What’s in a California Estate Plan, and Why Do I Need One?

What’s in a California Estate Plan and why do I need one? A California Estate Plan generally includes a Living Trust, Powers of Attorney, a Living Will, and a Pour-Over Will—for starters. It requires a specialized California Estate Planning Attorney to do it right. An Estate Plan cannot be created after you die.

By James L. Cunningham Jr., Esq.

Everyone has an estate, and literally every adult should have an Estate Plan, usually including a Living Trust.

No plan? Chaos.

For starters, please understand that an Estate Plan is not just about who gets your condo when you die. The right Estate Plan matters just as much when you get sick or are otherwise incapacitated. And it’s absolutely vital for anyone who depends on you.

Right now, if you got hit by a car and lay unconscious in the hospital, who would legally be empowered to manage your finances? Pay your bills? Take care of your young children? Run your business? Make critical decisions about your healthcare?

Think it’s your spouse? Maybe. But what if he or she is out of action, too?

Not quite sure? You need an Estate Plan. Contact us to set up a consultation today.

Estate Planning Prevents Sibling Battles

If you left the world tomorrow, what would happen to that house you’re renting to your grandson and his family? Would your three adult children fight over it? Would the grandson have some kind of rights?

Not entirely certain how that would play out? You definitely need an Estate Plan with a Living Trust.

Here’s what happens if you have no estate plan: people you love will likely have to go to what’s called “probate court” to fight over their rights.

Have a daughter who’s in a shaky marriage and could someday face divorce? Twenty years from now, when you’re gone, will her ex have some kind of claim on the money you’d like to leave her?

Unclear? You need a good California Estate Planning Attorney, right now.

What Happens If I Have no Estate Plan?

Here’s what happens if you have no Estate Plan and Living Trust: people you love will likely have to go to what’s called “probate court” to fight over their rights—not just to your house, but your bank accounts, your investments, and maybe even guardianship of your minor children and other dependents.

If you’re still alive, but incapacitated, they may be forced to stand by your bedside and fight over who will take control of all those parts of your life, and about who will make health and end-of-life decisions for you as well.

When any of your loved ones go to court for any of these reasons, it usually ends up costing a lot of money. Really a lot of money. Often along with months, even years, of everyone’s time.

Not to mention that somewhere along the road, even the closest family relationships may be destroyed.

Can My Children Make an Estate Plan for Me After I Die?

After you get very sick or you die, it’s too late to make an Estate Plan. Your children cannot create a plan after you are gone or incapacitated. Far too often, our office gets calls from children asking what to do if their parents made a plan but didn’t sign it—or left no documents at all. Sadly, we have to tell them they’re probably headed to court.

Only you can make an Estate Plan and create your Living Trust, and only when you are alive and coherent. Without the carefully designed, fully signed and witnessed documents in a complete Estate Plan, your wishes, which you assumed “everyone understood” will likely carry no legal weight.

You need to do this, and you need to do it now. Contact us to set up a consultation today.

What Does a Good California Estate Planning Lawyer Do?

Even for an experienced estate planning attorney, California presents a special challenge, including specific strategies to keep Proposition 13 tax caps, deal with Medi-Cal issues, and much more. Simply searching “estate planning lawyer California” is not enough.

The best kind of Estate Lawyer will have specific California experience, and they will sit down to really understand your family makeup and concerns. They’ll dig deep to clarify the specific issues, in your particular situation, which you and your loved ones will face when the inevitable occurs. Complete estate planning in Calfornia must also include getting a full picture of your assets to do serious tax planning for you and your heirs.

Every good Estate Plan is a custom event, taking into account your current family structure, along with up-to-the-minute tax law and recent court decisions. A good Estate Lawyer will also work with you as the years go by to keep your plan and Living Trust up-to-date and relevant. No automated Estate Planning Tool or “California Living Trust Template” can do this right. Googling “estate planning California” and trying to do it yourself may well lead to disasters for your loved ones, decades in the future.

Is a Last Will and Testament Enough for an Estate Plan?

In California, a Last Will and Testament is not an Estate Plan—in fact, it’s not really a legally binding document! In practice, a Will is little more than a letter you write to a probate judge expressing your desires. That judge, whom you will never meet, will actually decide. And a Will does nothing to clarify what happens if you are merely incapacitated.

With just a Will, perhaps created by downloading some kind of California Last Will and Testament Template, your heirs will probably need to spend a lot of money on lawyers, court fees, and likely 6-18 months in probate. No tax planning will have occurred, which may in itself create a disaster for your heirs.

What Are the Parts of a California Estate Plan?

A complete California Estate Plan is a highly customized set of documents which generally includes a Living Trust, a Pour-Over Will, Durable Powers of Attorney for Property and Healthcare, a “HIPAA” authorization, a Living Will/Advance Healthcare Directive, Deeds to your properties, Beneficiary Designations on life insurance, annuities, IRAs, 401(k)s, Guardian Nominations for your minor children and incapacitated dependents, and perhaps more.

All of these documents must be signed and carefully archived so they can be found when you die or become incapacitated. Some of these will be standard California estate planning forms, but most will be specially drafted for your circumstances. After the documents are signed, the Living Trust must be funded, and forms must be updated at your financial institutions.

Let’s take a quick look at some of the key documents:

What is a California Living Trust?

For most people, a California Living Trust lies at the heart of their Estate Plan. Sometimes, attorneys will create separate Living Trusts for spouses, and sometimes joint trusts, depending on their circumstances. This type of trust is called “living,” because it goes into effect and protects you even while you are alive. It also lives on past your own death, and in some cases, beyond the death of your immediate heirs.

A Living Trust is a legally defined “box” into which you place certain kinds of assets so that you and your “successor trustees” have control over those assets. A Living Trust anticipates your incapacity and death and puts into place your long-term wishes. A Living Trust is not a legal fiction, but a well-recognized mechanism in American society which has proven itself as the best way to plan your estate and protect your legacy for the people and causes you care about.

A Living Trust anticipates your incapacity and death and puts into place your long-term wishes.

During your lifetime, you have complete control over this box, and you can change it because it is a “Revocable Living Trust.” Crucially, however, when you become incapacitated or die, a Living Trust can be easily handed to the next generation—usually with no involvement of a court or a judge. Click here to learn more about how California Living Trusts are created.

What Are California Durable Powers of Attorney for Property?

“Powers of Attorney” have nothing to do with actual “attorneys” or lawyers.

Rather, these vital documents say, “If I get sick, such-and-such persons have a continuing (durable) power to take care of things that aren’t in my Living Trust. This person can collect a registered letter from the post office on my behalf, pay my bills, and choose a nursing home for me. This other person can make decisions for my business and my financial holdings. This third person can deal with my IRA, 401(k), 403(b), digital assets, Facebook page, Twitter feed, blog, Instagram, Dropbox, and other social media accounts.”

In California, these people are called an “attorney-in-fact.” Again, nothing to do with actual lawyers.

What Are California Durable Powers of Attorney for Healthcare (Healthcare Agent)?

Another key document in your Estate Plan will designate “durable powers of attorney for healthcare decisions” for when you are unable to make those decisions for yourself. Should the doctor try that new operation? Continue chemotherapy? These documents can have different names in different states, like “advance healthcare directive” or “physician’s directive.” In California, the person you give this power is sometimes called your “healthcare agent.”

Scary subjects? Maybe. But if you don’t decide whom to entrust with these decisions, someone else will. Why? Because the decisions will have to be made, even if you are just out of action for a few hours on the operating table.

Wouldn’t you rather choose who makes these decisions, rather than leaving it to a doctor, a “hospitalist,” or a judge?

What Is a Living Will in California?

A California Living Will (not to be confused with a Living Trust) states your desires in case of truly extreme medical situations, and your attorney can discuss specific issues with you in detail—including how the scenarios usually play out in real life.

You can think of a Living Will as a permission slip that you give your loved ones to let you go when it’s your time. But it gives you the opportunity to say a lot more than, “If I’m a goner, pull the plug.” It allows you to say, for example, whether you want breathing and feeding tubes – all decisions you may care deeply about.

Dying “intestate” means dying without a Will – an often disastrous situation for everyone you leave behind.

Without a Living Will, you are likely setting your loved ones up for even more excruciating decisions, and possible guilt—as well as your own possible suffering.

How Do I Designate a Guardian for My Children in California?

Most people care deeply about the future of their minor (under the age of eighteen) children. If you have minor children, it is part of your fundamental responsibility as a parent to create documents that nominate a guardian (and backups!) if you are dead or are otherwise disabled.

If you have nominated a guardian in your estate plan, it’s very likely (though not guaranteed) that the court will follow your wishes.

Importantly, guardianship comes in two flavors: Physical custody is one kind of guardianship. This is a guardianship of a person. The other is guardianship of the estate. This is a guardian in charge of the money. Courts generally separate these two responsibilities, and you may wish to separate them in your estate plan.

What Is a California Pour-Over Will?

Part of a California Estate Plan is a Pour-Over Will that leaves everything that may not be in your Living Trust at death (but should be) to your trust. For example, if a lender requires you to take your home out of your trust to refinance the mortgage and you forget to transfer the property back into the trust by deed, your Pour-Over Will is there to make sure that the home is distributed under the terms of the trust, rather than your state’s laws of intestacy.

Dying “intestate” means dying without a Will – an often disastrous situation for everyone you leave behind.

What is a California HIPAA Document?

A HIPAA (Health Insurance Portability and Accountability Act) authorization allows designees access to your healthcare documents. Think about how important such a document might be: You might not want a home health worker making medical decisions for you, but you might want him or her to be able to pick up a lab report and talk to a nurse about your care. If no such authorization exists, you are definitely creating an unnecessary problem for your own well-being.

What Other Documents Might Your California Estate Plan Need?

More documents will be created by your California Estate Planning Attorney, depending on your specific circumstances. This may include asset protections for people anticipating divorce, bankruptcy, or lawsuits involving themselves or their heirs. Special Trusts and strategies will be required to protect special-needs and disabled beneficiaries.

The important thing to remember is that an “estate plan” is not one document, but a collection of appointments, nominations, and directives that determine who will do what, and how your stuff will move from point A to point B. Once again, this is not a simple or static collection of documents, but one that must be properly created, archived, maintained, and updated over time.

What Do We Do?

The lawyers and staff at CunninghamLegal help people plan for some of the most difficult times in their lives; then we guide them when those times come.

Make an appointment to meet with CunninghamLegal for California Estate Planning and Trust Administration. We have offices throughout California, and we offer in-person, phone, and Zoom appointments. Just call (866) 988-3956 or book an appointment online.

Please also consider joining one of our free online Estate Planning Webinars.

We look forward to working with you!

Best, Jim

James L. Cunningham Jr., Esq.
Founder, CunninghamLegal

We guide savvy, caring families in the protection and transfer of multi-generational wealth.

James L. Cunningham Jr., is CEO, Partner, and a Certified Specialist in Estate, Trust, and Probate Law at CunninghamLegal. A well-known speaker and YouTube educator, Jim is the author of the bestselling book, Savvy Estate Planning: What You Need to Know Before You Talk to the Right Lawyer.

Contact us today for a consultation!

Estate plans aren’t just for heirs, they also protect you when alive.

FAQ: Here are some common questions our attorneys receive about Estate Planning in California. Please contact us for more information.

How long does it take to create an Estate Plan?

It really depends on the complexity of your personal situation—which a good attorney will take time to understand fully. Are you divorced? Remarried? Have estranged children? Do you have a child whose marriage is unstable? A child with special needs? Does your estate need protection against creditors? It’s vital to get this right, and to keep getting it right as circumstances change. That said, the whole process to create a foundational estate plan usually runs five weeks from initial steps like a consultation to signing Estate Plan documents. It’s rare for any planning effort to run more than 90 days.

What other ID can I use for a Notary if I don’t have a valid driver’s license?

A valid U.S. Passport or Senior ID issued within the last five years. Senior IDs can be valid for 10 years so it’s important to look at the issue date and make sure it’s within the last 5 years.

Do I have to move my bank account into my new Living Trust?

Generally, all non-retirement accounts should be held in a Trust, including your day-to-day checking account. But there are many exceptions, such as business accounts. It is vital to discuss this question with an attorney, as all financial circumstances are different.

Does a Trust expire?

Generally, a Trust expires when there are no longer any Trust assets held in the Trust—but this can be a complex question and each circumstance should be examined by an attorney.

What’s the difference between a Will, a Living Will, a Pour-Over Will, and a Living Trust?

These are completely different documents with completely different purposes, although the similarity in names often causes confusion.

1) A Will states your intentions for distributing your property. If you don’t provide an accompanying Living Trust, a Will must go through probate in court, where a judge will decide on distributing the assets.

2) A Living Trust is a legal “bucket” into which you place assets, controlled by a Trustee. It can be passed to the next generation without Probate Court involvement.

3) A Pour-Over Will is a special kind of Will that accompanies a Living Trust. In general, it states that any asset not named in the Trust should “pour over” into the Trust after the original Grantor of the Trust dies.

4) A Living Will is a document in which you instruct your loved ones that it’s okay to “pull the plug” if you are a “gonner.” Too often, loved ones are reluctant to discuss end of life decision-making and their medical wishes. The Living Will gives peace of mind to loved ones faced with difficult end-of-life decisions.

Do Advance Health Care Directives, Living Wills, and HIPAA documents expire when someone dies?

Each Estate Plan is different, but there are typically two documents dealing with health care.

1) The Advance Directive for Health Care (also known as a “Durable Power of Attorney for Health Care”) generally expires upon death but can make provisions for the disposition of your remains.

2) Some HIPAA documents expire upon death, but some may not expire until two years after death.

Do I have to retitle all my real estate properties to my Living Trust?

Generally, all your real properties should be titled to a Trust rather than to a person, but it’s important to discuss your particular situation with a qualified attorney. After a death, many families suffer confusion and long, expensive court processes when the decedents failed to move houses, land, and other properties into their Living Trust before they died. Remember that in law, what’s actually written on the title to a property is generally what counts as “ownership,” so when you create a Trust to hold properties, the title must be changed.

If my Trust is written in California, will it work in different states?

Generally, a Trust written in California will work in another state, but there might be a good reason to change the Trust if you move. We highly recommend reviewing your Estate Plan with an attorney licensed in your destination state when you move. CunninghamLegal lawyers are licensed in many states other than California.

Do I have to pay for future changes to my Living Trust?

Yes. As your family and life circumstances change, it is vital to keep your Estate Plan up to date. Has there been a birth, death, or divorce that requires a change to your plan? Such modifications require the attention of a qualified attorney and the correct language if you wish your family to avoid stress, probate, and legal challenges after you die.

Should I name one Successor Trustee or two for my Living Trust?

It is generally best to name a single Successor Trustee for a Living Trust, but two may be fine if they get along extremely well. More than two people will almost certainly cause problems. Overall, the choice of a Successor Trustee is a weighty one, and bears thoughtful consideration. Don’t just name someone as Successor Trustee to “honor them.” Choose someone who will take this responsibility seriously and act with diligence, honesty, and wisdom. During the Estate Planning process, a good attorney will help you choose the right Trustee. You may also wish to consider the services of a Professional Trustee, and you should certainly consider adding a Trust Protector with the power to change out the Trustee if there’s a problem with your choice at any point after you die.

What is the cost of probate vs. the upfront cost of Estate planning and creation of a Living Trust?

Probate generally costs about 5% of the value of an estate—in other words, it costs a great deal of money. Say $100,000 on a $2 million dollar estate. Estate planning with a Living Trust usually costs from $3,000 to $9,000. Read our complete article on the costs and process of creating a Living Trust in California.

Can I name a foreign beneficiary of an IRA? Can I leave an IRA to someone without a Social Security Number?

Yes, but in order to collect, a person without a Social Security Number (SSN) will have to apply to get a Taxpayer Identification Number (TIN) from the U.S. government.

Do I really have to give over so much personal information for your attorneys to make an Estate Plan for me?

This can be one of the more delicate Estate Planning questions. But basically, it’s impossible for us to create an effective Estate Plan to protect you and your loved ones without knowing a great many personal details, including your asset structures, marital history, and what may be sensitive facts about your family. CunninghamLegal has been established for more than two decades, operates with the highest of ethical standards, and adheres to the strictest levels of attorney-client confidentiality.

Are handwritten Wills legal?

Theoretically yes, but it’s very risky. The chance of you making a mistake on a handwritten Will, failing to include crucial language, or accidentally creating an invalid document is extremely high. Use a qualified lawyer to create a Living Trust and related pour-over Will as part of a valid Estate Plan.

Is a Will or a Living Trust Better?

A Living Trust is often immeasurably better than a mere Will to pass on your assets to loved ones, and it is the foundation of a complete Estate Plan. If you only create a “Last Will and Testament” you are forcing your family to go to probate court to resolve your estate after you die. Indeed, a Will is little more than a letter you write to a probate judge to influence their decisions. By using a Living Trust, your family can avoid probate entirely. See our discussion of Trusts in this article.

Does it matter if the law firm that creates my Living Trust still exists after I die?

Although we commonly get this Estate Planning question, we do not believe this is quite the right way to phrase it. We believe every person should ask themselves: “Does my family need a long-term relationship with a law firm to deal with review and changes to our Estate Plan, long-term tax planning, and generational succession?” Estate Plans should be reviewed about every three years to ensure accuracy and relevancy. This is because family situations and laws change rapidly over time. Many firms consider the writing of an Estate Plan to be a one-off transaction, rather than a relationship—and many firms are solo operations consisting of a single attorney who may be retired when issues with your Estate Plan arise.

At CunninghamLegal, we are dedicated to continuity. We are constantly working to train the next generation of attorneys on our staff. We utilize modern archiving technologies for documents and remind you when it’s time for a review. Our goal is to help savvy, caring families protect and transfer multi-generational wealth.

What is a QTIP Trust?

A “Qualified Terminable Interest Property” (QTIP) Trust is a way for a spouse to leave another spouse assets in a tax-efficient manner—while controlling who ultimately receives the assets in the Trust after the death of the surviving spouse. A QTIP is a complex vehicle that requires the help of a qualified attorney to create. If your estate is large enough to face the estate tax or “death tax,” you should ask your attorney about options like a QTIP Trust.

What’s the difference between a POD and a TOD designation? When are PODs and TODs used?

Payable-on-Death (POD) and Transfer-on-Death (TOD) designations for beneficiaries are similar, but used for different purposes. Both directly transfer assets to “designated beneficiaries” without the use of a Trust or a Will, following a death. A POD is generally used to designate beneficiaries in instruments like bank accounts, while a TOD is used when assets other than cash, such as a stock portfolio, paid to one or more individuals following the death of the owner. Importantly, certain assets like retirement accounts and insurance policies are generally transferred with a POD or TOD and not a Will or Trust—though you should consider a specialized IRA Legacy Trust for your retirement accounts.

Please note that PODs and TODs must be documented properly at the institution holding the assets, such as a bank or a brokerage firm—you cannot specify them in any other way. They should also name persons, not Trusts or “Estates.” Many families suffer because PODs and TODs at multiple institutions are not updated properly following births, deaths, or re-marriages—or because there is a conflict between what’s written in the POD/TOD vs a Will. Importantly, heirs must take action to exercise their own POD and TOD beneficiary rights, because no Executor or Trustee is necessarily acting on their behalf. Indeed, such assets may not even be mentioned in a Will or Trust, so Beneficiaries may have to make inquiries to discover them.

What is a letter of instruction in an Estate, also known as a letter of intent?

A letter of instruction (LOI) is a supplement to an Estate Plan that provides specific directions to those handling your estate when you die. People refer to these important letters by many names, including “letter of intent, will letter, beneficiary letter of instruction, CA letter of instruction, trust letter, letter of last instruction, letter of direction for estate, or letter of direction to trustee.” You may address a letter of instruction to a lawyer, Trustee, Beneficiary, or Executor of your estate, and it should be kept with your other estate documents and updated annually—probably more frequently than any of your other estate documents.

A letter of instruction does not carry the same legal weight as a Trust or a Will, as it generally conveys non-legal binding duties or dispositions of property. Nevertheless, it will contain information vital to your heirs. There are no specific requirements or definitions for a California letter of instruction, although an estate lawyer can usually provide a letter of instruction sample. You require no witnesses or notary to sign it.

Typically, a letter of intent will include:

Personal messages for your Beneficiaries and loved ones, to be read in the event of your death
Contact information for attorneys, Trustees, insurance brokers, or Beneficiaries. Anyone your heirs may need to contact to settle or manage your affairs after your death
Financial advice, such as how to handle IRAs or how to dispose of properties
Life insurance information
Requests for your funeral services, your burial, and related matters
Detailed information on all your accounts and properties, including digital account passwords, and your wishes for their direction after your death
Necessary information to access hidden or stored valuables, documents, and accounts
Recommendations for the care of pets, plants, and other living things

What is a Certificate of Trust?

A Certificate of Trust, also known as an Abstract of Trust, states basic facts about a Trust, and is used to represent the Trust to various institutions without having to provide the full, often lengthy Trust document itself. A Certification of Trust document typically:

States the date of the Trust.
Says whether the Trust is irrevocable or revocable.
Says who most of the important people are in the Trust, such as the Settlors, and Trustees.
States how many Trustees there are and how many need to sign on behalf of the Trust.
States the Trust identification number.

Like a full Trust document, a Certificate of Trust must be signed before a notary.