Fact Sheet: Estate Planning

Transfers to Heirs

Several methods exist for directing who will inherit assets upon an owner's death.

• Joint tenancy ownership supersedes other arrangements, so assets a person holds as joint tenant, if any, will be transferred on death to the surviving joint tenant(s).
• Other assets for which a person has named a beneficiary or made a pay-on-death (or transfer-on-death) arrangement will be transferred to the surviving person(s) the person has named.
• If a person has a Living Trust, the assets owned by the Trust will be transferred according to the terms of the Trust. The main reason for having a Living Trust is to avoid probate with respect to real estate.
• A person's remaining assets will be transferred according to the terms of the person's will.
• If a person dies without a valid will, the person is "intestate." In that case, the person's remaining assets would be transferred according to the California intestacy laws.

Probate

Probate is a court proceeding to pass the probate estate of a deceased person to the deceased person's heirs. The probate estate consists of the person's assets that do not have joint tenancy, beneficiary naming, pay-on-death, transfer-on-death, living trust or other probate avoiding arrangements in place.

In some cases probate is not required, even though probate avoiders are not in place for all of the deceased person's assets. Probate is not required when the probate estate is going to a surviving spouse or when the value of the probate estate is $100,000 or less. In each of these situations, simplified procedures are available for passing assets without probate. In some cases, a simplified court proceeding may be required.

Wills

A Will allows the person to name those who will receive the person's probate estate and to name an executor (the person who will manage and distribute the probate estate).

Assets for which probate avoiding arrangements are in place are not included in the probate estate, and thus not impacted by a Will.

Revocable Living Trusts (Living Trusts)

The primary reason to create a revocable living trust (Living Trust) is to avoid probate. There are different ways to avoid probate, depending on the nature of the assets under consideration; a Living Trust is particularly useful for real estate.

Among other things, a Living Trust allows a person to name those who will receive the person's trust assets upon the person's death, and to name the trustee (the person who will manage and distribute the trust assets upon the person's death and who will manage the trust assets if the person becomes unable to do so).

More on Trusts

• If possible, the Living Trust should name at least two successor trustees in sequential order.
• The Living Trust should include a trustee succession test that will work in the context of the laws regarding the privacy of health information (the federal Health Insurance Portability and Accountability Act, or "HIPAA," and the California Confidentiality of Medical Information Act)
• For married couples, where each spouse is a co-trustee, the Living Trust should provide that either co-trustee may act alone if the other is unavailable or incapacitated.
• The Living Trust should include a provision addressing the resignation of the initial trustee(s).
• For changes in the law, gifting and other purposes, consider including a provision in the Living Trust allowing the Agent under a durable power of attorney for financial matters the power to amend and revoke the Living Trust.
• For married couples with a Living Trust, after the death of the first spouse the surviving spouse should meet with an attorney regarding administration of the trust and estate.

About Will and Trust Contests

Estate planning arrangements can become the subject of challenges, commonly known as will and trust contests. To succeed, a challenge must show incapacity, undue influence or a failure to follow legal formalities in creating the will or trust. The job of an attorney preparing estate planning documents is to make sure not only that the formalities are followed, but that the plan for distribution of assets in the will and/or trust is the independent, knowing wish of the person.

November 2006