There are different approaches that can be taken when you are planning your estate, and this is why you should work with an attorney to create a custom crafted plan. This being stated, there are some standard components that make up the basic framework.
In an effort to provide you with a starting point, we will share an outline of a basic estate plan in this post.
The facilitation of postmortem (after death) asset transfers is at the core of the estate planning process. Everyone has heard the simple will, and this is an option, but there are limitations and drawbacks that you should be aware of before you make any final decisions.
A person that creates a will is called the testator. When a will is being created, the testator will name an executor to act as the estate administrator. After the death of the testator, the executor would admit the will to probate.
This is a legal process that takes place under the supervision of a court. It will take about nine months at minimum and 2-3 years in most cases, and the inheritors have to wait it out. No bequests are distributed until the estate has been probated by the court.
The time lag is one negative, and probate expenses reduce the value of the estate expenses are roughly about 5% of the gross value that’s paid to the attorney and executor as fees). Since it is a public proceeding, prying eyes can access the records to dig into the details (think TMZ’s coverage of Michael Jackson and Prince’s estates), so there is a loss of privacy. This is also a concern because predators can find out who your heirs are and potentially take advantage of them. Additionally, this is a ready venue for disgruntled, disinherited people to contest and often force “nuisance” settlements.
In addition to these negatives, if you use a will, the people that are named as beneficiaries will receive lump sum inheritances with no asset protection or spending safeguards.
You could use a revocable living trust is an alternative to a will as the centerpiece of your estate plan. If you go in this direction, you would act as the trustee while you are living, so you would have complete access to and control of the assets that you convey into the trust.
The “revocable” designation is quite literal. As the grantor of the trust, you would have the ability to revoke it at any time, so there are no risks at all.
When you are creating the trust declaration, you name a successor trustee to administer the trust after you are gone. This can be a professional trustee such as a trust company, or you could name a family member or someone else that you know to act as the trustee.
After your death, the trustee would distribute assets to the beneficiaries, and the probate court would not be involved at all, so there is privacy and usually the delays, easy contests and high fees associated with probate are avoided. You would not have to instruct the trustee to distribute the assets to the beneficiaries all at once. The terms of the distributions would be entirely up to you.
This is one option that is available, and there are other trusts that can be used to satisfy specific objectives.
If you have dependent children, you should name a guardian for the children in a simple will, even if you have a living trust. An emergency guardian document is also a good idea in the event you are incapacitated from an accident but do not die.
You should certainly have enough life insurance, and your trust can be the beneficiary of the insurance. The trustee would be able to administer the trust on behalf of the minor beneficiary until they reach the age of majority. Life insurance naming minor children as beneficiaries can be problematic.
Your plan should also address end-of-life eventualities. A living will is an advanced directive for health care that is used to record your preferences regarding the use of life-support. The document can contain your organ and tissue donation choices as well.
As part of your advanced directive document, you can use a durable power of attorney for health care to name someone to make medical decisions on your behalf that are not related to life-support. A HIPAA release should be added to give the health care representative the legal right to obtain your medical records.
If you have a living trust, you can name a disability trustee to step into the administration role if it becomes necessary. A durable power of attorney for property can be utilized to name an agent to manage property that is not held by a trust.
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Our doors are open if you are ready to work with a Burbank, California estate planning lawyer to put a custom crafted plan in place. You can send us a message to set up a consultation appointment, and we can be reached by phone at 818-937-2335.