what is an estate plan?

Investopedia defines estate planning as “the preparation of tasks that serve to manage an individual’s asset base in the event of their incapacitation or death. The planning includes the bequest of assets to heirs and the settlement of estate taxes….” Okay, but what does that mean? Estate planning plots a course for your life, so that when you do pass away, the wealth you accumulated while living will be distributed as you instructed in your estate plan. Essentially, an estate plan is the discipline that many of us need in order to keep our eye on what is important to us, such as our retirements and ensuring our loved ones are provided for after we pass.

avenue, trees, path-815297.jpg

Now that we know what an Estate Plan is, what is included in an Estate Plan? An entire Estate Plan can consist simply of a Will. Or an Estate Plan can consist of a Trust if real estate or a business is included in the estate. Regardless of whether you decide on drafting a Will or a Trust, it is also a good idea to include other important documents. These documents are Powers of Attorney, Advance Healthcare Directives, Final Disposition and Authorization, Dementia Directive, Marital Agreement (to change the character of an asset), and Nominations for Guardian, Advanced Health Care Directive and Power of Attorney for your children—if they are minor children. These documents are important because, in the event of your disablement or incapacitation, they instruct how your agent (the person you entrusted to care for you) cares for you and how your children’s guardian is to care for them.

What is the difference between a Will and a Trust?

A Will is a legal document created to provide instructions on how an individual’s property and custody of minor children, if any, should be handled after death. The individual expresses his/her wishes through this document and names an executor (a trusted person) to fulfill his/her intentions stated in the Will. In California, a Will must be in writing and must go through a public probate process. The probate process is a court supervised procedure that proves the authenticity of the Will. The court will officially appoint the executor named in the Will, which will give the executor the legal power to act on behalf of the deceased to distribute the estate to the deceased’s intended beneficiaries. This is often a complex process and can be expensive.

road, forest, fall-1072821.jpg
poppies, field, sunset-174276.jpg

Depending on the individual’s intentions, a Trust can take effect during his/her lifetime (Living Trust), or it can take effect at the time of his/her death (Testamentary Trust). A Living Trust is a legal document created during an individual’s lifetime, where the individual (Settlor) designates a person (Trustee) to be responsible for the management of the Settlor’s assets for the benefit of eventual beneficiaries. After the Settlor’s death, the Trustee takes legal possession and/or title of the deceased Settlor’s assets and distributes these to the Settlor’s intended beneficiaries. A Testamentary Trust is a Trust that is established in accordance with the instructions contained in a Last Will and Testament. An individual’s Will may contain instructions to establish a Testamentary Trust so that the Trustee can distribute the deceased individual’s assets in accordance with the provisions outlined in the Will. A Testamentary Trust, however, is not created until after the individual passes away.

A Living Trust, which takes effect during the individual’s lifetime, is designed to allow for the easy transfer of the individual’s assets while bypassing probate, which as noted above, can be a complex and expensive process. On the other hand, a Testamentary Trust, which is not created until after the individual’s death, is established in the provisions of the individual’s Will. As a consequence, the Testamentary Trust will not be created until after the Will has completed the probate process.

In addition, a Trust may be Revocable or Irrevocable. You (the Settlor) may modify or revoke your Trust during your lifetime. The moment you pass away, the Trust becomes irrevocable. Irrevocable Trust is a Trust that may not be modified or revoked once it has been signed.

What other documents are included in an estate plan?

In addition to the Trust and/or Will, most Estate Plans include Financial Powers of Attorney, Advance Health Care Directive, Final Disposition and Authorization, Dementia Directive, and perhaps for married individuals, a Marital Agreement. For clients with young children, Nominations of Guardians, Power of Attorney, and Advance Health Care Directive are also part of a complete Estate Plan.

  • Financial Powers of Attorney is an important legal document. This is your “general power of attorney” which is primarily intended to give your named agent the power to deal with any trust or non-trust assets in the event of your incapacity. Please be aware that this document gives your agent broad powers to dispose of, sell, convey and encumber your real and personal property.
  • An Advance Health Care Directive is also an important legal document. It gives your named Agents the power to make medical decisions, sign consents and/or releases with hospitals and/or doctors. It conforms to the new Federal Laws (known as “HIPAA”) with regard to the releases. It also acts as your “living will” for end-of-life decisions.
  • Advanced Dementia Directive. The Voluntary Advance Directive for Oral Feeding and Fluids in the Event of Dementia sets forth your wishes regarding the administration of food and hydration in the event you are suffering from an advanced stage of Alzheimer’s or another incurable, advanced dementing disease.
  • The HIPAA Authorization and Waiver is a “stand-alone” document to authorize your health care providers to release information concerning your otherwise confidential medical information to the individuals you have designated to act on your behalf in the event of disability and to any other individuals who you would also want to have such access.
  • The Final Disposition and Authorization Instructions give you the opportunity to specify how you wish to have your remains be dealt with (i.e., cremation or burial); to provide details of any prior arrangements and to designate the persons to carry out your wishes.
  • Marital Agreements are used when a married couple wants to change the character of an asset, a written marital agreement (Transmutation) is required (if you were married after January 1, 1985). If an asset was acquired before the couple got married, by gift, or by inheritance, then that asset is that person’s Separate Property. If an asset was acquired while the couple is married, and the asset was acquired in California, then that asset is characterized as Community Property. Both spouses equally own the entire asset. If an asset was acquired during marriage but is dearer to the wife than to the husband (i.e., diamond earrings, China set), then the couple can create this document to change the character of the asset from Community Property to the wife’s Separate Property. That way, the wife may dispose of the asset as she sees fit, without worry that the husband may claim the asset is Community Property.
  • Nominations of Guardian is a document that sets out who you want to care for your minor children in the event that you and the children’s other parent passes away. In this document, you instruct the court who you want to care for your children and leave any special instructions for the care of your children. Also, because children cannot make important financial decisions, you may also nominate a person to mange the minor children’s property until they become legal age of majority.
  • Appointment of a Power of Attorney and Health Care Power for Minors. Although there is no statutory authority, the Power of Attorney and a Health Care Power for your minor children will help cover the situations where you are not available.
Who needs an estate plan?

Many people may believe that they are ‘too young” to need an Estate Plan. Other people may believe that they are “too old” to begin thinking about an Estate Plan, while others may think they do not have a large enough worth or do not own enough assets to make it worth creating an Estate Plan. All adults, whether you are a young person going off to college or an elderly individual, should make creating an Estate Plan a top priority.

It is a wise idea for everyone who is over the age of 18 to draft an Estate Plan. Estate Plans are not solely created for people of power or wealth.  For young families, people of limited means, or those who are not concerned with avoiding the probate process, a Will may be a perfectly reasonable option. Perhaps you have young children and want to include an education savings plan (IRS 529 Plan) or you want to create a general trust fund for your children.

mother, mom, female-1782017.jpg
port, boats, sunset-6496782.jpg

For more established families or people who own real estate or a business or for those who wish to avoid the probate process, a Trust may be your choice as an Estate Plan vehicle. Maybe you own a small business and when you pass away you intend that your spouse or children inherit it. Placing your small business into a Trust may be a good idea so your beneficiaries can avoid state estate taxes.

In addition, Capital gains taxes can be avoided in certain situations by creating a Charitable Remainder Trust (CRT). A CRT is a gift of money or property to an irrevocable trust. The Trust is free to make investments. You (the donor) will receive an income stream for a certain term of years or for your lifetime. Also, you will receive an immediate income tax charitable deduction when the CRT is funded based on the present value of the assets that will eventually go to the named charity. Typically, you will be the beneficiary during your lifetime. However, you could also create an irrevocable trust with regards to the income received from the CRT. This may create additional tax savings to your beneficiaries.

Perhaps you have an existing Estate Plan, but you want to make amendments to it. It is a good idea to revisit your Estate Plan every five (5) years, or whenever there is a major change in your life. Or you have an ailing parent who needs a Will or Trust. As mentioned above, if you pass away without a Will (intestate), then the courts will dispose of your property for you—regardless of any wishes you may have told anyone. California requires a written Will.  Or you or your parent has a Will or Trust, but you think you may need one of the other documents I spoke about earlier. A Power of Attorney grants a trusted agent the authority to act on your behalf or your parent’s behalf in financial matters. An Advance Health Care Directive designates the physician, nominates a conservator, includes end-of-life health care wishes, disposition of the principal’s remains, and whether the principal wishes to donate his/her organs and tissue, among other important instructions and provisions.

To sum it up, I advise everyone to have or create an Estate Plan.

mountains, birds, silhouette-100367.jpg
Why do I need an estate plan?

A Will or a Trust is considered an individual’s last testament. Your estate will be disposed of and distributed according to your intentions. However, if you do not draft and leave a Will or Trust with these instructions on how to dispose of and distribute your assets, your estate will be disposed of by way of Intestate Succession. Your estate will be distributed according to California law, typically with your spouse, children, parents, or other relative will become the beneficiaries of your estate.

Additionally, if you become physically or mentally unable to care for yourself, a comprehensive estate plan, complete with Durable Powers of Attorney and Advance Health Care Directives instruct your agent, loved ones, health professionals, and financial professionals how you wish to be cared for.

family, people, mother-5065296.jpg
mountain, nature, dusk-6525356.jpg

Furthermore, you can get creative in order to defer, reduce, or avoid future tax liabilities. We work hard for what we earn and have more than likely already paid some sort of tax. A creative Estate Plan can keep Uncle Sam’s hands out of the pot, or at the very least postpone any tax collection.


I am not a tax expert. For a more in-depth discussion regarding the tax-savings potential of any Trust, I advise speaking to a trusted California CPA.

How can I create an estate plan?

It is true, anyone can create his or her own Estate Plan. There are templates available all over the internet. However, it is easy to begin to chase your tail or fall down a legal rabbit hole that may not even be relevant in your situation. Also, it may also be difficult to determine whether you can legally make the gift you intend to make.

This is where an Estate Planning attorney will assist you. An attorney will help you keep on the right track and will not let you fall down any rabbit holes. Even if you are unsure about how you want to distribute your estate or who to make distributions to, a good Estate Planning attorney can help you make those decisions through open and candid conversations.

mountains, fog, sunset-833326.jpg
Where Do I Get an Estate Plan?
I Can Help

Addressing the issues of potential illness, declining mental capacity, and eventual death are not easy or comfortable topics to discuss. I understand, it took my wife some convincing before we started to discuss who we wanted to take Guardianship over our minor children and how we wanted our property distributed after we pass away. But after we signed all of the documents, my wife felt better knowing our children will be taken care of and our property will be distributed according to her intentions.

I charge flat fees for the drafting and execution of an Estate Plan. That means that you do not need to fear contacting me to ask a question because “the meter is running.” My intention is to take a genuine interest in you, my client. I want to understand your Estate Planning objectives. That is the fool proof way to draft a legally sound Estate Plan. This flat fee covers your initial Estate Plan consultation where we discuss your assets, family situation, and a rough idea of what you would like included in your Estate Plan. After that, we will again meet (either personally or virtually) where I will ask a range of pertinent questions. After which, I will be able to draft a comprehensive, well-planned Estate Plan. Any major changes and future amendments will be charged at the firm’s hourly rate.

bridge, forest, fantasy-19513.jpg