Always have a valid WILL

What is a will? Your will is a legal document in which you describe instructions to be carried out after your death. You can direct the distribution of your assets (money & property), and give your choice of guardians for your dependents.  It becomes irrevocable (unchangeable) when you die.

In your will, you can name:
1. Your beneficiaries

2. A guardian for your minor children – a person responsible for your child’s personal care if you and your spouse die before the child turns 18. You may name your guardian, who may or may not be the same person, to be responsible for managing any assets given to the child, until he or she is 18 years of age.
3. An executor – an institution or person to collect and manage your assets, pay any debts, expenses and taxes due (on court approval) and distributed to beneficiaries according to the instructions on the will.  Role has significant responsibilities and is time-consuming – choose the executor wisely.

Does a will cover everything I own? No. Your will affects only those assets that are titled in your name at your death.  The following may not be affected by your will.

Life insurance
Retirement plans
Assets owned as joint tenant with rights of survivorship
“Transfer on death” or “pay on death.”
“Community property with right of survivorship”
– Married couples or registered domestic partners may hold title to their community property assets in their names as “community property with right of survivorship”.  When the first spouse or domestic partner dies, the assets pass directly to the surviving spouse or partner without being affected by the will.

What happens if you don’t have a will? If you die without a will (you die intestate), California law will determine the beneficiaries of your estate.

Contrary to popular myth, if you die intestate everything is not kept by the state but the state may inherit your estate under certain situations.  In California, those married or in a registered domestic partnership will have their community property assets passed to their spouse/registered domestic partner.  They may also receive part of your separate property assets, with the rest going to your children, grandchildren, parents, sisters, brothers, nieces, nephews and other legal relatives.

If you are not married or in a legal partnership, your assets will be distributed to your closest relatives and if your partner dies before you, their relatives may also be entitled to some or all of your estate.  Friends, a non-registered partner or your favorite charity will receive nothing unless you name them in a will.

If you die intestate and your deceased spouse/registered partner have no living relatives then your estate does go to the State of California.

What if my assets pass to a trust after my death? A will can provide that all assets be distributed to trust on your death.  When trusts are created under a will, they are testamentary trusts.  If you have a living trust (a trust established during your life) then your will is referred to as a pour over will.  The purpose of such a will is to make sure that any assets not already in the name of your trust are transferred to your trust upon your death.

How is a will carried out? A will is managed by a court-supervised process called probate.  The executor of a will needs to start the probate process by filing a petition in court seeking official appointment as executor.  The executor can take charge of your assets, pay debts and, with court approval, distribute your estate to your beneficiaries.

Advantages of probate:  Rules that are followed on dispute are defined and quickly executed.
The court reviews the executor’s handling of the estate protecting the beneficiaries’ interest

Disadvantages of probate: It is public – your words and the value of your assets are on public record.
Fees are usually higher because they are based on a statutory fee schedule which can be more than under a trust. It takes longer – usually 6 weeks for each court request

Who should know about your will? You will need to decide who should know about your will – the exact content will be (at minimum) known by your attorney and yourself.  Your executor and close family should know how to access your documents but don’t need to know the details.  Your original signed will, should be kept in a safe place (lawyer’s safe or a fireproof box).

*** THIS INFORMATION IS PROVIDED ONLY AS EDUCATION AND NOT AS LEGAL ADVICE ***

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

What Legacy Will You Leave?

What Legacy Will You Leave?

Aviva Shiff Boedecker, J.D.
www.asbcharitableplanning.com

 Retirement plans are the most heavily taxed assets in most people’s estates because when heirs withdraw the funds, they must pay income tax, in addition to any estate tax that may have already been paid. By designating a charity, school, religious organization or other nonprofit as a beneficiary of your retirement plan, you can reduce or eliminate taxes, retain complete flexibility and control over all your assets, and leave a legacy that will have a lasting impact.

You and your heirs can avoid both income and estate tax on your retirement account when you give the remainder of the plan to one or more tax-exempt organizations and leave your heirs other, less-taxed property.

With a simple designation of beneficiary form, which is available from your plan administrator, and without impacting your own or your family’s security, you can make the gift of a lifetime.

For more information about making a flexible and tax-wise legacy gift to the organization(s) of your choice, contact Edi or Aviva.

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

Introduction to Living Revocable Trust

Introduction to a Living (Revocable) Trust

(information summarized from the State Bar of California)

Living trust is a legal document that you use to control your assets during your life and that your trustee can use to direct your assets when you are incapacitated or at death.  Your assets (bank accounts, brokerage accounts) are put in the name of a trust (instead of your own) and administered by the trust.

You manage the trust during your life and your successor trustee (an institution or person) will direct it when you are unable or unwilling to do it yourself.  This type of trust is called a revocable living trust or revocable inter vivos trust or grantor trust.  Your trust can be amended or revoked while you are competent.

  • A living trust agreement gives the trustee the legal right to manage and control the assets held in your trust.
  • Instructs the trustee to manage the trust’s assets for your benefit during your lifetime
  • Names the beneficiaries (person and charitable organizations) who are to receive your trust’s assets when you die
  • Finally, it gives guidance and certain powers and authority to the trustee to manage and distribute your trust’s assets – the trustee is a fiduciary.

What can a living trust do for me? It can allow someone of your selection to make financial decisions and act on your behalf if you’re unable to manage them yourself.  In setting up your living trust, you may serve as its trustee initially or you may choose someone else to do so.  You can name a trustee to take over the trust’s management for your benefit if you ever become unable or unwilling to manage it yourself.  At death or if disabled your trustee like a will’s executor and would then gather your assets, pay any debts, claims and taxes, and distribute your assets according to your instructions.  Unlike a will, this can only be done without court supervision or approval.

Should everyone have a living trust? No.

What are the disadvantages of a living trust?  No court supervision.
Cost of trust can be higher than creating a will.
Creates additional paperwork since lenders don’t usually lend to a trust and you may need to take it out of the trust (by deed) before you can take the loan on any real property.

If I have a living trust, do I still need a will? Yes.  Your will affects any assets that are titled in your name at your death and are not in your living trust or some other form of ownership with a right of survivorship.

Will a living trust help reduce the estate taxes? No.

Will I have to file an income tax return for my living trust? During your lifetime the trust is identified by your social security number and all income and deductions related to the trust’s assets are reportable on your individual income tax returns.

How do you find an attorney to work with you?
Ask us for a referral or ask a trusted friend. You can also call the California State Bar – certified referral service.  www.calbar.ca.gov/lrs or 1-866-442-2529.  You may want one who is ‘certified specialist in estate planning, trust and probate law’ although some good estate attorneys do not have this certification.  You could also check a list at www.californiaspecialist.org and click Specialist Search. Some attorneys charge hourly and others have a fixed/flat fee.  Always be wary of insurance an annuity sales companies giving estate planning advice.  You may want the pamphlet “How Can I Find and Hire the Right Lawyer?” from the state bar: www.calbar.ca.gov

** The information provided is NOT legal advice it is only provided for informational purposes to guide you through this process **

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

Durable Power of Attorney (DPOA)

Durable Power of Attorney (DPOA)
(source: The State Bar of California information)

DPOA documents are meant to provide a trusted person to act in your stead.  There are two types of DPOAs that you need to include to care of your needs when you are unable or unwilling to do so.

The Health Care Directive should include the name of an agent or attorney-in-fact who you know will advocate for your health care needs.  This individual needs to be an advocate to ensure that your wishes (not theirs) will be respected and followed.

The DPOA for property (or finances) will handle day-to-day financial transactions that you normally handle; such as, paying bills or signing your taxes if you’re not able.  In addition, if you have a Revocable Trust it is the attorney-in-fact that will transfer non-trust assets to your trust if appropriate.

Know that your DPOAs are only valid while you’re alive.

If you don’t have a DPOA and you are unable to make decisions a court will appoint a professional conservator for you and pay them from your estate.  The court does supervise your conservator but it is often more expensive and cumbersome if your conservator does not know or follow your wishes.

Act now, you never know when you might need assistance to direct your financial or your health decisions.  You can get templates from the State of California or contact an Estate attorney or call us for an internal referral.

*** This blog is provided as information to encourage individuals to make available documents that are legally important in their lives ***

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com