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.
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? Decide if you get the penicillin or the morphine?
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.
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.
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 whether you want morphine at the last, 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!
James Cunningham Jr., Esq.