9. Other Documents You Need

This is part 9 in my series, Estate Planning – What You Need to Know.

Part 9 – Other Documents You Need.

Pour-Over Will

When you create a revocable living trust as the central piece of your estate plan, you should also include a pour-over will.

A revocable living trust only controls property that you have transferred to it. If you die without transferring your property to the trust, such as real property, bank accounts or investment accounts, the omitted assets will not be owned by the trust.

This is where the pour-over will comes in The pour-over will instructs your personal representative to literally pour-over the omitted assets into the trust and distribute those assets as if they were part of your revocable living trust.

This is an effective tool for getting your assets to the right person. But I don’t recommend you rely on the pour-over will.

The better approach is to take the steps to formally transfer your assets to your trust. Assets distributed to your trust after your death via the pour-over will be subject to probate. And if your assets have to go through probate, you will have defeated one of your primary objectives of creating your revocable living trust, AVOIDING PROBATE.

The better approach is to consider the pour-over will as a safety net, which insures your assets get to the right person. But be diligent in funding your trust.

Health Care Documents

Your estate plan should include an Advance Health Care Directive, also referred to as a Power of Attorney for Health Care.

The Advance Health Care Directive accomplishes two objectives. First, it authorizes your spouse, children or close friend (referred to in the document as your “agent”) to make health care decisions on your behalf if you are unable to do so.

The Directive gives your health care agent the right to, among other matters:

  • Consent or refuse consent to medical care or services
  • Choose or reject your physician
  • Consent to the release of medical information
  • Donate organs, authorize an autopsy and dispose of your body.

Second, the Advance Health Care Directive includes a provision for you to state your intent regarding life support if you are seriously ill.

We generally use the following provision by the California Medical Association:

I request that all treatments other than those needed to keep me comfortable be discontinued or withheld and my physician allows me to die as gently as possible.

Most of my clients are comfortable with this language and include it in their Advance Health Care Directive.

In addition to the Advance Health Care Directive is the HIPAA (medical privacy act authorization).

The HIPAA authorizes your doctors and hospital staff to talk to your health care agents about your medical condition. Without a HIPAA, hospital red tape could kick in and delay vital communications with your health care agents.

Durable Power of Attorney

The Durable Power of Attorney authorizes the agent you name to manage your assets for you if you become incapacitated.

This is an important document if you have a revocable living trust, but a vital document if you don’t have a living trust.

If you become incapacitated and you don’t have a Durable Power of Attorney, no one will have the authority to get to your accounts or other assets. So your family would have to go to court to have a judge appoint someone as your conservator.   This is not something you want. A conservatorship can be worse than a probate.

With a conservatorship, someone, hopefully someone that knows and cares about you, would be appointed by the court to manage your affairs.

A conservatorship is expensive and becomes a hardship on the person the court chooses to manage your affairs.

Bottom line. When you do your estate planning, make sure you get all the important documents.


7. Funding Your Revocable Living Trust

This is part 7 in my series, Estate Planning – What You Need to Know.

Part 7 – Funding Your Revocable Living Trust

Now to get the benefit of your revocable living trust, you have to transfer your assets to your revocable living trust. This is called “funding your trust.” We tell our clients to think of their trust as a big container with instructions. The instructions will control how the assets in the container will be managed.

If the assets aren’t in the container, the instructions don’t apply. If you don’t fund your trust, your assets may still have to go through probate – and then you defeat the primary objective of establishing your trust.

How is property transferred to your trust?

As an example, when you establish a revocable living trust, you and your attorney will record a new deed, which will transfer title of your house from you and your spouse’s name to you and your spouse – as trustee of your trust.

You will also retitle your bank and investment accounts from your individual names to the name of your trust. All property that has title, such as bank and investment accounts, real property, and business interests must be retitled to your trust. Personal property such as furniture, jewelry and clothing has no formal title and can be transferred to the trust with a written statement.

When your trust is funded, the trust owns your property. Although as trustee, you still control everything.

For practical matters, nothing changes except the paperwork. The tax identification number for the trust is your social security number. Your tax returns are filed the same as before you created the trust.

The legal title to your assets is no longer in your name, but in your name as trustee of your trust.

 Example: Your home is titled in the name of you and your spouse:

 Jack Lee and Jill Lee, husband and wife, as joint tenants

 After recording a deed transferring the house to your trust, the title will read:

 Jack Lee and Jill Lee, Trustees of the Jack and Jill Lee Revocable Living Trust

 Avoids Conservatorship

When your trust owns your property, there is no need for conservatorship hearings or probate. If you become disabled, the trust contains provisions naming a successor trustee (most often your spouse, parent, brother or sister, friend or adult children). The successor trustee is authorized to manage your property on your behalf. As a result, there is no need for a conservator. Likewise, when you pass away, your successor trustee is authorized by the trust to administer your trust property, so there is no need for probate.

When your assets have been transferred to your trust, the trust owns it. The trust continues to own it if you become incapacitated and when you die. Because the trust owns your assets, there is no need to get court approval to manage or distribute them.

With a trust everything remains in-house. Upon your disability and death, your successor trustee will follow the trust instructions without the need for court approval or interference.

Brief History – Perspective

Before Revocable Living Trusts became popular, probate attorneys would charge a marginal fee to prepare a basic will knowing that if they outlived their client, they would make big fees on the probate. Now that more people are choosing to create living rusts rather than wills, probate attorneys have either evolved into trust attorneys or have limited their practice to probating wills of clients who never got around to creating a trust.

Bottom Line. With a revocable living trust, your assets can avoid the delays, publicity and costs of probate, which is why a revocable trust is the best choice for most people.

Next up is Part 8: How to Protect Your Children’s Inheritance from Divorce and Lawsuits.

6. Revocable Living Trust

This is part 6 in my series, Estate Planning – What You Need to Know.

Part 6 – Revocable Living Trust.

The solution for probate is a revocable living trust. A revocable living trust is a legal contract you make with yourself, or, if you are married in a community property state like California, with your spouse. The trust is a set of instructions on how you want your assets to be managed if you become incapacitated and how you want them distributed when you pass away.

You, or if it is a joint trust with your spouse, you and your spouse, are the managers, or trustees, of your trust. As trustee, you have full authority over the trust assets: you can buy, sell and spend assets as you see fit, just like you would do without the trust. The difference is that the assets owned by the trust can be managed by your successor trustee if you become incapacitated or pass away.

Because there is someone already appointed and authorized to manage your affairs, there is no need for the probate court.

Here’s the example I use with my clients to make the point.

You and your wife own your home. The deed to your home names both of you as owners. When you sell your home, you will have to sign a new deed to transfer the home to the buyer.

What if you both pass away and your children need to sell your house? You and your spouse are still listed on the deed as the owners. If your children find a buyer, how will you sign the transfer deed? You’re no longer alive – you can’t sign the closing documents.

That’s when the court gets involved. For the title company to complete the sale of your house, it needs an order from the court stating that someone (the executor) has the authority to sign the deed on your behalf. This is done in probate court.

In other words, your children can’t sell your house without going through the court and getting an order from the judge. That is a real hassle.

However, if you’ve established a living trust, and you’ve transferred title of your home to your trust, then the trust owns your home. It owns your home not only when you are alive, but also when you die. Therefore, your family will not need the court order to sell your house. Instead, the person you named in your trust as your successor trustee can sign the new deed on behalf of the trust to sell your home.

Bottom line: The main benefit of a living trust is it allows your family to manage your affairs “in-house” without court approval and the costs and delays of the probate.

Next is Part 7, Funding Your Trust.


5. What If I Only Have a Will?

This is part 5 in my series, Estate Planning – What You Need to Know.

5 – What If You Have Only a Will?

So maybe you’ve done some planning. You’ve executed a will. Is that enough? Maybe not.

The will states who gets your assets, and if you have young children, it names the guardians to raise your children. That’s good and it’s certainly better than no plan. However, the downside to a will is your family or friends may have to take your estate through probate, and they probably won’t be happy about it.

Probate is a court procedure where an attorney will file your will in the court’s public records, notify any existing and potential creditors and heirs to make a claim against your property, and when the time for making a claim has expired, seek the court’s permission to distribute your remaining assets. The process takes about nine months to a year for a small estate and much longer for a large estate.

Probate Attorney Fees

The attorney and the executor are each entitled to statutory probate fees. In California, the fees are significant. California Probate Code establishes the fees for the attorney and the executor as follows:

Estate Value

Attorney Fees

Executor Fees






























These are the statutory fees. Family members can negotiate with the attorney for a different amount, but this is the standard used in most cases.

Public Record

In addition to the delay and costs, probate also makes a public record of your will and the probate proceedings. Anyone can look up your public record and see what you owned, what you owed, the name, age and address of your children and who gets your assets.

Did you ever notice that when certain celebrities die, within days, the media reports what the celebrity owned and who will inherit the assets? Over the last few years, we learned about the estate of Jacqueline Onassis, James Brown, Michael Jackson and Whitney Houston. You’re probably not a celebrity, but do you want your very personal information made a public record?

Next is Part 6, Revocable Living Trust.

4. Why You Need Guardians If You Have Young Children.

This is part 4 in my series, Estate Planning – What You Need to Know.

Why You Need Guardians if You Have Young Children.

If you have young children, the most important part of your estate plan is naming the guardians to raise your children if something happens to you and your spouse.

Typically, the guardians are named in the will. If the estate plan has a revocable living trust, the guardians are named in the pour-over will.

Naming guardians is not easy.  But if you have young children, you have to do it. If you don’t name guardians and something happens to you and your spouse, the court will have to decide who will raise your children.

Some of my clients have an easy time naming guardians. They have parents or siblings who are well qualified.

But many of my clients aren’t so lucky. They have a hard time deciding on the right people.

Here’s what I tell my clients who can’t decide on a guardian.

First. No one will be as good as you. No one is perfect (except you of course). If you are gone, someone you choose is better than the court choosing.

Second. The only people you can really choose from are those already in your personal network. Your network consists of your family and close friends. Some good. Some bad. Be realistic. Make the best choice of those in your network. That’s all you can do.

Third. You can always change your mind later. Most of my clients change their guardians every few years as their situation changes. You may meet someone with similar nurturing skills or your relatives may have matured into better parents.

Just know your choice is not permanent. Every decision we make today can only be made based on what we know today. If tomorrow changes, you can change your plan.

Knowing you can change your choice of guardians should take the pressure off. Your choice doesn’t have to be perfect, but you do need to choose.

Next up – Part 5. What if You Only Have a Will?

Vacation Planning

School is out or almost out and you may have lined up a vacation or two.

Now is a good time to check to see if you have a plan in place to protect your family if something happens to you. Do you have enough life insurance for your spouse and children to make ends meet if something happens to you? Have you done a will to name guardians to raise your children if something happens to you and your spouse? Have you done a living trust to make sure your assets go where you want them to go in an easy and cost effective way – without probate? And if you have done a will and living trust, are they up to date? Are you still ok with the person you named five years ago to raise your children?

Estate planning doesn’t have to be a downer. It can be done quickly and simply, and you will feel good when you finish, knowing you’ve protected your family.

Is Your Living Trust Funded?

Although most families have not done their estate planning, many have, and many have established living trusts. The objectives in establishing a living trust are to avoid the high costs and hassles of a California probate and to provide an easy administration of the estate assets. Living trusts are great and will accomplish these objectives – if they are maintained.

Your estate will still go through probate, even if you have a living trust, if you have not transferred your assets to your living trust. We tell our clients to consider their living trust like a container. The trust will only control the assets that have been transferred to the container. If when you die, you left significant assets (real property, bank and investment accounts) outside the container, your loved ones may have to take your estate through probate. Probate is unwelcome to most families because it is expensive and generally takes at least a year in court.

Ask yourself these questions to confirm your assets are in your living trust. [Read more...]