Probate, Estate Planning and Trust Law
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San Fernando Valley Probate & Estate Administration Law Blog

Preparing a will as part of estate planning

California residents who are over the age of 18 may want to consider writing a will. A will is a part of most estate plans, and without one, the state often decides how an individual's assets are distributed after their death. A will appoints beneficiaries who will receive those assets, and those beneficiaries might be friends, family or organizations, such as charities.

A will also needs an executor. This can be a friend, relative, attorney, financial planner or some other professional. The executor inventories the estate, distributes assets, and pays debts and taxes. This may be a complex job depending on the estate, so an individual appointing an executor may want to ask the person if they are willing to complete the task.

The importance of estate planning

California members of the Baby Boomer generation have traditionally been more concerned with maximizing income and planning for retirement than they have been with estate planning. However, as the boomers enter their sixth decade, it becomes more important to have a plan. This may help to protect their worldly possessions for the next generation and save them from certain difficulties as the details of the estate are worked out.

It is important to leave some kind of document specifying the distribution of property and goods and making the wishes of the benefactor clear. Even after these documents are in place, it may be necessary to revisit and revise them as situations warrant. Updating the beneficiaries may be necessary with older wills and estate plans because situations may have changed in the time since the relevant documents were originally drafted.

Cash-value life insurance as part of an estate plan

Some California residents may benefit by choosing to purchase cash-value life insurance insurance policies as a part of their overall estate plan. Those most likely to do so are people who already have enough assets for their own retirements, are older and who are risk-averse.

Many investors, wary of the vagaries of the marketplace, place money into low-yielding investment tools such as certificates of deposit or money market funds, with the idea that the money will be earmarked for a designated beneficiary. These investors may do better by instead liquidating the low-yielding asset, then using the money to purchase cash-value life insurance for the named beneficiary instead.

Options for estate plans vary widely

As part of their estate planning, California residents may want to leave portions of their assets to family and charity, but they may also want to go beyond those two categories. Estate tax exemptions are higher than they used to be, so individuals concerned about taxes have more flexibility as to where they might direct their money.

For example, while the legal system primarily recognizes family as heirs, individuals have the option to leave less of their estate to family or even to disregard family altogether. Instead, an individual might opt to leave some or all of their assets to a partner they are not married to, friends or domestic employees. With this in mind, individuals who are estate planning might want to consider whether to expand their circle of beneficiaries beyond family.

Making estate planning easier for the family

Some California residents may know that one facet of estate planning involves explaining to family members what the estate plan entails and what to do if that individual should die. Because an estate plan may be complex, there might be an easier way to take care of those details without unduly stressing family members.

One estate planning suggestion is to place the details of the plan with an attorney so that beneficiaries may make a phone call to that attorney to find out what the estate entails and where the documents for the estate are located. This may include a will and information on retirement accounts, insurance policies, banking and business accounts, and other assets. Instructions about paying bills or other ongoing financial matters may also be included in the estate plan.

Duties of a trust administrator

Residents of California may wonder what is involved in trust administration. A trust has two parts, income and principal, and the administrator, also known as the fiduciary, is in charge of managing both of those parts. The principal consists of all the assets that are in the trust, while the income is paid out to beneficiaries. The beneficiary may also eventually inherit the principal or receive income until death. At that time, the principal may pass to another beneficiary.

A fiduciary is responsible for making sound decisions in managing the assets and investments and avoiding taxes as much as possible. As a result, a financially inexperienced fiduciary is often advised to seek expert advice. Beneficiaries will want to know that fiduciaries are investing wisely, and a written investment plan can help reassure heirs about the fiduciary's intentions.

Trusts as important estate planning tools

While many California residents think that a will is the only document they will need to pass on their assets to beneficiaries when they die, there are other estate planning documents that can also be useful in a variety of circumstances. As one example, the importance of establishing an advance health care directive to ensure that the maker's wishes concerning the types of medical treatment that will be allowed in the event of incapacity is well established. Another type of document that can be applied to a variety of situations is a trust.

In its most simple form, a person will place property that will be managed by a trustee for the benefit of a named beneficiary into a trust. The trustee can be an individual or an institution, such as a bank, and that entity is the legal owner of the trust property. The beneficiary is considered the property's equitable owner. The trust itself can be created either during the grantor's lifetime or by a provision contained in the maker's will.

Examining the estate planning issues that business owners face

Woodland Hills business owners may be interested in some information on the particular estate planning issues that they may face. These issues include not having a business plan at all or having an incomplete or outdated one.

According to one survey, just over 70 percent of business owners had an estate plan. The definition for "estate plan" in this case was set low; any of the surveyed individuals who had a will were included in this category. Many who have not begun their estate planning say that it is because the subject is very difficult to think about. Others feel that they do not have the need for a comprehensive estate plan. However, estate planning can be extremely important when it comes to dealing with business issues after one's death. This is because the business itself is usually one of the more valuable assets in the owner's estate.

Ernie Banks' children, caregiver battle over his estate

California baseball fans may have heard that the will of Chicago Cubs baseball great Ernie Banks is the subject of a tumultuous fight in Illinois. Banks, affectionately known as Mr. Cub, died of a heart condition on Jan. 23 at the age of 83.

Banks left his entire estate to a woman who was his talent agent and caregiver, completely excluding his three adult children and estranged wife. However, his family noted that the baseball star's death certificate listed dementia as a "significant condition contributing" to his death. This is relevant because Banks changed his estate plan only three months before he died, signing over his power of attorney, new will, health care directive and trust solely to his caregiver. The Banks children claim that she manipulated their father into changing his will and kept him from talking to his family in the months leading up to his death. An attorney for the Banks family said his children plan to contest the will in court.

Estate planning consideration

As many California residents know, the Internal Revenue Code contains provisions that deal with the imposition of taxes on certain transfers of property from one person to another. The estate tax applies in some cases to transfers made from an estate after the owner's death, while the gift tax is imposed on transfers made while the giver is still alive. In each case, there are certain exemptions, exclusions and credits that may apply.

For the 2015 taxable year, estates with a gross value not in excess of $5.43 million are not subject to the estate tax. In the case of married couples, the estate of each spouse is allowed the $5.43 million exemption, with any amount left over after the first spouse dies carried over to the survivor. With respect to the gift tax, people are allowed to make gifts in the amount of up to $14,000 per recipient in a calendar year without having to pay any tax. A gift tax will be imposed on gifts in excess of that amount.