Updated: Mar 23
FOR MANY, estate planning is little more than a distant idea that most people assume is something reserved for wealthy and elderly people with large families. But the fact is, any person who passes away leaves behind an estate of some kind, regardless of the scope and size of one’s finances and family tree.
What is an Estate Plan?
An Estate Plan is a written plan that includes a set of decisions a person makes which describes their wishes for how their property should be handled either upon their incapacity or death, provisions for family members, and instructions in case they need someone to make medical decisions for them under certain circumstances. In short, it’s an action plan that we put into place legally to protect ourselves, and our loved ones and our property.
What are the most common documents found in an Estate Plan?
The specific documents included in an estate plan will vary depending on the circumstances of each person creating one, but generally, estate plans will include either a trust, a will or both, an advance health care directive, also known as a medical power of attorney, and a power of attorney for finances. Each document has a specific purpose and various benefits so working closely with an estate planning attorney is the best way to determine what type of estate plan is needed.
What is a Trust?
A trust is essentially an arrangement that is made by a person, known as the Trustor (sometimes also called Grantor or Settlor) who transfers his or her property to a Trustee, whose role is to manage the transferred property for the benefit of one or more Beneficiaries. Perhaps an easy way to understand what a trust is, is to imagine first creating a vault then designating a team of handlers to watch over it, and finally moving all of your earthly belongings into the vault, along with a specific set of instructions for how everything inside should be used both during your life and after you pass away.
Why would I need both a Trust and a Will?
While a Will is also a written instrument that helps a person state their final wishes and distribute property upon their passing, a Will only operates after a person has died. Wills are also subject to court oversight in a process called Probate. Trusts however, are private instruments which become effective as soon as they come into existence, usually upon the signing of documents in front of a Notary Public. Unlike Wills, Trusts are not subject to probate court so everything meant to be handled through a trust instrument can be actioned by the Trustee right away according to the terms set forth in the document. A comprehensive estate plan often includes both Wills and Trusts which are meant to work together to carry out one’s estate plan. Having only a Will is not the most protective way to plan an estate since it still exposes a person to delays, expensive court costs and additional tax consequences.
What will happen to my property and finances if I die without an estate plan?
In California, the probate court oversees the property of those who die “intestate,” which means without a will. In short, a probate case will be opened, most likely by someone in your family with the help of a probate attorney. This can be a very lengthy and expensive process in which a judge decides for you without any insight into your specific wants, how your property will be distributed and to whom according to the default rules of the state. There is a cost for court filings and the time an attorney spends assisting the process that is set by state law. Many people who do eventually create estate plans do so in order to avoid the expense and hassle of a complex probate court process.
Can I just ask a trusted person to handle things for me in case something happens?
While you can always ask a trusted family member to assist you in certain circumstances like disability, incapacity and even death, doing so does not provide the legal authority needed to stand in your shoes and address things like making medical decisions on your behalf, speaking to your doctors or health institutions, caring for minor children or others with special needs, accessing your financial accounts to pay your bills or assist you with other legal obligations. When something unexpected happens, it’s better to be prepared with a plan of action that actually reflects your wishes, which will avoid needless expense, delay, confusion and heartache.