Revocable Living Trust
Your estate plan often has a trust: a trust is a contract. You, the trustor (founder) of the trust, enter into a contract with yourself as trustee (manager) of the trust. You are also the beneficiary of your trust during your lifetime. This means that the assets you place in your trust are used for your benefit during your lifetime. Only upon your death do your named beneficiaries have a right to the trust assets. As a result, by setting up a revocable trust, you establish the vehicle to avoid probate court, but nothing changes during your lifetime with respect to management of assets, sale or disposition of assets, or other actions you’d seek to take during the course of your life. There are no restrictions on the use of trust property because it is your property!
In the event you become incapacitated during your lifetime, your successor trustee that you nominate when establishing your trust will step in to manage your trust for your benefit until you either regain capacity or pass away. This means the successor trustee is tasked with ensuring the assets are prudently invested and that steps are taken to protect assets if you need to resort to Medi-Cal to pay for your care.
At the time of your death, your successor trustee will take over management of the trust and distribute your property according to the trust’s terms. In other words, you determine how, when, and to whom your estate is distributed.
A pour-over will differs from what you know as a typical Last Will and Testament. A will is what most people think will dictate the distribution of their estate at their death, however, because a trust is used to avoid probate court, your pour-over will acts as a safety net to “pour” any assets that you did not fund in your trust to your trust at your death. The purpose is to avoid probate court for those assets that maybe you acquired after your trust and left that asset titled in your individual name, or for other assets that you neglected to re-title into your trust’s name at the time of establishing the trust.
Your pour-over will also nominate your executor who is charged with distributing, selling, or donating the personal effects in your home such as furniture, house wares, and other personal items.
Durable Power of Attorney for Finances
This document nominates agents to act on your behalf should you become incapacitated or unable to manage your affairs due mental or physical health issues. Your agent only has authority over non-trust assets. Your successor trustee will manage all trust assets. Typically, this person is one in the same, but it is an important distinction to note. Non-trust assets are usually qualified retirement plans such as IRAs, 401(k), and the like, government benefits such as social security and VA benefits, assets held in joint tenancy, and other assets that either cannot be owned by your trust or that, for whatever purpose, you did not fund in your trust.
Your agent nominated in this document should be someone you trust implicitly, someone reliable, and someone with some financial acumen to be able to handle your affairs in your best interest.
Last, a quick note on the word “Durable” when used to refer to a power of attorney. Under California agency law, when you, the principal, grant an agent authority to act on your behalf, that authority ceases upon your incapacity. The purpose of this is to prevent agents from acting on your behalf or at your direction when lacking capacity. Thus, the word “durable” means that the authority granted your agent survives even if you, the principal, is determined to lack capacity to act on your own.
Advance Health Care Directive
In California, your health care power of attorney and your “living will” are combined into one document called an Advance Health Care Directive. This document nominates agents to make health care decisions for you in the event you are incapacitated. Your agents make these decisions based on the roadmap you outline for them in this document.
Specifically, this document grants your agent certain health care decision making powers while simultaneously allowing you to make elections regarding the following: (1) End of Life Decisions: you decide whether you’d prefer artificial nutrition or the assistance of life support if you’re diagnosed with an irreversible condition that will lead to your death in a short period of time; (2) Donation of Organs: you elect whether you want any viable organs donated upon your death and for what purpose; (3) Disposition of Remains: you define what you’d like done with your remains at your death.
HIPAA Authorization Form
In 1996, Congress passed the Health Insurance Portability and Accountability Act (HIPAA). HIPAA regulates the use and disclosure of an individual’s health care information held by “covered entities.” Because your health care information is confidential, this document is necessary to nominate individuals – usually the same health care agents nominated in your Advance Health Care Directive – to access your medical records, if necessary. After executing this document, if your records must be accessed by health care providers or others integral to your care, the named individuals are authorized to provide that information to the provider despite the confidentiality afforded by HIPAA.
Community Property Agreement
California is a community property state. If you are married, it is important to define what of your assets is community property and separate property. The property agreement is a document signed by spouses to define the character of their property. This document can become very important depending on how you’d like your estate distributed and in the event of divorce. By defining the character of your property, you also make it easier to take advantage of tax breaks afforded married couples and to administer your estate at your death.
Free Documents and Services Package
In addition to the above documents, our firm offers the following documents and services free of charge.
Instructional Letter Regarding Funding Your Trust
After you sign your trust, there is some work to be done. For instance, bank accounts that have titled in your individual name must now be re-titled to your name as trustee of your trust. Our firm makes this process simple by providing you a detailed letter on how to accomplish this, including how to properly title the accounts or other assets that will be transferred to your now valid and open trust.
Instructional Letter Regarding Retirement Plans and Life Insurance
Now that you have a revocable trust, we want to be certain you understand how to address beneficiary designations of your qualified retirement accounts and life insurance policies. As a result, our firm provides every new client with an estate plan letter on how to address qualified retirement plans and life insurance policies in light of establishing their trust.
Free Sample Letter for Institutions
Our firm also provides you a sample letter that you can provide to banks or other institutions at which you have accounts or assets that you’d like re-titled into the name of your trust. If the institutions asks for something in writing from your regarding re-titling accounts or assets, this letter can be used to satisfy that requirement.
During the drafting of your estate plan documents and after you’ve signed the documents, our firm does not charge you for phone calls or emails. We want you to understand your documents and their importance. If at any time you have questions or concerns, or encounter issues with a bank or other institution, we are here to assist you at no additional charge.
Free Three Year Review
Life ebbs and flows, assets change, people lose contact with one another over time, and your estate plan should be kept up to date with your personal circumstances. That is why our firm offers a Free Three Year Review of your estate plan to determine if anything should be updated under the law or as a result of personal choice. For instance, you may chose to change your successor trustees or change the distribution of a particular asset or percentage of your estate. We want you to feel confident that your estate plan reflects your current desires. We encourage our new clients to take advantage of this offer. After all, it won’t cost you a dime.