Estate and Tax Planning FAQs

Estate planning is the process of analyzing a person’s overall financial picture and implementing a plan of action. Estate planning involves strategizing to avoid probate, minimizing estate tax, and implementing documents that appropriately direct the ultimate disposition of one’s estate considering testamentary and other family needs. Estate Planning involves people — your family, other individuals and, in many cases, charitable organizations of your choice.  It also involves your assets (your property) and the various forms of ownership and title that those assets may take. The concept of the ‘Family Trust’ or ‘Revocable Living Trust’ is basic to creating an estate plan. Through the estate planning process, you can determine and control:

• How and by whom your assets will be managed for your benefit during your life if you ever become unable to manage them yourself.
• When and under what circumstances it makes sense to distribute your assets during your lifetime.
• How and to whom your assets will be distributed after your death.
• How and by whom your personal care will be managed and how health care decisions will be made during your lifetime if you become unable to care for yourself.

Many people mistakenly think that estate planning only involves the writing of a will. Estate planning, however, can also involve financial, tax, medical and business planning. A will is part of the planning process, but you will need other documents as well to fully address your estate planning needs.

There are many issues to consider in creating an estate plan. First, ask yourself the following questions: What are my assets and what is their approximate value? Whom do I want to receive those assets — and when? Who should manage those assets if I cannot — either during my lifetime or after my death? Who should be responsible for taking care of my minor children if I become unable to care for them myself? Who should make decisions on my behalf concerning my care and welfare if I become unable to care for myself? What do I want done with my remains after I die and where would I want them buried, scattered or otherwise laid to rest?

Once you have some answers to these questions, or realize that you need advice in answering these questions, you are ready to seek the advice and services of a qualified Trust and Estate lawyer.

We all do – whether your estate is large or small. All of us, regardless of our degree of wealth, need to designate someone to manage our assets and make health care and personal care decisions for us if we ever become unable to do so for ourselves. For many, such “life planning” is the most important aspect of an estate plan. If your estate is small, your plan may simply focus on who will receive your assets after your death, and who should manage your estate, pay your last debts and handle the distribution of your assets. If your estate is large, our firm will also discuss various ways of preserving your assets for your beneficiaries and of reducing or postponing the amount of taxes which otherwise might be payable after your death. If you fail to create a probate avoidance type trust and happen to have an estate that is in excess of the threshold dollar amount for probate ($184,500 in 2024), a judge will appoint someone to handle your assets and personal care.  Contrary to popular myth, everything does not automatically go to the state if you die without a will. Your relatives, no matter how remote, have priority in inheritance well ahead of the State. Still, those people may not be your choice of heirs; a properly drafted and implemented estate plan gives you much greater control over who will inherit your assets after your death.

All of your assets. This could include assets held in your name alone or jointly with others, assets such as bank accounts, real estate, stocks and bonds, and furniture, cars and jewelry. Your assets may also include life insurance proceeds, retirement accounts and payments that are due to you (such as a tax refund, outstanding loan or inheritance). The value of your estate is equal to the “fair market value” of all of your various types of property — after you have deducted debts (your car loan, for example, and any mortgage on your home). The value of your estate is important in determining whether your estate will be subject to estate taxes after your death (see #11) and whether your beneficiaries could later be subject to capital gains taxes. Ensuring that there will be sufficient resources to pay such taxes is another important part of the estate planning process.

A will is a traditional legal document that:

• Names individuals (or charitable organizations) who will receive your assets after your death, either by outright gift or in a trust.
• Nominates an executor who will be appointed and supervised by the probate court to manage your estate; pay your debts, expenses and taxes; and distribute your estate according to the instructions in your will.
• May include nominations of guardians for your minor children.

Most assets in your name alone at your death will be subject to your will. Some exceptions include securities accounts and bank accounts that have designated beneficiaries, life insurance policies, IRAs and other tax-deferred retirement plans, and some annuities. Such assets would pass directly to the beneficiaries and would not be governed by the terms of your will (see #13).

In addition, certain co-owned assets (see #12) would pass directly to the surviving co-owner regardless of any instructions in your will. Assets that have been transferred to a revocable living trust (see #6) would be distributed through the trust — not your will.

For some, a California Statutory Will (a fill-in-the blanks form) may be sufficient. This form can be printed out from the State Bar website at www.calbar.ca.gov (go to Will Form under Quicklinks). Keep in mind, however, that you must execute your will in the manner required by California law. Failure to do so could invalidate the entire will. You should discuss such requirements with a qualified lawyer. For more information, see the pamphlet Do I Need a Will? on the State Bar website at www.calbar.ca.gov/Public/Pamphlets.aspx.

It is a legal document that can, in some cases, partially substitute for a will. With a revocable living trust (also known as a revocable inter vivos trust or grantor trust), your assets are put into the trust, administered for your benefit during your lifetime and transferred to your beneficiaries when you die — all without the need for court involvement. Most people name themselves as the trustee in charge of managing their living trust’s assets. By naming yourself as trustee, you can remain in control of the assets during your lifetime. In addition, you can revoke or change any terms of the trust at any time as long as you are still competent. (The terms of the trust generally become irrevocable when you die. However, in trusts created by married couples, some or part of the trust may continue to be revocable by the surviving spouse.) In your trust agreement, you will also name a successor trustee (a person or institution) who will take over as the trustee and manage the trust’s assets if you should ever become unable to do so. Your successor trustee would also take over the management and distribution of your assets when you die. A living trust does not, however, remove all need for a will. Generally, you would still need a will — known as a pour over will — to cover any assets that have not been transferred to the trust.

You should consult with a qualified estate planning lawyer to assist you in the preparation of a living trust, your will and other estate planning documents. Keep in mind that your choice of trustees is very important. That trustee’s management of your living trust assets will not be automatically subject to direct court supervision. For more information, see the pamphlet Do I Need a Living Trust? on the State Bar website at www.calbar.ca.gov/Public/Pamphlets.aspx.

Probate is a court-supervised process for transferring a deceased person’s assets to the beneficiaries listed in his or her will. Typically, the executor named in your will would start the process after your death by filing a petition in court and seeking appointment. Your executor would then take charge of your assets, pay your debts and, after receiving court approval, distribute the rest of your estate to your beneficiaries. If you were to die intestate (that is, without a will), a relative or other interested person could start the process. In such an instance, the court would appoint an administrator to handle your estate. Personal representative is another term used to describe the administrator or executor appointed to handle an estate.

Simpler procedures are available for transferring property to a spouse or domestic partner or for handling estates in which the total assets amount to less than $166,250. The probate process has advantages and disadvantages. The probate court is accustomed to resolving disputes about the distribution of assets fairly quickly through a process with defined rules. In addition, the probate court reviews the personal representative’s handling of each estate, which can help protect the beneficiaries’ interests. One disadvantage, however, is that probates are public. Your estate plan and the value of your assets will become a public record. Also, because lawyer’s fees and executor’s commissions are based on a statutory fee schedule, a probate may cost more than the management and distribution of a comparable estate under a living trust. Time can be a factor as well. A probate proceeding generally takes longer than the administration of a living trust. Discuss such advantages and disadvantages with an estate planning lawyer before making any decisions.

Yes. You should consider alternative beneficiaries in case your primary beneficiary does not survive you. If a beneficiary is too young or too disabled to handle an inheritance, you may consider setting up a trust for his or her benefit under your will or living trust. Once you have decided who should receive your assets, it is very important that you correctly identify those chosen individuals and charitable organizations in your will or trust. Many organizations have similar names and, in some families, individuals have similar or even identical names. An estate planning lawyer can help you clarify and appropriately identify your beneficiaries.

That is your decision. You could name your spouse or domestic partner as your executor or initial trustee.  After your spouse or partner’s passing, you might choose an adult child, another relative, a family friend, a professional fiduciary who is licensed by the State of California, or a corporate fiduciary such as the trust department of a bank. Your executor or trustee is not legally required to have any special training. What is most important is that your chosen executor or trustee is organized, diligent, responsible and honest.  Although the executor of a will is subject to direct court supervision, and the trustee of a living trust is not supervised other than by way of beneficiary review of their actions and transactions, they serve almost identical functions. Both are responsible for ensuring that your written instructions are followed. It is very important that you discuss your choice of an executor or trustee with your estate planning lawyer.  There are many issues to consider.  For example, will the appointment of one of your adult children hurt his or her relationship with any other siblings? What conflicts of interest would be created if you name a business associate or partner as your executor or trustee? Will the person named as executor or successor trustee have the time, organizational ability and experience to do the job effectively?

First of all, in your will, you should nominate a guardian to supervise and care for your child until he or she is 18 years old. Under California law, a minor child (a child under age 18) would not be legally qualified to care for himself or herself if both parents were to die. Your nomination of an appropriate guardian could avoid a tug of war between well-meaning family members. Further, a minor is not legally qualified to manage his or her own property. You should appoint a successor trustee of your trust that will be able to handle your child’s inheritance until he or she reaches the age that you designate for outright distribution of assets to your child. The guardian and the successor trustee do not need to be the same person. Oftentimes, people see advantages in not naming the same people to act as guardian and successor trustee. It is most important to consider the age at which you feel your children will be able to responsibly handle the amount of money that one would receive as an inheritance. It is generally accepted that it is not prudent to hand over large sums of money to a very young adult. Many of our clients restrict their children’s inheritances until they reach the ages of 25, 30, and/or 35.

The Federal Estate Tax, or sometimes called the ‘death tax,’ carries with it one of the highest tax rates of any of the various taxes that our government imposes. The Federal Estate Tax exemption amount for 2024 and 2025 is $13.61 million per individual. That means that an individual can pass assets that have a date-of-death value of that dollar amount to their heirs and beneficiaries without estate tax. However, for every dollar of wealth over that amount, it is quite likely that an estate tax can be charged at the rate of 42% or more, depending on the tax laws in effect at the time of death. The establishment of the estate tax amount is a political process, and the amount varies from year to year.  This firm regularly handles the representation of and tax planning for families whose net worth is in excess of the estate tax exemption amount. The starting point is always the preparation and maintenance of an appropriate revocable living trust. Additionally, such techniques as the use of Family Limited Partnerships (FLP’s) and/or other appropriate business entities, Qualified Personal Residence Trusts (QPRT’s), Irrevocable Life Insurance Trusts (ILIT’s), Grantor Retained Annuity Trusts (GRAT’s), Spousal Lifetime Access Trusts (SLAT’s) and maximizing/ leveraging the Annual Gift Tax Exclusion are all transactions that we regularly employ to minimize our clients’ estate tax liabilities.

Yes. The nature of your assets and how you hold title to those assets is a critical factor in the estate planning process. Before you take title (or change title) to an asset, you should understand the tax and other consequences of any proposed change. Your estate planning lawyer will be able to advise you.

Community property and separate property. If you are married or a registered domestic partner, assets earned by either you or your spouse or domestic partner while married or in the partnership and while a resident of California are community property. (Note: Earned income in domestic partnerships, however, may not be treated as community property for federal income tax purposes.)

As a married individual or registered domestic partner, you may continue to own certain separate property as well — property which you owned prior to the marriage or domestic partnership. A gift or inheritance received during the marriage or partnership would be considered separate property as well. Earnings associated with such separate property, even if earned during a marriage, retain their character as separate property.

Separate property can be converted, or transmuted, to community property (and vice versa) by a written agreement (it must conform with California law) signed by both spouses or domestic partners. However, taking such a step can have significant tax and other consequences. Make sure that you understand such consequences before making any such change.

Tenants-in-common. If you own property as tenants in common and one co-tenant (co-owner) dies, that co-tenant’s interest in the property would pass to the beneficiary named in his or her will. This would apply to co-tenants who are married or in a domestic partnership as well as to those who are single.

Joint tenancy with right of survivorship. Co-owners (married or not) of a property can also hold title as joint tenants with right of survivorship. If one tenant were to die in such a situation, the property would simply pass to the surviving joint tenant without being affected by the deceased person’s will.

Community property with right of survivorship. If you are married or in a registered domestic partnership, you and your spouse or partner could also hold title to property as community property with right of survivorship. Then, if your spouse or domestic partner were to die, the property would pass to you without being affected by the deceased person’s will. Married couples and registered domestic partners also have the option of jointly holding title to property as community property. In such a situation, if one spouse or partner were to die, his or her interest would be distributed according to the instructions in his or her will.

Yes. Certain kinds of assets are transferred directly to the named beneficiaries. Such assets include: -Life insurance proceeds.- Qualified or non-qualified retirement plans, including 401(k) plans and IRAs. -Certain “trustee” bank accounts. -Pay on death (or POD) assets, a common title on U.S. savings bonds. -Keep in mind that these beneficiary designations can have significant tax benefits and consequences for your beneficiaries — and must be carefully coordinated with your overall estate plan.

You can help determine what will happen by making your own arrangements in advance. Through estate planning, you can choose those who will care for you and your estate if you ever become unable to do so for yourself. Just make sure that your choices are documented in writing. A power of attorney, for example, is a written legal document that gives another person the right and authority to act on your behalf. It can be limited to special circumstances or it can be general. That authority will end if you become incapacitated — unless you have a durable power of attorney. A durable power of attorney will remain in effect while you are incapacitated. This means that if you were suddenly unable to handle your own affairs, someone you trust — your legal agent or attorney-in-fact — could do so for you. You may choose to set up a springing power of attorney. It would only become effective at a specified future date or event (your loss of capacity, for example). You can authorize your agent to simply pay your bills. (This is usually a safer arrangement than adding someone else’s name to your bank account.) Or you can empower your agent to handle nearly all of your affairs. Your agent, however, cannot take anything of yours as a “gift” without your specific written authorization. These powers of attorney all expire when you die. Make sure that you understand all of the terms before signing a power of attorney. And be absolutely certain that your chosen agent is both capable and trustworthy. There are those who have lost their life savings to unscrupulous agents — even to agents who are family members. If you set up a living trust, it is the trustee who will provide the necessary management of the assets held in trust. However, even if you have a living trust, you should still consider setting up a durable power of attorney for property management as well to handle limited financial transactions and to deal with assets that may not have been transferred to your living trust, such as retirement accounts. With an advance health care directive, you can also designate someone to make health care decisions for you in the event that you become unable to do so for yourself. In addition, this legal document can contain your wishes concerning such matters as life-sustaining treatment and other health care issues and instructions concerning organ donation, disposition of remains and your funeral. (You can revoke the directive at any time, as long as you are still competent.) Give copies to your health care agent, alternate agent, doctor, health plan representatives and family. And if you are admitted to a hospital or nursing home, take a copy with you. If you become unable to make sound decisions or care for yourself and you have not made any such arrangements in advance, a court could appoint a court supervised conservator to manage your affairs and be responsible for your care. The court’s supervision of the conservator may provide you with some added safeguards. However, conservatorships can also be more cumbersome, expensive and time-consuming than the appointment of attorneys-in-fact under powers of attorney. In any event, even if you appoint attorneys-in-fact who could manage your assets and make future health care decisions for you, you should still document your choice of conservators in case a conservatorship is ever necessary.

Can I do it myself? Yes. It is possible for a person to do his or her own estate planning with forms or books obtained at a stationery store or bookstore or from the State Bar, if one’s situation is fairly simple. However, you should make sure that the materials you are using have been customized to comply with California laws. Each State has its only unique laws pertaining to estate planning. At the very least, a review of such forms can be helpful in preparing you for estate planning with a qualified professional. If you review such materials and have any unanswered questions, or your situation involves complex or unique circumstances, you should seek professional help.

Do I need a professional’s help? It depends. If you do seek advice, keep in mind that wills and trusts are legal documents that should only be prepared by a qualified lawyer. Many other professionals and business representatives, however, may become involved in the estate planning process. For example, certified public accountants, life insurance salespersons, bank trust officers, financial planners, personnel managers and pension consultants often participate in the estate planning process. Within their areas of expertise, these professionals can assist in planning your estate.

The State Bar urges you, however, to seek advice only from professionals who are qualified to give estate planning advice. Generally, the professional must be licensed by the state to provide such guidance. Ask the professional about his or her qualifications. Ask yourself whether the adviser might have an underlying financial incentive to sell you a particular investment, such as an annuity or life insurance policy. Such a financial incentive could bias that professional’s advice. Unfortunately, some sellers of dubious financial products gain the confidence and private financial information of their victims by posing as providers of estate or trust planning services.

Yes. There are many who call themselves “trust specialists,” “certified planners” or other titles that suggest the person has received advanced training in estate planning. California has experienced numerous promotions by unqualified individuals and entities that only have one real goal — to gain access to your finances in order to sell insurance-based products such as annuities and other commission-based products. To better protect yourself:

• Consult a lawyer or other financial adviser who is knowledgeable in estate planning and is not trying to sell a product that may be unnecessary — before considering a living trust or any other estate or financial planning document or service.
• Ask for time to consider and reflect on your decision. Do not allow yourself to be pressured into buying an estate or financial planning product.
• Know your cancellation rights. California law requires that sellers who come to your home to sell goods and services (with some exceptions) that cost more than $25 must give you two copies of a notice of cancellation form to cancel your agreement. You, the buyer, generally would be able to cancel this transaction up until midnight three business days later. Depending on the circumstances, you may have longer to cancel life insurance or annuity transactions. If you are 65 or older, for example, you would have 30 days to cancel.
• Be wary of organizations or offices that are staffed by non-lawyer personnel and that promote one-size-fits-all living trusts or living trust kits. An estate plan created by someone who is not a qualified lawyer can have enormous and costly consequences for your estate. Do not allow yourself to be pressured into a quick purchase.
• Be wary of home solicitors who insist on obtaining confidential and detailed information about your assets and finances.
• Find out if any complaints have been filed against the company by calling local and state consumer protection offices or the Better Business Bureau.
• Insist on the person’s identification and a description of his or her qualifications, education, training and expertise in estate planning. Also, keep in mind that legal document assistants are not permitted to give legal advice. And paralegals must work under the direct supervision of a lawyer. (As a precaution, ask to speak directly to the supervising attorney if you are not given an opportunity to do so.)
• Be aware that state law prohibits some professionals — broker-dealers, investment advisers and insurance brokers, for example — from using senior-specific certification, credentials or professional designations to mislead consumers. Insurance brokers and agents cannot use certain “senior designations” that even imply special expertise or training in advising seniors in particular on finance, insurance or risk management unless certain conditions are met.

For more information, go to insurance.ca.gov and type senior designations into the search box. Always ask for a copy of any document you sign at the time it is signed. Report high-pressure tactics, fraud or misrepresentations to the police or district attorney immediately.

It depends on your individual circumstances and the complexity of documentation and planning required to achieve your goals and objectives. The costs may vary from lawyer to lawyer. Generally, the costs will include the lawyer’s charges for discussing your estate plan with you and for preparing your will, trust agreement, power of attorney or other necessary legal documents. Some lawyers charge a flat fee for estate planning services. Others charge on an hourly basis or use a combination of both types of fees.

It seems that in today’s ever-changing world, the notion of a ‘family’ consisting of a married mother and father with several biological children is not always the norm. Despite blended families being so common, the estate planning issues associated with the blended family structure can be fraught with difficulty.  It is crucial for those people that have suffered the end of a marriage, for whatever reason, to use qualified estate planning counsel with respect to their testamentary documents.