FREQUENTLY ASKED QUESTIONS ABOUT CALIFORNIA ESTATE PLANNING LAW

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If you die without a will, trust, or estate plan—referred to as dying intestate—your property will be distributed according to the laws of intestate succession of the state where you resided at your death. Your loved ones will have to petition the probate court to have a personal representative named to administer your estate. In California, your property will be distributed partly to your spouse or registered domestic partner, and partly to your children and other relatives in a priority prescribed by law. If you do not have a spouse, registered domestic partner, or living relatives, your property goes to the State of California. Your friends, unregistered domestic partner, and favorite charities will receive nothing.

Having a carefully structured estate plan, can help protect your estate from unnecessary estate taxes. It can also avoid having your estate go through probate after your death. In California, any estate with more than $150,000 in assets is required to go through the probate process, which is a public process through which the probate court oversees administration and distribution of estates. A good estate plan can structure your estate to avoid probate completely. The details about your estate are kept private, and the probate court does not become involved in distribution of your estate. Avoiding probate saves on expenses and time. Your heirs will be able to receive their distributions from the estate more quickly, and there will be more assets to distribute because of the tax and expense savings.

A good estate plan also includes documents like durable powers of attorney and advance healthcare directives, which designate the individual or institution that will take care of you and your finances in the event you become incapacitated during your lifetime.

A will, trust, or estate plan that will ultimately accomplish your goal is more complex than filling in the blanks on a form. There are abundant opportunities to make your own will—often referred to as a DIY or Do-It-Yourself will. Making a will, trust, or estate plan without the advice of an attorney is a very risky route to take. A DIY can give you a false sense of security that you have taken care of what happens to your family and loved ones when you die. In reality, your DIY will could be invalid in whole or part, if state legal requirements are not met. Even the process of signing your will has to be completed in a specific manner, with “qualified” witnesses. If you give inaccurate or incomplete answers to questions, or do not fully understand the legal meaning of terms — like beneficiary, executor, residual beneficiary, and alternate beneficiary , your will or estate plan may not actually accomplish what you think it does.

A living trust is a formal legal document that sometimes can partially substitute for a will. In a living trust, the person creating it—called the grantor—transfers property (assets) into a trust, which is a type of financial account. Most often, the grantor is the trustee when it is created. The trustee administers the trust for his or her own benefit during his or her lifetime. The trust document also names a successor trustee, who becomes responsible for administering the trust after the grantor’s death. A living trust is a revocable trust during the grantor’s lifetime, which means it can be changed or terminated at any time at the grantor’s discretion. It becomes an irrevocable trust after the grantor’s death.

A will and a living trust are not mutually exclusive. In California, if you have a will and own property valued at more than $150,000, you probably also need a living trust to protect assets from probate. If you have a living trust, a will is still necessary to address assets that are not transferred to the living trust during your lifetime, including proceeds of life insurance policies and retirement accounts, in the event the named beneficiary predeceases you. In a will, you also name the executor for your estate and nominate guardians for minor children, as well as a trustee to administer assets the minor children may receive under the will.

The trustee, a person or institution who administers a trust, has considerable authority and responsibility. A trustee is not under direct court supervision. For those reasons, trustees must be chosen carefully. The trustee has fiduciary responsibilities in overseeing administration of the trust and managing distributions to the trust beneficiaries. California law imposes specific duties on a trustee:

• Loyalty: the trust must be managed solely for the interests of the beneficiaries
• Safeguarding trust property: the trustee must protect the trust property
• Avoiding commingling: trust assets must be kept separate from the trustee’s own property and from other property
• Dealing impartially with beneficiaries

In a living trust, the grantor (creator) of the trust normally names himself or herself as trustee during his or her lifetime. The document creating the living trust also names a successor trustee to take over those responsibilities at the grantor’s death.

When a person with children remarries after divorce or death of a spouse, estate planning needs to take into account both the new (second) spouse, as well as the children from the previous marriage. In most cases, a trust will be used as part of the estate plan, either in form of a living trust or as a testamentary trust. The trust provisions will specify how and when the trust assets will be disbursed to both the spouse and children from the prior marriage after the grantor’s death. In either case, the trust will be irrevocable on the grantor’s death, so the terms established by the grantor will govern distributions from the trust as long as it continues to exist.

A living will—also called an advance directive, advance healthcare directive, or medical directive—is a legal document that provides your written instructions regarding your preferences for medical care if you become unable to make decisions for yourself. The directive gives guidance to doctors and caregivers if you become terminally ill, are seriously injured, suffer from dementia, or otherwise become incapacitated. By planning ahead with an advance healthcare directive, you decide on the kind of medical care you want and relieve family members and loved ones from having to make difficult choices on your behalf. Because end-of-life situations can occur to anyone at any age and time, advance directives are an important part of every estate plan.

If you become incapacitated, there are two different aspects of your life that need to be addressed: your personal / medical care, and your finances. There are two documents that address these needs. Both are an essential part of a thorough estate plan. The first is an advance healthcare directive—or living will—which addresses your personal and medical care, giving guidance to doctors, caregivers, and your loved ones. For financial matters, a durable power of attorney—also sometimes called a financial power of attorney—designates a person or institution to manage your finances in the event you are unable to do so yourself.

In California, probate is a statutory court-supervised process through which an estate is administered and the assets distributed to the beneficiaries. It is required for all estates that have more than $150,000 in property. Probating an estate takes time and involves expenses and fees. It is also a public process, so all the details of your estate are available to anyone. If you have a good estate plan, such as one that includes a living trust, most or all of your estate can avoid the probate process. Without probate, distribution of the assets goes more quickly. In addition, the expenses and fees of probate are saved, so there probably will be more assets to distribute to the beneficiaries.

In California, if a person has a will when he or she dies, the probate process in California begins with the executor who is named in the will filing a petition in probate court, seeking appointment. If a person dies without a will (called dying intestate), a relative or other person starts the process, and the court appoints an administrator to handle the estate. Personal representative is another term used to describe the executor or administrator of an estate.

Once appointed, the personal representative collects all the assets and property of the estate, pays all debts and expenses, and after court approval, distributes the rest of the estate to the beneficiaries. If there are disputes or disagreements among the beneficiaries or with the personal representative along the way, they will be resolved by the probate court.

Probate is required for estates over $150,000 in California. More streamlined procedures are available for smaller estates.

In California, community property is any property acquired during a marriage or domestic partnership. Community property is owned equally by both parties. Spouses or partners are presumed to contribute equally to marital earnings, so income earned during the marriage or partnership is community property owned equally by both spouses. Community property does not include any separate property.

A person who owns community property can transfer his or her share (1/2) of the property to a beneficiary through a will. The surviving spouse or partner still owns the other half. If the partner or spouse dies intestate (without a will), the deceased spouse’s or partner’s half of the community property will pass to the surviving spouse or partner.

For purposes of a will or estate, separate property includes all property and assets owned solely by the deceased person, and excludes property owned jointly with another person or persons, such as community property. The most common types of separate property include:

• Property owned or acquired before the marriage or domestic partnership
  Inheritances
• Gifts
• Property acquired from a trust
• Property that is separate by agreement of the spouses or domestic partners
• Property acquired with the proceeds of separate property that is not intended for use or benefit of both spouses / partners
• Property acquired after the parties separate

If you are not married, your partner can inherit from you, but only if you proactively create an estate plan.

If you do not do any estate planning, California’s intestacy statute will determine who will receive your money and property, as well as the amount each legal heir will receive. Generally, your money and property will go first to your surviving spouse (if you are married), then to your descendants (children or grandchildren), your parents, your siblings, and your siblings’ children, in that order, depending on who survives you. If the state law governs your estate plan, your partner will receive nothing because the state law does not include unmarried partners in their plan.

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