Estate Planning

The client has to have confidence in the attorney and the attorney has to be able to feel that the client is being forthcoming, really tells him what they want and isn't trying to hide things from them.

In estate planning process, the first step is just getting the facts. A lot of this is financial information. Many people are hesitant to disclose their financial affairs, but in order to effectively make an estate plan, you have to know this.

In California, we have some extra things we need to de because we're a community property state. That can make estate planning a little bit more complicated, because if it's separate property, then then only one spouse has the right to determine where it goes.

You have to find out not only what they have, the value of it, you also have to know how they acquired it. This can get into sensitive areas for a lot of people. They don't want to tell that much. Sometimes they find out they don't even know that much. Sometimes, by the time everything is said and done, I end up knowing more about their financial affairs than they actually do in order to plan their estates.

The second step in the estate planning process if finding out what the client wants, what are their objectives. Are there special needs? If they have a person with an illness, then maybe a special needs trust may be appropriate to develop.

If they're going to have an estate that's large enough to be taxed, if there are going to be tax issues, then there are special things we can look at. Generally, a lot of people tend to get the cart before the horse, that is, they come in and say I don't want to pay any tax, I want tax savings. Really, you need to know what your objectives are, then once we have your objectives, we can try to achieve them with the minimum possible tax consequences. Just saying "all I want to do is save taxes" is not an easily accomplished solo objective by itself in estate planning. We need to know how your wealth and assets are going to be distributed.

There's a big misconception surrounding estate planning. It's done not just for when you pass on. It can be lifetime planning too. There can be lifetime gifts, we can effectively use your annual gift tax exclusion, which is currently up to $13,000. We strategically plan for what uses we can make of that. We need to know about any heath issues with family members. If there's an issue of very poor health, we need to carefully look at what you want to accomplish. If that person needs financial assistance, we may want to gift it, although there are some circumstances with possible capital gains taxes that the beneficiary would have to pay.

My expertise is in compiling all this information and developing a plan that achieves your objectives while minimizing your taxes.

Then the next step is to prepare all the documents to implement the plan. Then I go through all the documents with you carefully, translating them into plain English for you to make sure you understand them and know what they're saying. Otherwise they tend to be a cure for insomnia.

The fourth step is to actually fund the trust. We have to set up the trust and get all the assets titled properly so that it actually legally achieves what we set it up to do for you.

We do a lot of living trusts because they are so popular.

If you're going to gift assets to multiple generations in your family, such as grandchildren and beyond in addition to your immediate family, we have to be very careful about and plan around the generation skipping tax that can be incurred on those disbursements.

The object is usually to pass the most to your beneficiaries that we possibly can.

If your estate is large enough that there may be some tax due, we can talk about getting some assets out of the trust into an irrevocable life insurance trust so that there can be funds available to pay any taxes that are due upon a death. That way those assets will not be included in the estate for federal estate tax purposes.

If you are going to have a tax due and have a second home, we can do a residence or qualified residence trust to get that real estate passed on to your chosen beneficiary with the least amount of tax possible ending up being due on it.

If your estate is under $3.5 million, there's a much lower liquid tax consequence and we can work more directly on achieving the objective that you've laid out. Sometimes I will do this working alone. Other times I'll take a team approach to minimize your taxes, working with your insurance agent, financial advisor or broker to meet your objectives.

If you have a business, we may reframe that into a limited liability corporation or limited family partnership to be able to transfer your business to your beneficiaries with the minimum amount of tax due.

Sometimes the issue is not one of tax due. Rather, it's an issue of financial ability of your beneficiary or recipient. It could be that they can't handle money well, or have a health or addiction problem, we may still set up a trust to make sure the assets are used to the maximum benefit of your beneficiary and are not squandered.

Many people think a will is all they need and that can be a big mistake, because a will only goes into effect once one passes away. A will is useful in the case of younger people who may not have a lot of assets, who wants to be able to specify who will care and provide for their children and make financial decisions about the estate it they pass away prematurely. The guardian of the children and the guardian of the estate do not have to be the same individual.

Even though you can nominate those people in your will, they still have to go into court and get approval from the court system.

If the assets are in a trust, guardianship approval from the state is not necessary.

A will with a testamentary trust can be used if you don't need a trust right now. It doesn't take effect until a person dies. This could apply to a young family that has insurance policies set up with substantial cash to provide for the surviving spouse and/or children. A testamentary trust will make sure that those funds are properly managed for the benefit of the surviving family members.

Estate planning is essentially working to set up your financial affairs to achieve your objectives without having to deal with the power of the state and the court system stepping in to manage it for you.

With people living longer, estate planning also can be used to provide for what their health care is going to be like, using an instrument in California called an Advanced Health Care Directive. You can specify what kind of health care you want, the quality of life you want, if you want to be kept on life support or not if you're comatose showing no brain activity, whether or not you want to make any anatomical donations, you can specify funeral instructions and you can specify who will make these decisions for you.

It's important to know that estate planning is not just for those who are considered "wealthy".

Estate planning can also handle the management of debt, using a power of attorney. You might someday need someone to manage your affairs if you're unable to. We'd use a durable power of attorney to handle that situation. A regular power of attorney terminates upon two conditions: mental incapacity or death. Only a durable power of attorney survives those conditions.