Estate Planning

Nobody likes to think about death, but everyone needs to plan for it. Deciding what to leave for your family or friends to ensure their security once you pass is certainly not the most pleasant experience, but prudent planning in advance can save your loved ones from unnecessary stress, disagreement, and litigation. The most common instruments created through estate planning are the testamentary will and revocable living trust. 


A will is simply a testament of the creator (the "testator" in legalese) that directs to whom their property, some or all of it, should pass when he or she dies. It can either be handwritten and signed ("holographic will") or typeset, signed, and witnessed by two disinterested individuals ("formal will"). While the will itself is relatively brief and simple, it may not be ideal for your heirs as wills must undergo the litigious process known as probate. Estates exceeding $150,000.00 in value must be probated in order for distribution to legally occur (estates worth $150,000.00 or less and not containing real property may be administered through a Small Estate Affidavit; estates worth $150,000.00 or less and consisting of real property may be probated through a shorter, summary procedure). The probate process basically confirms that the will itself is valid, allows the appointed executor to handle matters of the estate including payment of debts, taxes, liquidating assets, etc. The process can be lengthy and often exceeds one year before final distribution can occur. Finally, the cost for probate (though borne by the estate) is rather expensive. For example, a $500,000.00 estate, which is not uncommon for a decedent who lived and owned property in the bay area, would cost the estate $26,000.00 ($13,000 for the attorney $13,000.00 for the executor) in statutory probate fees.

Revocable Living Trust

There is however an option to avoid your heirs from having to probate your estate, thereby saving the fees that would otherwise be paid to a probate attorney and/or the executor of the estate. That option is called a revocable living trust. A living trust is simply a trust device wherein the creators of the trust (the "settlors") direct all of the property they own while living to the trust. The creators of the trust will simultaneously act as "trustees" of their own trust while alive, essentially owing a duty of trust to themselves. Upon the death of the settlors, the trust instrument itself will appoint a "successor trustee" to then administer the trust for the benefit of the named "beneficiaries". Sometimes the trust will direct the successor trustee to make outright distributions of the assets of the trust to the beneficiaries, or may direct the successor trustee to retain the assets in the trust for the benefit of the beneficiaries until some condition precedent occurs (e.g., a minor child provision, where the successor trustee maintains the assets in the trust until a named child beneficiary attains a particular age). The ultimate effect of the revocable living trust is in most cases the same as a will, although a living trust does not have undergo the probate process. Furthermore, the fact that the trust is "revocable" means that the settlor of the trust can amend or revoke the trust at any time while alive (living trusts generally become irrevocable once the settlor or settlors die). Thus, the revocable living trust is a great alternative to the traditional will.

Powers of Attorney and Advanced Healthcare Directive

Two other important documents in estate planning are the durable power of attorney for healthcare and the springing power of attorney. Both documents grant the authority to make particular decisions on behalf of the creator to a third party (the "attorney in fact"). These two particular documents however are distinct from a standard power of attorney which may take effect immediately upon execution thereof, in that they only take effect if and when the creator of the documents is deemed to have become incapacitated. Appointing an attorney in fact in advance can avoid your loved ones from having to file a conservatorship petition with the court, which is essentially a process where a proposed "conservator" asks the court to grant him or her authority to make decisions on behalf of the "conservatee", the latter of whom being incapable of making those decisions on his or her own. The durable power of attorney for healthcare appoints an attorney in fact to make decisions regarding healthcare matters, whereas the springing power of attorney grants the authority to make decisions with regard to personal matters, including financial matters. Another related document is the advanced healthcare directive, which simply directs the treating physician or facility to act in a certain fashion with regard to healthcare options based on the enumerated requests iwithin the document.

If you are curious about any of these estate planning instruments, or have questions generally about how to plan for your ultimate demise, please feel free to contact me for a free consultation.