Frequently Asked Questions

Everyone should have some form of estate plan, although an estate plan will differ from person to person. Your typical estate plan includes the following documents:

• Advance Health Care Directive – designates a person you trust to have legal authority to make medical decisions if you are mentally or physically unable to care for yourself.
• Durable Power of Attorney – Designates a person you trust to have legal authority to handle your financial affairs and help take care of your family.
• Revocable Trust – Designates a person you trust to control what happens to your property if you become incapacitated or pass away. The trust allows you to decide before hand what happens to your things before this happens.
• Will – Your will allows you to make sure that all of your things are distributed as you wish after your passing. A will may “pour-over” your things into the trust so that your trust may distribute the property. Importantly, if you have minor children, you can designate guardians of your children in your will.

While there are many different forms of estate planning, these documents cover the typical estate plan. While your specific situation may need a more, or less complicated estate plan, everyone should have the Advance Health Care Directive and Durable Power of Attorney at a minimum to avoid undue complications for your loved ones should anything happen to you.

A revocable living trust is a written document, which names a person (the “trustee”) to take care of your property. During your lifetime, you are typically the trustee, and after you die, the person you nominate takes care of your property and makes sure that your property gets distributed as you wish. You can imagine your trust is kind of like a wall safe. You keep all your valuable assets in a trust just like you would a safe. As long as you are alive, you hold the key to your trust and you can take things out and put things in whenever you wish. The purpose in having a trust is so that if you become incapacitated or pass away, you get to choose who gets the key to your safe. Instead of the court going through your things and deciding piece by piece who gets what according to the law, you get to choose who gets the keys, and they get a set of instructions from you on what to do with your “stuff”. This allows you to be in control of what happens to your “stuff” and, you get choose who gets what “stuff” and who gets none of your “stuff”. With a revocable living trust, your trustee can transfer your property without having to go through the time and expense of probate. Having a revocable trust also makes the process of transferring everything much quicker and cheaper, and saves your family undue stress and anguish.

“ATROs” stands for Automatic Temporary Restraining Orders. You may also see these referred to as “Standard Family Law Restraining Orders”. If you have been served with a summons from family court, you are already subject to these restraining orders. Basically, these orders tell the parties involved in a family court case to keep the status quo. For instance, you may not take your minor children out of the country, make any major purchases, or change beneficiary designations for any insurance or other coverage. While there are ways to make changes, they typically involve notification and consent of all parties involved. If you are subject to ATROs and need to make these kinds of changes, you should consult a lawyer on the best way to do so.

Estate planning is probably the last thing on your mind after going through an emotional divorce. However, you need to update your estate plan after a divorce, because if you don’t, then your property could be distributed in ways you don’t want after you die, including to your ex-spouse. While California law provides some protections, such as revoking any bequests that your will made to your former spouse (probate code § 6122), there are parts of your estate planning that may not be affected, or worse, be left without anyone to make decisions if the person named was your former spouse. Even before a divorce is finalized, you should be taking steps to create new estate planning documents, and updating the people who are going to help you in your time of need. You should contact an estate planning attorney during divorce proceedings, as there are many restrictions and requirements to modifying your estate plan before your divorce is final.

In California, when property is held as joint tenancy or community property with right of survivorship, each spouse is prohibited from providing their share of property to anyone other than the other spouse in their will. When one spouse dies, the other spouse is automatically given 100% of the property interest.

The main difference between these forms of title is what happens when it comes to paying taxes. If a couple has property held as joint tenants, and one spouse sells the property jointly held prior to the death of the other spouse, part of the profit will be subject to capital gains tax. However, if the property is held as community property with right of survivorship, it will not be subject to capital gains tax when sold. While unmarried parties may hold title as joint tenancy, only a married couple or registered domestic partnership may hold title as community property with the right of survivorship.

When you create a revocable trust you still technically own all the assets within the trust. All of the income, interest, and dividends earned by the trust assets are reported to the Internal Revenue Service on your own tax return. While there are certain situations that may require a separate tax id number for your revocable living trust, you will typically report income earned on your personal tax return and do not need a separate income tax return for your revocable trust.

When you die, your trust will continue. Your trust income will no longer be accredited to you, and will become its own taxable entity. When this occurs, the trust will need its own taxpayer identification number and the trustee will need to file a separate income tax return for your trust. Any income distributions made to beneficiaries will be deducted from the trust income and the beneficiaries will report the income received on their own income tax return. The trust will pay taxes on its own income that does not get distributed.

Probate guardianships are court proceedings in which a judge gives custody of a child, and/or the power to manage a child’s property, to someone who is not the parent of the child. In a nutshell, you need to File a Petition for Appointment of Guardian with the court along with a few other required forms. Then you must schedule an investigation, serve relatives with notice, have all your forms reviewed and filed, attend your hearing, and file the order and letters. In general, you do not have to have a lawyer, but it takes a lot of time and energy to fill out the forms and give notice to all relatives. The forms are complicated and may require you to go back to court and take more time if any mistakes are made. I recommend reviewing “Becoming a Guardian” published by the California Judicial Branch.

A life insurance company will not pay proceeds to minor children. Also, they will not pay proceeds to a surviving spouse. Naming your minor children as beneficiaries is not a good idea. If you want to have your minor child benefit from your life insurance proceeds, speak with your insurance company or your estate planning attorney to determine the best way to do this. There are various methods that enable you to benefit your children from your life insurance. If you are stuck in the situation above, the next steps will be petitioning a probate court to appoint a guardian who will have oversight until the child reaches the age of majority (18 in California). This means sitting through court proceedings and dealing with court supervision, which is inconvenient and an additional expense at best, and at worst, potentially dangerous if you have disabled children who depend on that money for their care.

The need for a conservatorship will depend on each individual’s different circumstances. The court process to appoint a conservatorship is expensive, time consuming and public, which can be humiliating. As long as your mother still has capacity, you should consult an estate planning attorney to obtain healthcare and financial powers of attorney. You mother can then nominate someone that she knows and trusts to help take care of her. If your mother no longer has capacity, your only option is to start a court proceeding. The best way to avoid this situation is to prepare your estate plan early. If you are over 18, you should consider consulting with an estate planning attorney.

A fiduciary is a person who is in a position of trust. When that trusted person is administering a trust or executor of an estate, they may be required to keep detailed financial records. Those detailed records are the fiduciary accounting. The fiduciary accounting will typically be made up of records such as income, capital gains and losses, expenses, payments, receipts, debts, interest, and dividends. The fiduciary accounting will be prepared in a statement provided to the interested parties, as well as the Court in some cases. Once approved by the interested parties, and/or the Court, the fiduciary may distribute the proceeds from the trust and the estate property.