Some Estate Planning Basics

It is important to understand some estate planning basics when considering how to pass on your property when you die.  Surprisingly, about 35% of folks die in San Diego without leaving a will or trust to pass on their property.  This is called dying “intestate.”  The result is that your property passes to your heirs in a “pecking order” pre-established by the California Probate Code–possibly not in the manner you would have chosen had you made a will or a trust.  Another negative consequence of dying intestate is that your estate may require a costly and time-consuming probate before title to the property can be transferred to your heirs.

Will or Trust?

To effectively pass on your property, should you use a will or a trust?  As a starting point, if you own a home, you should make a trust.  This is because when you die, no probate of the trust would be required, whereas a probate would be required if this house passed, instead, by a will.  When you do set up a trust, be sure to transfer title to the house by deed to yourself as trustee of your new trust.

What is a Trust?

Just what is a “trust?”  A trust is an arrangement whereby you as “trustor” transfer certain property to a “trustee” who is typically yourself while you are alive.  The Trustee holds and manages this property for the benefit of a “beneficiary”, again, who is typically yourself while you are alive, and whoever you leave the property to upon your death.  The terms of this trust are set forth in a trust instrument which is usually called a Declaration of Trust or Trust Agreement.

Revocable Living Trust

In the above case, what type of trust should you use?  Typically, you will use what is called a revocable living trust.  Such a trust is “revocable,” since you can change its terms in any manner while you are still alive.  It is “living,” because it is created while you are alive.

Other Documents

If you create a revocable living trust, there are other supplemental estate planning documents you should have.  Here are the most important ones:

  • Will: the purpose of this will provides that anything not transferred into your trust or disposed of by other means (such as a life insurance policy death benefit payable to its beneficiary) will pass to your trust and be distributed as a part thereof.
  • General Power of Attorney: this is a general/financial power of attorney, by which you designate an “agent” to conduct your affairs if you are unable.
  • Advance Health Care Directive: this document contains a health care power of attorney – by which you designate an agent to make emergency medical and related decisions on your behalf if you are unable; it sets forth “pull the plug” provisions if you so desire; and it provides organ donation directions as you see fit.

If you’re married, what estate planning documents do you need?  Typically, a married couple will have one “joint” trust instrument between yourselves, and a separate will, general power of attorney, and advance health care directive for each of you.  We have comprehensive packages available to assist you with these estate planning basics.

The above “Basics” are generalizations only and should not be taken as legal advice for the reader’s particular situation.