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Lunch & Learn Recap: Estate Planning

Lunch & Learn: Estate Planning

Last week, Rebecca Goldfarb, an attorney specializing in estate planning and elder law services visited the Animation Guild to talk about estate planning, a subject that can be difficult and stressful for many individuals. If you missed the event, you can read an overview of her discussion here.

Estate Planning 101

There are four components to estate planning that you should keep in mind.

  1. Advanced Health Care Directive (AHCD) – This document gives a person the legal authority to make health decisions for you. It often consists of two parts: A Living Will that outlines your healthcare wishes to enable the person designated as your Power of Attorney to make medical decisions on your behalf. You can find a general California Statutory AHCD here.
  2. Durable Power of Attorney for Finance (DPOA) -This document protects you when you cannot make legal or financial decisions. It allows a designated agent to make these decisions on your behalf should you become incapacitated.
  3. Will – A legal document that administers your assets after your death. Estates with values over $150,000 will have to enter into probate.
  4. Trust – A complex legal instrument that protects your assets for your beneficiaries and does not require probate.

What if you don’t create an AHDC or DPOA?

Should you become medically incapacitated, your family or caregivers will have to seek a conservatorship. A conservatorship is the court process that determines who will be making medical and financial decisions for you.

What is probate?

Probate is the process of administering an estate of someone who has died. The goal of a probate is to wind down the affairs of the estate, locate assets, file and pay taxes, pay off creditors and distribute assets to heirs.

Trusts vs. Wills

Wills distribute your assets, name a legal guardian for your minor children or caretaker for your pets. Estates with values over $150,000 enter into probate. Legal fees and costs can add up to tens of thousands of dollars and the process can last years. For example, you would pay about $22,000 in probate fees on a $400,000 estate. While you are in probate, all of your assets are frozen.

Trusts protect your assets for your beneficiaries through a complex legal instrument. A trust is divided into three elements: Grantor, Trustee and Beneficiary. While you are alive you are the Trustee and Beneficiary but after you pass away your heirs become the new Trustees and carry out your wishes accordingly without having to go through the expensive probate process. All Trusts also come with a pourover will that names legal guardians. Imagine you have an empty box (The Trust) and you must place all your assets (cars, homes, etc.) into the box, which can then be handed to your heirs. You still have access to what is in the trust, i.e. selling an existing home and buying a new one.

Common Questions about Esatate Planning

What if you have designated a beneficiary on your life insurance?

A Beneficiary designation for your life insurance, pension, 401Ks, etc.  bypasses probate and supersedes a Trust, so make sure your designations are always up-to-date. You can make your Trust a beneficiary of these assets.

Should you give out copies of your will or trust to multiple individuals?

Goldfarb doesn’t always recommend having lots of copies. What if you change things? Generally, keep the trust to yourself but let your heirs know where they can eventually get a copy.

Do you need to update your estate plan?

Yes! It’s not meant to be done only once. Many plans have a fatal flaw: outdated documents, missing documents, poorly written documents, a Trust that isn’t funded (i.e. you didn’t put your assets in the box), or acted without good council. It’s a good idea to revisit your estate plan and ensure everything is current.

Do I need a will or to go through probate if my spouse dies?

If both of your names are on all accounts then you can do whatever you want with the assets. You don’t need to go through probate. However, if you have independent credit cards or separate accounts, it will be a problem.

How much does estate planning costs?

On average, estate plans can cost between $2,500 to $5,500, depending on your needs.

Can you put international assets into a Trust?

No, international assets cannot be put into a United States Trust. Every country has its own laws and regulations.