Estate Planning & Wills

Estate planning and wills is often where the conversation begins with my clients. Many clients ask me if they need a trust or a will. The answer is that you need both.

The “Will Reading” is a dramatic feature in many popular films – Who will inherit what?  Consider the movie “Gran Torino”, where the Clint Eastwood character bequests the movie’s namesake car to Thao Vang Lor, a young Hmong teenager and Eastwood’s neighbor.  Or in “Knives Out”, where Harlan Thrombey, the elderly family patriarch, caused a ruckus by leaving everything to Marta, Harlan’s nurse.

Avoiding Probate Court

In California, assets pass to the next generation in a very different manner, primarily to avoid the Probate Court.  If your total non-retirement assets total more than $166,250, those assets will go through the probate court, which in California is an expensive, time-consuming, and public affair.  A will dictates who should inherit the assets, but court involvement is still required.

Advantages of Revocable Living Trusts

In order to avoid this, California residents typically set up a Revocable Living Trust. The trust states who will inherit the assets and in what form (i.e. outright, subject to a trust, etc.), and who is responsible to oversee the administration process (i.e. the successor trustee). All of the important information is contained in the trust, and the probate court process is not involved.

Pour-Over Will

You might conclude from this, “Ah, so I don’t need a will!”  But even with a trust, we still prepare what is called a Pour-Over Will.  This type of will states that, if you neglected to transfer an asset into the trust, the will can be used to scoop up and “pour over” that asset into the trust, and thus avoid probate.  This specific language in a Pour-Over Will should read something like “My Executor will distribute my entire estate to the Trustee of the [your name] Family Trust.”

The other important function of a will is to nominate guardians for your minor children (under age 18 in California).  If both parents of a minor child are deceased, the court will hold a hearing to determine who will act as guardian of the minor child.  This process always involves the probate court, since the court wants to make sure the person(s) the parents have nominated as guardians are the right choice – they are still willing and able to act in this role.

A few clients have told me, “I don’t need a Pour-Over Will, since I’ll fund my trust properly and I don’t have minor children!”  But we don’t know which assets you might have upon your death.  For example, you may have inherited some property and you didn’t have a chance to transfer title into the trust, or a beneficiary of a retirement account has died or disclaimed his or her interest, so that asset would otherwise go into your estate.  The Pour-Over Will is still an essential part of an estate plan.

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