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What happens to your Children if something happens to
you?
Actually, it's up to you, and you have two choices: a) Decide now who you
think should raise your children if you could not, and name them in your
Will as 'Guardian'; or b) If something happens to you, let a judge make
the decision for you.
Of course, the right decision is obvious, but many people
procrastinate here because they can't decide who the 'perfect' choice
would be. Just remember that a good choice by you—even if it's not
the 'perfect' choice—is going to be better than one made by someone
you've never met. Also keep in mind that it's something you can always
change.
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What's the point of a Living Trust?
The easiest way to understand the primary benefits of a Living Trust is
to answer two questions.
First, on your death, would you prefer that: a) Your family spend 1 to
2 years doing paperwork at the Probate Court, pay $10,000 to $20,000 in
lawyer's fees, and leave a public record of exactly what you owned and
the names and addresses of who inherited it—which is what happens
when you only have a Will; or b) Have your family handle things privately
in a fraction of the time (usually a few months), at a fraction of the
cost (usually zero to a few thousand dollars), and leave no public
record? If you prefer the private, quicker and more cost effective
method, a Living Trust is for you.
Second, if something happens to you, would you prefer that your
children: a) Receive their entire inheritance outright at age 18 and
probably not use it in the wisest of fashions; or b) Have someone older
and wiser (whom you have chosen) use the inheritance to pay for your
children's education, housing, etc. until an age you choose for them to
inherit the money outright (for example half at age 25, half at age 30)?
If you chose the 'older and wiser' route, once again, a Trust is for you.
It is also important to note that married couples can save hundreds of
thousands of dollars in Death Taxes by the use of an A/B Living Trust Plan.
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What is Probate and how come everyone wants to avoid
it?
Probate is when you go to court to have property ownership transferred
out of a deceased person's name, and into the names of the people who are
going to inherit the property. This is a necessary process for anyone who
has not done proper estate planning.
The reason why most people want to avoid Probate is that it takes a
long time (an average of 1 to 2 years of paperwork), is very expensive
(generally a minimum of $10,000 to $20,000 in lawyer's fees for Southern
California families due to the high value of real estate here), and
leaves a public record of exactly what you owned and the names and
addresses of who inherited it. With a little planning, everyone can avoid
putting their families through Probate.
If planning was not done in advance and you need to go through a
Probate, don’t worry, we can help you get through it as quickly and
painlessly as possible.
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Don't I Avoid Probate if I have a Will?
No. This is a very common misconception. Think of a Will as your ticket
to Probate.
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Don't I Avoid Probate if I have a Trust?
Yes, but only for property you transfer into your Trust. But be very
cautious here. Make sure you get professional help with this because you
will need to know the correct language for the transfers, which assets
should/should not be transferred into your Trust and the different
methods for transferring different assets into your Trust. Not
transferring assets into your Trust or transferring assets incorrectly
can be worse than having no Trust at all.
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What are the 5 Legal Documents Every Parent Should
Know About?
The 5 Legal Documents are a Will, Living
Trust, Advance Health Care Directive, Durable
Power of Attorney for Finances and where appropriate a Community
Property Agreement. Click each of these documents to see more
information about them in the FAQs on this page, or visit my Services page for a brief description of each of
these documents and how they fit into a basic Estate Planning Package.
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What is included in a Complete Estate Plan?
A basic Estate Plan generally includes Will(s), Living Trust(s), Advance
Health Care Directive(s), Durable Power(s) of Attorney for Finances and
where appropriate a Community Property Agreement and/or other tax saving
documents like Life Insurance Trusts (ILITs). Also included should be instructions
for transferring assets into your Trust, a binder with tabs for each
document (Living Trust, Will, etc.), and a place in the binder to write
down where your safe deposit box is, where the key is, list bank
accounts, life insurance policies, financial advisors names and phone
numbers, etc. For more information on a Living Trust Package, go to the Services page.
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What is a Will?
A Will is a very useful document that allows you to: nominate someone to
raise your children after your death, say who gets your property after
your death, and appoint a 'Personal Representative' or 'Executor' who
will appear before the Probate Court, gather your property, pay your
debts and taxes, and distribute your property per your instructions.
The problem with only having a Will is that it is your ticket to
Probate. If you have a Living Trust and have properly transferred your
assets into it, you will avoid Probate. Note that if you have a Trust,
you still need what's called a 'Pour-over Will' to nominate a Guardian
for your children and to cover any assets that were inadvertently not
transferred into your Trust.
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What is a Durable Power of Attorney for Finances?
This is a really useful document if you become disabled because it can
allow someone you choose to handle your financial affairs that are not
part of your Living Trust, such as cashing checks made out to you,
handling your retirement accounts, filing your tax returns, accessing
your safe deposit box, selling a house to generate funds for your
family's support, planning to avoid death taxes, etc. Without this
document, the person caring for you would have to spend quite a bit of
their time (and your money) setting up what is called a 'Conservatorship'
and getting a judge's approval before acting on your behalf.
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What is an Advance Health Care Directive?
You may have heard of a 'Living Will' or a 'Durable Power of Attorney for
Health Care,' which were earlier versions of this document. In a Health
Care Directive you decide in advance such things as whether you'd like to
donate any of your organs, if you'd prefer cremation or burial, who you'd
like to be in charge of carrying out your wishes, and if it came down to
it, if you'd prefer to remain on life support or not.
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What is a Community Property Agreement?
In appropriate circumstances, a married couple can use a Community
Property Agreement to to ensure complete forgiveness of capital gains tax
upon the death of one spouse.
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What is Estate Planning?
In the simplest terms, Estate Planning is:
a) Putting in writing the names of the people you would want to take care
of your children, your finances and your health care if you couldn't do
so anymore (and telling them what you would want them to do); and
b) Using the appropriate legal documents so that in case of death or
complete disability, the money you've worked so hard for stays in your
family, instead of being wasted on excessive Probate Fees or Death Taxes.
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Should I buy a 'Cheapy' Trust from the Newspaper or
the Internet?
This is generally not a good idea. Like most things in life, you usually
get what you pay for, and Estate Planning is no exception. Most of the
problems with Living Trusts are caused by Trusts that are badly written,
do not come with the other documents you need, or do not come with proper
instructions for transferring assets into them. It's very important that
you meet personally with the attorney who will draft your documents, so
you can decide for yourself if he or she is competent and so you can be
sure that you will have all of the documents that are necessary to meet
your specific needs and goals. Where death taxes are concerned, mistakes
can cost your family thousands of dollars. It's simply not worth the
risk.
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My friend is a lawyer but does not usually do Wills
and Trusts. Should I have him/her draft a Will for me?
Think of it this way: would you go to a dermatologist to have open heart
surgery? Estate Planning is a specialized area that requires knowledge of
not only Wills and Trusts, but a variety of taxes (i.e., Estate Tax, Gift
Tax, Generation-skipping Tax, Income Tax of Trusts and Estates, and
Property Tax), Property issues (e.g., Real Estate, Personal Property,
Community v. Separate Property), Retirement benefits, etc. Most attorneys
are familiar with some of these legal issues, but only Estate Planning
Attorneys who work with them daily are skilled in all of them.
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Why isn't Joint Tenancy enough?
Joint Tenancy avoids Probate on the first death of a married couple, but
does not avoid Probate on the second death or on a simultaneous death.
After a first death, using Joint Tenancy with your children can lead to
unwanted results such as having to split the value of your house with
your child's ex-spouse on your child's divorce, having to sell your house
to pay your child's creditors after a car accident, or your child ending
up with gift tax problems when he/she gives part of the house to his/her
siblings after your death.
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