs and for your medical care. You want to protect your family on your death. Your plan can say who will control your assets. You may want to set up a Trust so that a person with financial experience can manage your assets for family members who are too young or inexperienced to handle financial matters. You may want to set up a Trust to help protect your family from creditors. You want to be sure that your family will have enough money to live on.

You want to save on death taxes. Your plan can help reduce those taxes. The estate of a person who dies in 2013 will have a $5,250,000 exemption, and be subject to a 40% tax above that level. The exemption is scheduled to increase with changes in the cost of living. A well drawn estate plan can help reduce death taxes for you, your spouse and your children. However, your plan shouldn’t interfere with your enjoyment of your assets. If you decide to make gifts, you should balance this decision against the need to preserve your assets so that you can be comfortable and financially independent for your lifetime.

Do I need a Trust?

Often times, clients ask, “Do I need a Trust?” A Trust isn’t right for everyone. The decision to create a Trust depends on many factors such as your age and health, the size of your estate, whether you own assets in more than one state, the type of assets you own, your desire to save some administration fees, your desire to avoid a conservatorship if you become incompetent and, finally, your desire to keep information about your assets and bequests private.

Do I still need a Will if I have a Trust?

You still will need a Will to deal with assets that have been left out of the Trust (for example, because you made a mistake and forgot to transfer them into the Trust). This kind of Will is called a “Pour-Over Will.” The assets in your name outside the Trust probably will have to be probated, but after the probate those assets will be “poured over” and added to the Living Trust.

Will a Trust protect my assets against creditors?

A Living Trust will not protect your assets from creditors. However, a Living Trust (or a Trust established under a Will) can protect the assets held for your beneficiaries from their creditors. There are other planning techniques available that can, in some cases, shield assets from creditors while still making those assets potentially available to support you if you have financial problems.

Does having have a Trust avoid Probate?

Just signing a Living Trust will not avoid a probate. A Living Trust allows you to avoid probate only if you transfer the legal title to almost all of your assets out of your name during your lifetime. (Remember, only assets held in your name directly are generally subject to probate; and assets held in joint tenancy or which are controlled by a beneficiary designation probably will avoid probate in any case). Thus, if you set up a Living Trust, and transfer almost all of your assets into it during your lifetime, then on your death a probate won’t be necessary.

Can/should I avoid Probate?

It often makes sense to avoid probate, especially by setting up a Living Trust. This is especially true if:

  • You are elderly or suffer from a debilitating illness
  • You own real estate outside the state where you live
  • You don’t want your Will or your assets to become known to the public
  • You own a sole proprietorship

Most of the expense and time delay that occurs with a probate will arise even if there is no probate. Many people mistakenly think that avoiding probate means that their family won’t have to pay death taxes. There are no tax savings from avoiding probate! The probate procedure provides for court supervision. Although this may be unnecessary in most situations, it is helpful in estates where someone has acted fraudulently.

How should I hold title to my house?

Usually, you should not hold the house in joint tenancy. The best way to hold title to your house depends on many things:

  • Whether you own the house alone or with another person
  • Whom you want to inherit the house when you die
  • Your income tax basis in the house

Whether you have a Living Trust If you have a Living Trust, usually the title to the house should be in the name of the Trustee of the Living Trust.

How do I fund my Trust?

You must sign various papers to transfer your assets to your Trust. You transfer real estate into the Trust by signing a deed. If done properly, there will be no Proposition 13 reassessment on transfers of real estate to the Living Trust. You transfer to the Living Trust your partnership interests, securities and deeds of trust by signing “assignments.” Your existing bank and savings accounts (other than a small operating account) should be retitled in the Living Trust. Similarly, you should rename your existing stock brokerage accounts in the name of the Trust.

Who should I name as the guardian of my children?

Choosing a guardian for minor children is a very hard decision. The guardian of minor children should be someone who is willing and able to look after your children and to raise them if something were to happen to you.

You should choose someone the children will get along with and who would have the time to look after your children. Obviously, the guardian should be someone who has a similar philosophy to yours on how to raise children, and who would respect your wishes on such matters as religion and schooling.

If you are considering naming someone much older than yourself (for example, your parents), consider whether they will have the stamina and tolerance for noise that it takes to raise children through the age of 18. If the guardian lives in another city, how will the children react to the move? Will the children be easily accessible to other members of your family? Is there a big gap in the standard of living you enjoy and that which the guardian enjoys?

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