Questions

Do I need an estate plan?

For most people, the answer is yes.  This is especially true if you have minor children because you want to be able to decide who will care for your children in your absence and to ensure that your assets are preserved for their benefit. Even if you have a small estate, it is important that you have designated someone to manage your assets and make health care decisions for you in the event that you are incapacitated.  If your estate is small, your plan may be quite simple, focusing on who will receive your assets after your death, and who should manage your estate and distribute your assets. If your estate is larger, there are many other issues to consider such as preserving your assets for your beneficiaries and reducing or postponing the amount of taxes which otherwise might be payable after your death.

What happens if I die without an estate plan?

In California, an estate with assets over $184,500, will be probated on your death unless you have a trust in place. Assets include bank accounts, stocks and bonds, furniture, cars, jewelry and the “fair market value” of any real estate owned by you. Your assets may also include life insurance proceeds, retirement accounts and payments that are due to you (such as a tax refund, outstanding loan or inheritance).

Probate means that your heirs will have to go to court where a judge will appoint someone to handle your assets and personal care. Your assets will be distributed to your heirs according to a set of rules known as intestate succession—which means that your assets may not go to the persons that you would have chosen. Probate can be a long and drawn out process that may take years. During part of probate, your assets are frozen so that an inventory can be made. Court or executor approval is required for any asset to be distributed or sold. If your family needs money to live on, they must request an allowance.

Probate can also be costly. Legal fees, executor fees and other costs must be paid first before your assets can be fully distributed to your heirs. Probate fees for an uncontested probate are set by the California Probate Code. (Cal. Probate Code § § 10810, 10811.) Fees are based on the total market value of the assets subject to probate (this is not what you owe, but rather, the full value of the asset) and  are usually paid out of decedent’s estate. Probate typically cost between 5% and 8% of the total estate value, depending on the size of the estate.

Unlike trust administration which is private, probate proceedings are matters of public record. This means that anyone can see what you owned and who will receive your assets.

What is the difference between a will and a revocable living trust?

These are both legal documents that identify who you would like to inherit your assets upon death.  However, a will is still subject probate, which is a public court proceeding that can be lengthy and costly. 

A revocable living trust is a private legal document that avoids the need for probate.  A trust can be highly customized to address your unique circumstances and concerns.  In addition to directing to transfer of your assets after death, a trust also addresses how you, your assets and children will be cared for in the event that you are incapacitated. It also allows you to specify how your children should be cared for in the event of your death. Trusts also allow you to maintain control of assets after your death because you will select a Successor Trustee to manage your estate and provide specific guidance as to how the estate should be administered. If you have young children, a trust allows you specify the terms of how and when they should inherit.  Importantly, a trust can be structured to protect your assets from your beneficiaries’ creditors, spouses, and themselves if there is a concern that they may be irresponsible.  Significantly, because it is revocable, the trust can be amended at any time during your life in order to address any significant life changes.

Who has control of my estate if something happens to me?

If you and your spouse have set up a revocable living trust, you will each typically serve as a co-trustee and either can act and assume control of the estate if the other is incapacitated or dies. If something happens to both of you, or if you are the only trustee, the person whom you have designated to serve as the successor trustee will step in and manage your care and financial affairs for you. If you are incapacitated, the trustee will serve until you regain capacity. If you are deceased, the successor trustee will serve for as long as the trust is in effect. The successor trustee’s job is to gather your assets, pay your debts, file your tax returns, distribute assets and oversee the financial care of your minor children for as long as you dictate.

How do I ensure that my minor children are cared for in case anything happens to me?

The best way to ensure that minor children are cared for is to name a guardian who will care for them until they reach adulthood, and to set up a revocable living trust with enough assets to cover their care. If you die and have not named a guardian, the court will appoint a guardian who will care for your child on a day-to-day basis, and assume responsibility for all legal, educational and medical decisions for your child. Further, if there is no guardianship nomination in place, multiple family members may petition the court to get the guardianship of the child and the judge may choose someone that you would not have chosen.

Because minor children are not legally qualified to manage their own property until they turn 18, it must be done for them. If you set up a revocable living trust that is funded with all of your assets, the trustee will be able to grow and manage those assets and use the funds to pay for your children’s living expenses. Assets can stay in your trust, managed by the trustee, until your children (or other beneficiaries) reach the age (or ages) at which you want them to inherit. You can continue the trust for as long as you like, in order to provide for children with special needs or to protect the assets from your beneficiaries’ creditors and spouses.

For help selecting a guardian for your minor children, click here.

How much does it cost to set up an estate plan?

The cost of an estate plan varies depending on the size and complexity of the estate. We offer a free initial consultation during which we will assess your particular situation, determine what your needs are, and provide you with a quote.  Mendoza Mosser Law charges flat fees for drafting an estate plan and hourly fees for trust administration.