Frequently Asked Questions

Estate Planning

1) What is estate planning and when should I start? ANSWER

After turning 18, it is never too early to begin your estate plan. It is a misconception to think that you need to be retired or have a large net worth to plan your estate. The truth is everyone needs an estate plan.

Many think that estate planning is only about passing assets after death and minimizing taxes. While this is certainly part of it, a comprehensive estate plan is so much more. Every family can benefit from having an estate plan created by an attorney who focuses on this area of the law.

Estate planning is about planning for every stage of life. Proper estate planning ensures that your wishes are followed with respect to your body and how you are treated during your life if you are unable to speak for yourself. Estate planning can ensure your children are taken care of if something happens to you and your spouse. Estate planning gives you the peace of mind that your financial matters will be taken care of in the way you want in the event of your incapacity. And, estate planning provides for your wishes with respect to what happens after you pass away by allowing you to give what you want, when you want and to the people you want, in the manner you want. Estate planning keeps you in control and gives you the peace of mind knowing you have a plan in place for the future.

An estate plan can help you accomplish the goals mentioned, and many more, and will include the following:

  • Revocable living trust
  • Wills
  • Durable powers of attorney
  • Health care directives
  • HIPAA authorizations
  • Personal property distributions

2) Isn’t estate planning only for the wealthy? ANSWER

No, estate planning is not only for the wealthy. While estate planning is certainly important for the wealthy, it is not reserved for only the wealthy. In fact, every family can benefit from having an estate plan created by an attorney who focuses on this area of the law. There are many reasons for comprehensive estate planning. Estate planning is about planning for every stage of life. Proper estate planning ensures that your wishes are followed with respect to your body and how you are treated during your life if you are unable to speak for yourself. Estate planning can ensure your children are taken care of if something happens to you and your spouse. Estate planning gives you the peace of mind that your financial matters will be taken care of in the way you want in the event of your incapacity. And, estate planning provides your wishes with respect to what happens after you pass away by allowing you to give what you want, when you want and to the people you want, in the manner you want. Estate planning keeps you in control and gives you the peace of mind knowing you have a plan in place for the future/

3) What if I already have a will or trust? ANSWER

If you have already put some planning in place, congratulations on making that important step! If your plan is more than three years old, it is highly recommended that the plan be reviewed for any law changes, family changes or situational changes. We provide a Family Wealth Planning Session where we will review your trust and estate plan and educate you on what will happen in the event of incapacity and at death under the current plan you have. You will be empowered and be able to determine whether you are satisfied with the current plan you have or whether your plan needs updating.

4) What happens if something changes after I have set everything up? ANSWER

If you realize you need to make a change to one of your decisions within three months after we execute your plan, we will be happy to make the necessary changes at no cost to you. If you want to make changes to your plan after that time, you absolutely can. Throughout the planning process, we will discuss review opportunities and keeping your plan updated in light of family and situational changes. Your estate plan will require on-going maintenance to ensure that your plan actually works in the event of your incapacity and at your death. Life is always evolving and so must your plan. Your goals and objectives may change, your family may change, the tax law may change, the people you name in your plan may change and your financial situation may change. We offer a complimentary review meeting every three years so we can review your plan and update where necessary. Those enrolled in my membership program have their plans reviewed every year.

Because estate planning is an involving process, we want to have an ongoing relationship with you. Throughout your life, things will change. We will diligently ensure that your plan will keep up with those changes.

5) What is included in an estate plan? ANSWER

In keeping with our philosophy that estate planning needs to be individualized, we offer different levels of planning. We have starter plans that are generally for families who have young children and little in the way of financial wealth to robust plans for well-established families concerned with asset protection, preservation and increased growth.

The three levels of planning are the Family Plan, the Trust Plan and the Wealth Plan.

During your planning session, we will review the various planning levels with you. You will select your own fee, based on your budget and what planning elements are the most important to you. We make sure your family has the support they need should something happen to you and that your plan will work as you wanted it to. Our process is designed to educate you so that you can make empowered, informed choices about what you want for your loved ones, and you aren’t simply choosing the least-expensive option because you have no other basis for making your decision.

At a minimum, a basic plan includes:

  • Revocable living trust (if Trust Plan or Wealth Plan);
  • Wills;
  • Durable powers of attorney;
  • Health care directives;
  • HIPAA authorizations
  • Personal property distributions.

6) How much does it cost to put an estate plan in place? ANSWER

Naturally people wonder what an estate plan will cost. Many lawyers will give you a quote by email or over the phone, but we don’t do that. Why? Because we base the price of services on what you need and the level of planning you choose based on your goal and objectives as well as your budget. While I can offer you a range, an exact quote is not possible.

As a society, we are used to shopping for anything based on price, but estate planning is much more complex and should not be purchased on price alone. By choosing who will do your estate plan based on price alone, you may end up with a standard plan full of documents that won’t achieve your family’s goals and may end up failing you when the time comes, resulting in family conflict and unintended government interference through the court system.

The first step to determine how much your plan will cost is to conduct a planning session, an extremely beneficial process where you will create a full inventory of your assets so that you know what you have. We will review all of your assets and discuss everyone you love and what you care about. We’ll make sure you fully understand exactly what would happen to everything you own and how it would impact your loved ones should you become incapacitated or when you die.

If you don’t currently have an estate plan, we’ll review how the state would deal with your death or incapacitation. If you already have some sort of an estate plan, we will review that with you. This is an Estate Review Planning Session. If you are not satisfied with either your plan or what the state has in mind for you, we will work to achieve your goals in the most effective, efficient and affordable manner. You can rest assured that you will be making educated decisions for those you love, not just shopping around based on price.

Our process will educate you quickly and effectively so that you can make the right decisions about what you want. While there are many options, and the price will vary from person to person, there is a range. A comprehensive plan (or update of your existing plan) will run between $2,000 and $8,000, depending on the choices you make during the planning session. If you think this sounds expensive, please know that in the long run, planning is substantially less costly than it would be for your family if you became incapacitated or died without a plan or with a plan that wasn’t well prepared. Nobody has ever left my office wanting to do this kind of planning and not following through because they couldn’t afford it. That is because we offer payment options because we are passionate about estate planning and know how crucial it is.

When you are ready to make informed and empowered decisions for the people you love, start the process by booking your planning session or Estate Review Planning Session by clicking here

7) Can I sell my house if it is in my living trust? ANSWER

Yes. Revocable living trusts do not impede your ability to buy or sell a home. There is no restriction or penalty for adding or removing assets from your revocable living trust.

8) What if I am uncomfortable discussing end-of-life decisions? ANSWER

Many people do not want to talk about wills or end-of-life care because it reminds us of our own mortality. It can be very uncomfortable and difficult to discuss such things with an attorney you have just met. However, the estate planning process is about providing for your family and loved ones during your life in addition to planning for your death. We do my best to make this process as comfortable as possible and you will have time to make these decisions, even after leaving our office.

9) Can’t I do my estate planning through LegalZoom or other do-it-myself methods? ANSWER

While it is possible to create documents online, you will likely end up with very poorly drafted documents that are not tailored to your specific needs and will result in plan failure when those documents are needed. For the majority of people who try to complete their estate planning using these low-cost options, the old saying applies “you get what you pay for” and you may end up spending more money in the long run for a experienced attorney to do it right. Or even worse, you family will end up in conflict or in court due to the plan failing or having unintended consequences while spending a fortune on legal fees. Unfortunately, you may never know that your do-it-yourself plan or the plan drafted by the lowest cost attorney is inadequate because the mistake is discovered after it is too late (either because you are incapacitated, or you have died). We’ve discussed this matter in my blog titled The Disadvantages of Online and Do It Yourself (DIY) Estate Planning.

What Are the Types of Trusts?

10) Revocable Living Trusts ANSWER

While there are many types of trusts, the most common is a revocable living trust, which is one that is created during your lifetime and can be amended and revoked during your lifetime. When a trust is formed, the person who created the trust (also known as the trustor) is also the trustee and the beneficiary. Once your assets are retitled into your trust, your trustee manages the trust. You are the initial trustee and you name successors to take over for you in the event of your incapacity and when you die. One of the many purposes of a revocable living trust is to avoid the cost and delay of probate as your assets are put into the trust, administered for your benefit during your lifetime, then transferred to your beneficiaries when you die without the need for court involvement.

A trust is beneficial for many reasons:

  • A properly drafted and funded trust avoids the expensive, time-consuming and public probate process;
  • A properly drafted and funded trust will pass assets to the designated beneficiaries promptly based on the terms of the trust; and
  • A properly drafted and funded trust safeguards financial privacy.

11) Irrevocable Life Insurance Trust ANSWER

Besides real property, life insurance is another important asset. Life insurance can have a substantial cash value or death benefit exposed to creditors. Even a term policy without cash value can be a valuable asset in that it will provide your family income and support after you are gone. But will your beneficiaries get the death benefit, or will your creditors? I discuss this issue in our blog titled “Six Questions to Consider When Selecting Beneficiaries for a Life Insurance Policy.” Life insurance can also pay your estate taxes and make funds immediately available to your survivors, thus avoiding the delay and expense of liquidating other assets.

An irrevocable life insurance trust (ILIT) is specifically designed to own life insurance. As with other trusts, the ILIT has a trustee, beneficiaries, and terms for distributions. Your ILIT would own your insurance policy. The insurance policy beneficiary would be the trust, not your estate. When you pass away, your insurer pays the ILIT trustee, who would follow the trust instructions and distribute the proceeds to the ILIT beneficiaries. An ILIT can be funded or unfunded. As the name suggests, the ILIT is irrevocable. It protects the policy’s cash value, death proceeds, and distributions from the trust to the beneficiaries. The ILIT – though sometimes important for protection – can also be an important tool to save you estate taxes. Because the ILIT owns the life insurance policy, the policy proceeds won’t be included in your taxable estate and are not subject to estate taxes.

12) Irrevocable Charitable Remainder Trust ANSWER

If you are feeling generous or need to reduce your estate value for estate tax reasons, you may choose to gift your assets to a tax-exempt charity of your choice as trust beneficiary. While you gain creditor protection, you can use these same assets to generate income for you during your lifetime. For asset protection and the immediate tax deduction advantage from gifting assets during your lifetime, the charitable remainder trust (CRT) can be your answer. Over your lifetime, your trust would pay you a fixed annual income; therefore, you receive an immediate tax deduction and future income from the donated assets.

13) Irrevocable Children’s Trusts or Beneficiary-Controlled Trusts ANSWER

Do you intend to gift money to your children? Instead of an outright distribution to your children, you can set up a children’s trust or beneficiary-controlled trust. Not only can it reduce taxes, it provides asset protection to the children because property transferred to a trust for minors cannot be seized by your creditors. It also won’t be included in your taxable estate. Income from the trust would be taxed at the children’s lower income tax rates. While the trust is in effect and the beneficiary is under a stated age, neither the grantors nor the child’s creditors can claim the trust assets. When your child reaches the allowed age, however, he/she can demand the trust assets unless they are taught the importance of keeping the assets in trust where they can be named as co-trustee of his/her trust.

14) Qualified Personal Residence Trusts ANSWER

With a qualified personal residence trust (QPRT), you transfer your residence to the trust and retain a tenancy for a number of years. At the end of the term, your residence passes to your remainder beneficiaries. Your objective is to transfer your residence now at its lower tax value (basis), rather than when you die and it has a greater value. The QPRT thus reduces estate taxes. It can also protect your home from lawsuits as your creditors can only claim your right to use the property for the remaining term of years (or the rental value for those years). However, your creditor cannot attach or seize the home because it would be owned by the trust. QPRTs are common with second marriages because they preserve your assets for the benefit of the children from a prior marriage, rather than the spouse’s children or family, who would become the probable beneficiaries of an estate passed outright to a surviving spouse.

Probate

15) What is probate? ANSWER

Probate in California is a court-supervised procedure that helps to ensure the legal transfer of assets from the deceased to the rightful heirs or beneficiaries. It can be very expensive and time-consuming. In addition, it’s a public process, which is very unappealing to many people. Probate usually takes a minimum of 12 months and can take up to two years or even longer for complex cases.

16) How much does probate cost? ANSWER

Probate can be expensive depending on what assets go through probate. California Probate Code Section 10801 sets probate legal fees and are determined based on the size of the probate estate as follows:

  • 4% of the first $100,000
  • 3% of the next $100,000
  • 2% of the next $800,000
  • 1% of the next $9,000,000
  • ½% of the next $15,000,000
  • For all amounts above $25,000,000, a reasonable amount is determined by the court

Also, keep in mind that the California statutory probate fees are based on the gross estate so it does not matter if there are debts to be paid. Additionally, the fees are paid to both the executor of the will and the probate attorney so you can multiply the fee by two. The California probate court can order additional fees for more complicated cases or extraordinary services. There are also court costs and filing fees, document certification and recording fees, and property appraisal fees.

With all that said, probate is expensive and creating a trust-based plan can save expenses and allow privacy and smooth administration at death. You can avoid the process of probate by having a proper estate plan.

17) What is an executor? ANSWER

If the deceased had a will, the person named in the will as the executor will serve, if eligible. If that person is unable or unwilling to serve as executor, or if there is no will, then any interested family member or person can petition the court to be the administrator of the estate. As mandated by California law, the executor is compensated according to a fee schedule based on a percentage of the gross assets of the probate estate, as discussed in “How much does Probate Cost?” The following shows how much an executor is compensated.

Size of Estate Attorney Fee Executor Fee Total Fee

$200,000 $ 7,000 $ 7,000 $14,000

$300,000 $ 9,000 $ 9,000 $18,000

$400,000 $11,000 $11,000 $22,000

$500,000 $13,000 $13,000 $26,000

$600,000 $15,000 $15,000 $30,000

$700,000 $17,000 $17,000 $34,000

$800,000 $19,000 $19,000 $38,000

$900,000 $21,000 $21,000 $42,000

$1,000,000 $23,000 $23,000 $46,000

18) What are the duties of an executor? ANSWER

Being an executor is a big responsibility, and you can be held personally liable for making mistakes while performing the duties of an executor. California Probate Code is comprised of a vast number of complex rules and procedures that an executor must follow during the probate process. In addition, there are certain deadlines that must be met by an executor in filing papers with the court. If you are serving as an executor and violate any of these rules, you may be held personally liable for losses to the estate. To avoid many of the headaches associated with probate, complete your estate plan and encourage your family to as well.

19) What are the assets subject to probate? ANSWER

All assets owned solely in the name of the deceased are subject to probate. Assets that pass by means of title, such as real estate titled as “Joint Tenants with Right of Survivorship,” or bank accounts titled as “Transfer on Death” are not subject to the probate process. Assets that are transferred by means of a beneficiary designation (life insurance, retirement accounts, etc.) are also not subject to probate. Be advised, though, that in some situations, assets that would otherwise pass by title or beneficiary designation can be subject to the probate process, in some circumstances. We would be happy to discuss your specific situation and what would happen to your specific assets in the event of incapacity and at your death during a planning session.

20) Doesn’t a trust automatically avoid probate? ANSWER

Unfortunately, simply having a trust doesn’t protect you in all situations. All too often people come into the office because they are facing the frustration, expense, and delay of probate, even though the person they loved had a trust.

That happens because the trust was prepared many years ago and was never updated or some or all of the deceased’s assets were not owned in the name of the trust – this is what we refer to as plan failure. Only assets that are properly named in a trust avoid the probate process.

This is why we highly recommend that an estate plan be reviewed a minimum of every three years. There may be changes to marital status, new children, new assets, minors becoming adults, changes in job status, among other things. We offer complimentary estate plan reviews to clients every three years (or every year if on membership) to ensure your plan still works the way it is intended and your assets are held the correct way to avoid probate. We are proud that we handle these issues differently than most other lawyers. Click here to see what makes us different.

Business

21) Can’t I do my business planning through LegalZoom or other do-it-myself methods? ANSWER

While it is possible to create a business online, it will not help you foresee and plan for litigation down the road nor will it provide you the proper planning your business needs. Additionally, there are specific state and local laws that must be complied with when starting a new business that you may be unaware of without proper legal counsel. Choice of entity, complete and customized governing documents and business planning are essential to a successful business. If you are going into business with a partner, avoiding future litigation and misunderstandings that can lead to the failure of the business is an invaluable start to your business. Even if you are going into business by yourself, having the proper legal, insurance, financial and tax (LIFT) systems in place is critical for a successful and thriving business.

22) If it is just me, do I need to incorporate my business? ANSWER

In many circumstances, having an entity is recommended to isolate your business from your personal assets and to save on taxes, but that does not mean you need to be incorporated (i.e., have a corporation). Each situation is different and your specific situation will need to be analyzed to determine the proper choice of entity. We can help you choose the best entity for your particular business that will put you in the best position for future success.

23) Why do I need corporate bylaws and minutes? ANSWER

Bylaws help create the culture of your business. They can be the difference between partners defining positions now so the business can grow successfully or having major litigation over a misunderstanding down the road that could lead to the failure of the business.

Every state requires a corporation to have annual shareholders’ meetings and the meeting minutes document the corporation’s compliance with state law.