menu

Estate Planning FAQ

SAN JOSE PROBATE & ESTATE PLANNING LAWYER

Estate planning can be complicated, so we have compiled a list of questions that my clients often ask me. If you are wondering how to proceed with your case, then please review the answers below.

Q. I have no estate. Is estate planning for me?

A. Absolutely. We like to think of estate planning as a type of emergency preparation. A comprehensive estate plan generally includes documents to protect against incapacity such as an advanced healthcare directive and durable power of attorney. Establishing a guardianship for minor children is also included in an estate plan.

Q. I'm not wealthy. Is estate planning for me?

A. Absolutely. There is a misconception that estate planning is only for the wealthy. That’s simply not the case. Parents with young children will want to establish guardianships if something were to happen to them. Protecting against incapacity and end-of-life health care decisions are important choices that can be made through a properly designed estate plan. Also, people like the simple idea of being able to control the disposition of their assets rather than leaving it to the state’s laws.

Q. I hear that I am supposed to avoid probate. What is probate and why should it be avoided?

A. Probate is a legal process that determines the final disposition of your assets. The probate process can be costly. It is also a public process – opening the estate to litigation. Probate often lasts from several months to a few years.

Q. I have a will, I'm good right?

A. Depends. A will does not avoid probate. Therefore, while you have expressed your intentions via your will, the administration thereof could be onerous, expensive and time-consuming.

Q. What is a living trust?

A. A living trust is a legal document that provides instructions for what you want to happen to your assets when you die. It can avoid probate, unlike a will, and it prevents the court from controlling your assets if you become incapacitated. There are three parties to a property executed trust –

Grantor – Also called Settlor or Trustor, this is the person who creates the trust, and usually the only person who provides funding for the trust. More than one person can be a grantor of a trust, such as when a husband and wife join together.

Trustee – This is the person who holds title to the trust property and manages it according to the terms of the trust. Generally, the grantor also serves as the trustee during his or her lifetime.

Beneficiary – This is the person designated by the grantor to receive the income or principal from the trust.

In order to be operable, the trust must contain assets or property. In other words, the trust must be funded. The funding process involves transferring assets from the grantor to the trustee. The trustee then holds the assets, manages them, and eventually distributes them according to the trust provisions.

Q. Is a living trust expensive?

A. Not when compared to all of the costs of court interference at incapacity or death. The cost of establishing a trust depends entirely on the complexity of the estate, the grantor’s goals, and the extent to which the trust is funded.

Q. Should I have an attorney draft my trust?

A. Yes. Most people don’t cut their own hair or perform their own surgeries. Estate planning and trust drafting is a skill. A local attorney who has considerable experience in living trusts and continually updates his or her knowledge base will give you valuable guidance to property complete your estate plan.

Q. What is a Trustee? Who should be mine?

A. It is common for the Grantor to also perform the role of Trustee while the Grantor is alive, willing, and able. Nominating a Successor Trustee is arguably the most important decision when planning your estate. This person can be an adult child, other family member, friend, or a corporate fiduciary. The Successor Trustee should be someone you trust who will carry out your wishes.

Q. Should my Trustee be paid?

A. Yes. The process of administering your trust could be difficult and time-consuming. Your trustee should be entitled to reasonable compensation.

Q. I'm the Successor Trustee of my mother's trust. She recently passed away, what now?

A. You are responsible for administering the trust and fulfilling your mother’s wishes. Some of your responsibilities include paying creditors, paying taxes, determining the distribution of assets, keeping records for any estate –related expenditures. Although hiring an attorney is not necessary, it is highly recommended. A qualified attorney will guide you through the process and make sure you are fulfilling your fiduciary obligations.

Q. I’m getting a divorce, what happens to the trust I established with my soon-to-be ex-spouse?

A. Although a judgment dissolving the marriage or Registered Domestic Partnership automatically revokes an existing will and trust, the act of physical separation or the filing of a dissolution petition alone does not. Generally, the estate plan during the separation stage prior to the final marital dissolution does not represent the grantors’ wishes. While unlikely, if a death occurs during this time, the estate planning documents control the distribution of the estate. Thus, it is crucial make changes to the estate plan to reflect the grantors’ current intentions.

Q. Can I modify my trust if there are changes in circumstances?

A. A revocable living trust can be amended as often as desired. People like the flexibility of the living trust to be able to make changes if life events call for it.

Q. How long does it take to set up a trust?

A. Generally, it depends on your willingness and ability to provide the attorney with the requisite documents and information. It shouldn’t take the attorney more than a few weeks to draft the documents and prepare them for signing.

Q. Does my trustee also make health care decisions?

A. Not necessarily. Your health care agent would make health care decisions for you if you become incapacitated. The instructions for your health care agent are found in your advanced healthcare directive–also known as your power of attorney for health care decisions.

Q. What about a power of attorney? How does that fit into my estate plan?

A. A durable power of attorney is an important document in your estate plan that gives someone authority or the right to exercise powers that you already have. For example, you currently have power to spend money, withdraw money from bank accounts, enter into contracts, etc. In essence, you are granting someone else this power. If this power is not in place, a loved one will likely be forced to petition the court to be appointed conservator or guardian.

Q. What is trust funding and why is it important?

A. Trust funding refers to the process of transferring assets into the trust. Funding consists of drafting deeds to effectuate the transfer of real property, re-titling brokerage accounts, re-issuing stock certificates, etc. Many attorneys opt to assist their clients with this process to ensure the trust is properly funded. At the Henshaw & Henry, PC, we assist you in the entire funding process.

Q. What assets should be owned by the trust?

A. Real estate, stocks, CDs, bank accounts, brokerage and investment accounts, insurance, other assets with titles. Most living trusts also include jewelry, clothes, art, furniture, and other assets that do not have titles.

Q. Does my revocable living trust reduce taxes?

A. Perhaps. Your estate will have to pay federal estate taxes if its net value when you die is more than the exemption amount at that time. Congress recently enacted the American Taxpayer Relief Act of 2012 and set the exemption amount for estate tax purposes at $5,120,000 and indexed for inflation. Thus, if the net value of your estate is less that the exemption amount, you will not owe any taxes. If you are married, your living trust can include a provision that will let you and your spouse use both exemptions, saving a substantial amount of money for your loved ones.

NEED AN ATTORNEY FOR ESTATE PLANNING IN SAN JOSE?

If you have any more questions about your specific situation, then please don’t hesitate to contact our firm, Henshaw & Henry, PC.  As a San Jose probate and estate planning lawyers, we can analyze your situation and find favorable solutions. Start by contacting us today!

Call Today to Schedule an Appointment