What is estate planning?

When I tell people what I do, they often ask me, “What is estate planning?” I tell them it’s a process of thinking through worst case scenarios and planning for them, so that you can have peace of mind. Some people think estate planning is just about writing a will, or it’s just for people with a lot of money. This is not necessarily the case. Estate planning is really for everyone. If you have young children, you can plan for how they will be taken care of in the event you cannot care for them. You can plan for who will get your assets if you die, rather than a line of succession determined by the probate code. You can plan for how and by whom your assets will be managed during your life if you ever become unable to manage them yourself. You can also plan for how and by whom healthcare decisions will be made if you are unable to make them yourself.

That is a very basic definition of estate planning. If you want more detailed information, the State Bar of California offers a handout that explains the estate planning process a bit more: Do I Need Estate Planning?

When you meet with me, we will also discuss issues specific to your estate planning needs.

I know I need to get my estate planning done. Now what?

When clients contact me, we usually start with an initial consultation over the phone or in person. I assess what their goals are for their estate plan, and they can ask me questions to decide if I’m the right attorney for them. If they decide to hire me to assist them, we will go into more detail about what information and documents are needed and how best to achieve their estate planning goals and needs. Once I’ve drafted their documents, we will review them together and make any needed edits until the documents accurately reflect their wishes. Every client has their own unique goals for their estate planning, and I work closely with them to make sure the estate plan meets those goals. When all the documents are finalized, we make a final appointment to sign them.

What does an estate plan include?

An estate plan from the Law Office of Mylinh Arnett usually includes:

• A living, revocable trust (if we determine one is needed)
• A pour-over will or a traditional will (both can name guardians for minors, if needed)
• Advance health care directive and HIPAA authorization form (if needed)
• Durable financial power of attorney
• Other supporting estate planning documents (if needed)

How long does the process take?

Once you decide to hire me, it usually takes me a few weeks to draft your documents, depending on my current case load. I can give you a better idea at our initial consultation what the current timing is. If you need the documents sooner due to some exigency, we can discuss an expedited schedule.

What if I don’t know who to name as guardian for my kids? What if I don’t know who to name as my agent for healthcare decisions or financial decisions?

This can be a tough decision to make, but I don’t want this decision to keep you from moving forward with your estate planning. Together, we can discuss these questions and take a look at your options and your concerns. I can offer some factors to consider and hopefully help you decide on a choice that works best for you and your family.

What is a will?

A will is a document that specifies who your family is and who you want to leave your assets to when you die. It nominates an executor, the person who will take care of your affairs when you die. If you have minor children, the will would also nominate potential guardians for them.

Two things to keep in mind about a will: 1) It has no legal effect during your lifetime. A will becomes effective only upon your date of death. 2) Depending on what you own, how it is titled, and the cumulative value of your assets, a will would not avoid probate. In California, if a person dies and they have assets with a gross fair market value of more than $150,000 in their name, their estate must go through probate.

What is a trust?

A trust is a legal document that goes into effect immediately upon execution. Like a will, a trust specifies who your family is and to whom, and how, you want to leave your assets after you are gone. Unlike a will, a trust also allows you to decide who you want to manage your affairs when you cannot do so during your lifetime.

Many of your assets, like your home or other real estate and bank and investment accounts are transferred from your name as an individual into your name as trustee of your trust. When you have a trust, with all the appropriate legal provisions it needs to have, and your assets are properly titled in the name of the trust, or potentially designated to the trust, your estate can avoid probate when you pass away.

A few things to keep in mind about a trust: 1) It goes into effect immediately. 2) You keep full control over the property and have the right to use and spend that property as if it had never been put into the trust. 3) It avoids probate when you pass away. Because a trust goes into effect immediately, if you should lose capacity during your lifetime, due to illness or accident, the trust can provide for your care for the rest of your life. Your successor trustee can manage your property for your benefit without having to go to court for a conservatorship and without ongoing court supervision.

If I have a trust, do I still need a will?

Yes. You should have a “pour-over will” along with your living trust. The pour-over will is a back-up for any property that might not have been properly transferred to the living trust during your lifetime. Without a pour-over will, any property acquired after you set up your living trust that inadvertently is listed in your name rather than in the name of your trust would normally pass to your heirs as determined under state law. Those heirs may or may not be the same people that you name in your trust to receive your assets at your death. The pour-over will ensures that any such assets will be added to your trust so that they will be ultimately distributed to the beneficiaries you name in your trust.

If you have young children, you can use your will to nominate a guardian for your children if both you and the other parent die or are otherwise unable to care for your minor children.

What are some reasons people choose to set up a living trust?

Here are a few reasons why people choose to set up a living trust as part of their estate planning:

1) To avoid probate: If all your property is in trust when you die or become incompetent, then legally you don’t own anything in your name. This means, if you die, no probate is needed to pass your property on to your beneficiaries. Or if you become incompetent, no conservatorship (formal court proceedings to administer an incompetent person’s assets) is needed to manage your property. In either case, the person that you name in your trust as the successor trustee takes over. If you die, the successor trustee can distribute the trust property according to your wishes without having to go to probate court to authorize the distribution. If you become incompetent, the successor trustee can manage the property for your benefit without having to go to court for a conservatorship and without ongoing court supervision. (See below for further discussion of probate.)

2) Control: Although a living trust is similar to a will in that they both let you decide what happens to your property when you die, a living trust allows you to be more specific. You can decide when and how your beneficiaries receive assets. You can establish conditions for receiving trust funds (e.g., my son must complete college before getting X amount of money).

3) Privacy: A trust is not a public record. So, the general public or anyone who is not a beneficiary does not have a right to know about the assets in your trust. (The only exception is that when you die, the successor trustee must give all of the named beneficiaries and all your heirs at law—the relatives who would have the right to inherit from you if you had died without a will—the right to ask for and get a copy of the trust.)

What is probate? Why do I want to avoid probate?

Probate is a formal court-supervised administration of a decedent’s estate.

Probate can be costly and time consuming. Currently, probate cases can take anywhere from nine months to two years or more in court. There is a significant court backlog due to budget cuts and a strained court system. During this time, your beneficiaries may not have access to funds needed for their care and living expenses. Costs of probate include court filing fees, probate referee appraiser fees, the personal representative’s fee (unless waived), and attorney fees. The fee for the personal representative and the attorney are set by the probate code. The current probate fees are:
• 4% of the first $100,000 of the gross value of the probate estate
• 3% of the next $100,000
• 2% of the next $800,000
• 1% of the next $9 million
• 0.5% of the next $15 million
• A reasonable amount (determined by the court) for any amounts higher than $25 million
This means if you die with a house valued at $600,000 (this is actually a modest estimate for homes in San Diego); some bank and brokerage accounts; and other personal property, it’s possible that your gross estate could be worth $900,000. In this instance, the probate fees would be $21,000 to the personal representative AND $21,000 to the attorney. This is money that your beneficiaries would not be getting.

Another potential benefit of avoiding probate is to maintain family privacy. The court file of a probate proceeding discloses extensive information about a decedent’s assets, debts, and disposition of the assets. The court file is a public record, easily viewed by anyone willing to go to the court clerk’s office and make a request, or in some counties, anyone willing to create an account with the online case filing system.

If I have a trust, what happens when I die?

When someone dies, I advise them to contact an attorney to help them through the process, whether or not the decedent had a trust or will in place. I can assist families through the trust administration or probate process.

But didn’t I establish a trust to avoid paying fees after I die?

Yes, but the fees you’ll be paying to your attorney during a trust administration will likely be much less than the statutory probate fees I outlined above.