Estate Planning Overview

What is Estate Planning?

This is the process of memorializing your affairs – personal, health and financial in case you become incapacitated or die
Choosing how the assets you have worked so hard all your life will be distributed at your death (personal and real property), bank accounts, IRA’s, etc.
Your goals and desires will be met, not somebody elses, not another family member you do not want to have that authority and not the State of California

What are Common Estate Planning Devices?

Planning for death:

Last Will & Testament
Intervivos Trust
Testamentary Trust
Business Succession Plan
Guardianship nomination for your children under 18

Planning for Incapacity

Advance Healthcare Directive
Living Will
HIPAA Declaration
Durable Power of Attorney

What happens if you DON’T do <a href=””>Estate Planning</a>?

Your estate could very well end up in Probate with years of battling and fighting among relatives
California law will kick in and issue it’s own “default Estate Plan” called intestate succession
Ex-spouses might get property
Children might inherit at 18
Assets could be distributed to distant relatives and relatives you don’t like
It will be costly, public and take time
You could become incapacitated and your wishes will not be followed, your financial affairs could become public with somebody or a Court appointed person making those decisions and your end of life decisions would not be followed since you do not have any Estate Plan designating them.

Key Issues that mandate you should do an Estate Plan?

Are you expecting to live longer?
Do you have children?
Do you have a blended family?
Are you a business owner?
Do you own real estate?
What kind of legacy do you want to leave?
Are you prepared for a catastrophic event?
Do you ant your estate to incur the cost, delay and public nature of a probate?
If you have done nothing, how will you protect your family and assets?

Do you need to Review your Estate Plan?

Have you received an inheritance?
Change in your financial circumstances?
Started a business?
Are you a business owner?
Your retiring?
There has been a death of a beneficiary?
Birth of a child or grandchild?
New son-in-law or daughter-in-law?
New Spouse or Divorce?

Why do you need incapacity planning?

Without it, the Court will have to appoint a conservator you may or may not know?
This will be in effect only while you are alive?
You can designate who will take care of your financial affairs while you are incapacitated?
You can state how your incapacity will be determined?
The third parties will be able to get information and give information to the person you designate for your financial affairs?

Advance Healthcare Directive

There are three main options for the drafting of documents in planning for health care decisions:

A statutory advance health care directive form ;
Preprinted forms, including the California Medical Association (CMA) , the California Hospital Association (CHA) form, a simply worded form from the Institute for Healthcare Advancement , and a form designed for persons with developmental disabilities from the Coalition for CompassionateCare of California; and
An attorney-drafted custom form, complying with statutory requirements.

Selecting the appropriate option will depend greatly on the health care choices the client wishes to make. The CMA form is the most widely used because hospital staff, hospice workers, doctors, and other health care providers accept it as a legally binding document. Using the CHA form may be prudent if the person signing it wants additional protection for not prolonging his or her life in situations not covered in the CMA form. The CHA form follows the statutory language exactly, while the CMA form  The easily understood form is useful for a client who may have trouble reading or comprehending legal documents. The form from theCoalition for Compassionate Care is an excellent choice for clients with developmental disabilities. An attorney-drafted form may be questioned by an inexperienced health care facility employee who is familiar only with the preprinted forms. Such questions may cause delays in treatment while the document is being approved by a hospital’s legal department. Attorney-drafted forms may occasionally be appropriate for a client with an unusual health condition or specific health care wishes that can be effectively communicated only in a custom document. In addition to the primary documents for health care decisions, there are several related documents that should be considered:

Release of protected health care information under the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the California Confidentiality of Medical Information Act (CMIA);
Request regarding resuscitative measures;
Anatomical gift of body or organs; and
Nomination of conservator of the person

Why do a Trust and/or Will after Residency or Citizenship?

You worked for a long time to get to this point.
You did it for your family. Why would you not protect them if you should become incapacitated or die or cannot make your own decisions?
Now that you are legal, it is time to protect your family.
Nobody knows when their time will be up or when something will happen to them making them incapacitated.
Give you and your family peace of mind.
Get a Trust.
Get a Will.
Get a Power of Attorney and the Health Care Directive

Estate Planning is the process of memorializing who you trust to manage your affairs (personal, health, financial) during incapacity and death and choosing how your assets will be distributed at your death. The ultimate goal of estate planning is determined by the goals of the client and may be as simple or complex as your needs may dictate. Who needs estate planning? Every adult that is mentally healthy (or has “legal capacity”) can benefit for some form of estate planning regardless of the value of your assets.

Q-Tip Trust

Married couples can maximize the use of both of their federal exemptions from estate taxes by using AB Trusts as part of their estate plan. The AB Trust system can be set up under the couples’Last Will and Testaments or Revocable Living Trusts. The “A Trust” is also commonly referred to as the “Marital Trust,” “QTIP Trust,” or “Marital Deduction Trust.” The “B Trust” is also commonly referred to as the “Bypass Trust,” “Credit Shelter Trust,” or “Family Trust.”
As the amount that can pass free of estate tax under IRC §2010(c) has increased, bypass trusts created under a marital deduction formula clause have become larger. Most often, the trust’s distribution provisions will provide for the distribution of almost all of the deceased spouse’s property. Thus, it may be desirable for the bypass trust to contain a mixture of provisions. For example, the bypass trust might provide for immediate distribution of gifts of tangible personal property or sums of cash to specified beneficiaries. The marital trust (sometimes called the “C trust,” “QTIP trust,” or “marital deduction trust”) is for the marital deduction and is usually the receptacle for the marital share. Depending on drafting, the marital trust may include only a portion of the marital share and the remaining amount may be given directly to the survivor’s trust (e.g., $100,000 may be given to the marital trust for purposes of making a “reverse QTIP election” if the decedent made lifetime taxable gifts of $100, 000 over the amount of annual exclusion gifts that did not use any GST exemption).

The attorney should verify that the marital trust actually qualifies for the marital deduction. A typical ABC trust provides for specific gifts on the death of the surviving spouse (e.g., $5000 to the gardener), without specifying that such gifts are to come from the survivor’s trust, thus requiring notice to such beneficiaries of any accounting or proceeding concerning the marital trust or credit shelter trust (perhaps causing great embarrassment to the surviving spouse, who perhaps also intended to be able to change the gifts). Certain transfers of “qualified terminable interest property,” qualify for the marital deduction. The statute defines “qualified terminable interest property” as property: (1) which passes from the decedent, (2) in which the surviving spouse has a qualifying income interest for life, and (3) to which an election under IRC §2056(b)(7)(B) has been made. “Property” is defined as either an entire interest in property or a specific portion of the entire interest.

The term “qualifying income interest for life” with respect to a QTIP trust has the same meaning as with respect to a general power of appointment trust. A QTIP trust qualifies for the marital deduction without providing the surviving spouse with a general power of appointment over the trust. This means that, after death, the testator may control disposition of his or her property while also qualifying a portion of the estate for the marital deduction. The testator may provide the surviving spouse with some discretion over the ultimate distribution of the QTIP trust assets by granting the spouse a power to appoint the trust property among a class of beneficiaries identified by the testator. This power must, however, be exercisable only on or after the surviving spouse’s death. No person may have a power to appoint any of the trust property to any person other than the surviving spouse. Unlike the power over a general power of appointment trust, the power over aQTIP trust may not be held even by a surviving spouse during his or her lifetime. Accordingly, the QTIP trust limits the surviving spouse’s ability to make lifetime gifts of trust assets even to a narrow group of recipients designated by the testator in a limited power of appointment. Control by the testator is particularly useful when there are children by a former marriage. Even individuals in single marriages may wish to control disposition of their portion of the estate at the surviving spouse’s death or limit it by giving the surviving spouse, at most, a limited testamentary power of appointment. This ensures ultimate distribution of the testator’s assets according to his or her wishes and prevents transfer to others, e.g., the surviving spouse’s new spouse, the surviving spouse’s children by a subsequent marriage.