Navigating through wills and trusts can be complex, often leaving individuals with numerous unanswered questions.
Whether you’re planning for the future or managing a loved one’s estate, understanding these vital legal tools is crucial.
To assist you, we’ve compiled and answered the top 50 questions most people grapple with regarding wills and trusts. This guide is designed to provide clarity from basic to advanced estate planning concerns.
However, we understand each individual’s circumstances are unique. For personalized, expert advice, Linda Albers is here to help. With a wealth of experience and a reputation for providing compassionate and precise guidance, Linda is ready to assist you in crafting an estate plan that meets your specific needs.
Dive into our comprehensive guide, and for personalized consultation, reach out to Linda Albers for a smoother journey through the realm of estate planning.
1. What’s the difference between a will and a trust?
A will is a legal document that specifies how your assets should be distributed after your death. It also allows you to name guardians for minor children. A will goes through probate in California, which is a court-supervised process.
A trust, specifically a living trust in California, holds your assets while you’re alive and dictates how they will be distributed upon your death. A trust can help avoid the probate process.
2. Why do I need a will?
A will allows you to dictate how your assets are distributed, designate guardians for minor children, and name an executor to handle your estate’s affairs. Without a will, the state’s intestate succession laws will determine asset distribution, which might not align with your wishes.
3. What happens if I die without a will?
In California, if you die without a will (intestate), state laws determine how your assets are distributed. Typically, your closest relatives (spouse, children, parents) will inherit, but it may not be in the proportions you would have desired.
4. Can I write my own will, or do I need an attorney?
While it’s possible to write your own will, hiring an attorney ensures it’s legally valid and adheres to California’s specific requirements. Mistakes in a self-written will can lead to disputes and potential invalidation.
5. What is probate?
Probate is a court-supervised process that authenticates a deceased person’s will, appraises property, pays debts and taxes, and then distributes the remaining assets as the will (or state law, if there’s no will) dictates.
6. How can I avoid probate?
In California, one common way to avoid probate is by creating a revocable living trust. Assets in the trust aren’t subject to probate. Additionally, joint ownership, beneficiary designations on accounts, and transfer-on-death deeds can avoid probate for specific assets.
7. What is a living will?
A living will, often part of an Advance Health Care Directive in California, specifies your preferences regarding end-of-life care, such as life support. It communicates your wishes if you’re incapacitated and can’t make decisions.
8. What is a power of attorney?
A power of attorney is a legal document that allows you to designate someone (an “agent” or “attorney-in-fact”) to act on your behalf in specific matters, like finances or health care decisions, if you’re unable to do so.
9. How do I update or change my will?
To change a will in California, you can make a new will or add a “codicil” (a specific amendment) to your existing will. Both require the same formalities as the original will, like being witnessed.
10. Can I disinherit a family member?
In California, you can disinherit most family members in your will, but not your spouse without a valid prenuptial or postnuptial agreement. If you try to disinherit a spouse without such an agreement, they can claim a portion of the estate through “community property” rights.
11. What are the advantages of having a trust?
Trusts offer several advantages: they can avoid probate, potentially reduce estate taxes, provide privacy (since they’re not public record like wills), allow for quicker distribution of assets, provide asset management during incapacity without court intervention, and can offer more precise controls on how beneficiaries receive assets.
12. What is a revocable trust versus an irrevocable trust?
A revocable trust can be altered, amended, or revoked by the grantor during their lifetime. It becomes irrevocable upon the grantor’s death.
An irrevocable trust, once established, generally can’t be altered, amended, or revoked by the grantor. This type of trust can offer certain tax benefits and asset protection advantages.
13. How do I fund a trust?
To fund a trust, you must transfer ownership of your assets (like real estate, bank accounts, or stocks) to the trust. This usually involves changing titles, deeds, or beneficiary designations to the trust’s name.
14. What is a trustee, and what do they do?
A trustee manages the trust’s assets, making decisions in the best interest of the beneficiaries. They have a fiduciary duty to act prudently and in accordance with the trust’s terms, and they may handle investments, distributions, and tax matters.
15. Can a will be contested?
Yes, a will can be contested in California, but only by someone with legal standing (a direct financial interest) and generally for specific reasons, like if the will wasn’t signed properly, the testator lacked capacity, or there was undue influence.
16. What assets should I include in my will?
Ideally, you’d include all assets not directed by beneficiary designations or held in trust. This could be real estate, personal property, bank accounts not in a trust, and any other assets you want to specify distribution for.
17. What is estate tax?
The estate tax, sometimes called the “death tax,” is a tax on the transfer of a deceased person’s assets. As of my last update, California doesn’t have a state estate tax, but there’s a federal estate tax with various exemptions.
18. How can I minimize or avoid estate taxes?
You can potentially minimize federal estate taxes through various strategies: gifting assets during your life, establishing certain trusts (like AB trusts for spouses), charitable contributions, and other advanced estate planning techniques.
19. What is a testamentary trust?
A testamentary trust is a trust created within a will. It only becomes active after the testator’s death and after the will has gone through probate.
20. Can a trust earn income?
Yes, a trust can earn income, like interest, dividends, or rental income from trust-held property. The trust may need to file an income tax return, and there can be tax consequences for both the trust and the beneficiaries receiving distributions.
21. How does a trust affect my taxes?
The tax implications of a trust can be complex. While revocable trusts typically don’t change your tax situation during your life, irrevocable trusts might. Income generated by trust assets may be taxable, and distributions to beneficiaries can also have tax implications.
22. What is an executor, and what is their role?
An executor (called a “personal representative” in some states) is designated in a will to manage the deceased’s estate. This includes settling debts, paying taxes, distributing assets, and navigating the probate process.
23. How do I choose a guardian for my children in my will?
When choosing a guardian, consider their values, parenting style, age, health, and willingness to take on the responsibility. It’s essential to discuss your decision with potential guardians and make sure they’re willing and able.
24. What are the basic steps of the estate planning process?
Typically, estate planning involves assessing your assets and goals, discussing options with an attorney, drafting documents (like wills, trusts, powers of attorney), finalizing and signing those documents, and then reviewing and updating them as needed over time.
25. How often should I review my estate plan?
Review your estate plan every 3-5 years or after major life events like marriages, divorces, births, deaths, or substantial changes in assets.
26. Can I set up a trust for my children’s education?
Yes, you can establish an educational trust to set aside funds specifically for education expenses. The trust can specify conditions, amounts, and distribution timings for educational purposes.
27. What is a special needs trust?
A special needs trust is designed to benefit individuals with disabilities. It provides financial resources without jeopardizing eligibility for public assistance programs.
28. What is a charitable trust?
A charitable trust is established to benefit a specific charity or the public in general. It can provide tax benefits to the donor while fulfilling philanthropic goals.
29. Can I specify funeral arrangements in my will?
Yes, you can outline your desired funeral arrangements in your will, but it’s crucial to inform loved ones about these wishes separately since the will might be read after funeral decisions are made.
30. How are debts settled after death?
Debts aren’t automatically eliminated upon death. In California, the executor of the estate will use estate assets to pay off the deceased’s debts. If the estate lacks sufficient funds, certain assets might be sold to cover these debts.
31. Can I leave assets to a charity?
Absolutely. You can designate specific assets, a fixed sum, or a percentage of your estate to go to a charitable organization in both your will and trust. Such charitable bequests can also have tax benefits for your estate.
32. What happens to my digital assets when I die?
Digital assets include things like online accounts, social media, and digital files. In California, unless otherwise specified in a will, trust, power of attorney, or other record, a custodian may grant full or partial access to digital assets to a designated recipient or fiduciary.
33. What are the costs associated with setting up a will or trust?
Costs can vary widely based on complexity and the attorney’s fees. A basic will might range from several hundred to a few thousand dollars, whereas more complex trusts or estate plans might cost more. Always ask for a fee schedule or estimate upfront.
34. What’s the difference between joint tenancy and a trust?
Joint tenancy refers to a form of co-ownership where two or more individuals hold an asset together, with the “right of survivorship.” If one owner dies, the asset immediately goes to the surviving owner(s). A trust, on the other hand, is a legal entity holding assets for the benefit of specific persons or entities with distribution managed by the trust terms.
35. Can I have beneficiaries in a trust?
Yes, beneficiaries are the persons or entities you designate to receive the trust’s assets. They can receive benefits either during your lifetime or after your death, depending on the trust’s design.
36. What are the implications of dying intestate (without a will)?
In California, dying intestate means state law determines the distribution of your assets. Typically, assets will be divided among your closest relatives like your spouse, children, or parents. The distribution might not align with your desires, making it essential to have a will or trust in place.
37. Can I set conditions or stipulations on an inheritance?
Yes, you can set conditions within trusts. For instance, you might stipulate that a beneficiary can only access funds upon reaching a certain age or for specific purposes like education. However, conditions must be legal; you can’t set conditions that would promote illegal activity or are against public policy.
38. What’s the role of a will or trust in estate planning for a small business owner?
For small business owners, a will or trust can be crucial in determining how the business is managed or distributed upon the owner’s death. It can set succession plans, provide liquidity for taxes or debts, or detail the sale or dissolution of the business.
39. Do life insurance proceeds go through probate?
Typically, no. Life insurance proceeds with named beneficiaries bypass probate and go directly to those beneficiaries. However, if the estate is the named beneficiary, the proceeds would be subject to probate.
40. How do healthcare directives or living wills differ from standard wills?
Healthcare directives or living wills specify medical treatments you wish to receive or avoid if you become incapacitated. They focus solely on health decisions. Standard wills, on the other hand, detail how your assets should be distributed after death.
41. What is the difference between a durable and non-durable power of attorney?
A durable power of attorney remains in effect even if the principal (the person granting the power) becomes incapacitated. In contrast, a non-durable power of attorney terminates if the principal becomes mentally incapacitated or when certain specified events occur.
42. How can I ensure my family knows about my will or trust?
It’s advisable to inform your close family members about the existence and location of your will or trust. You might also provide copies to trusted individuals, including your attorney, executor, or trustee.
43. What are the legal requirements for a will to be valid?
In California, for a will to be valid, the testator must be at least 18 years old and of sound mind. The will must be in writing, signed by the testator (or by someone else at the testator’s direction and in their presence), and witnessed by at least two people who understand they are witnessing a will and who aren’t named as beneficiaries.
44. How are taxes handled for inheritance?
California doesn’t impose an inheritance tax. However, inherited assets may impact federal estate tax liabilities. Additionally, while inherited property typically receives a “step-up” in basis to its market value, which can reduce capital gains taxes upon sale, certain income (like from IRAs) might be taxable to beneficiaries.
45. Can a trust protect my assets from creditors?
Certain types of trusts, like irrevocable trusts, can offer protection against creditors, as the assets are no longer owned by the grantor. However, assets in revocable trusts remain part of the grantor’s estate and are generally accessible to creditors.
46. How can I revoke a trust?
Revocable trusts can be terminated by the grantor at any time. Typically, the trust document provides a method for revocation. If not, California law permits revocation by any method demonstrating clear and convincing evidence of the grantor’s intent.
47. Do I need a separate attorney for estate planning if I already have one for other matters?
It’s advisable to consult an attorney specializing in estate planning. They’ll be updated on the specific laws, nuances, and best practices related to estate planning in California, ensuring a comprehensive and legally sound plan.
48. How does marriage, divorce, or remarriage impact my will or trust?
In California, marriage can invalidate any will made prior to the marriage unless the will states otherwise. Divorce, meanwhile, typically revokes any provisions in a will or trust benefiting the ex-spouse, unless specified otherwise. Remarriage might necessitate an update to your estate plan to accommodate the new spouse and any step-children.
49. What are ethical wills or legacy letters?
Ethical wills or legacy letters are non-binding documents that allow individuals to pass on their values, beliefs, life lessons, and hopes to their heirs. While they have no legal status, they offer a personal, emotional component to estate planning.
50. Can I exclude specific items from a trust?
Yes, when establishing a trust, you decide which assets to include. If you want certain items or accounts to remain outside the trust, simply don’t transfer ownership of those items to the trust.
