Estate Planning

Estate Planning

Estate Planning Devices

  1. Intestate Succession

This means you have no will or trust in place. If you do nothing, the State of California steps in and tells your heirs how the assets will be distributed.

  1. Wills

This is a document you have drawn up for you, or under certain circumstances can do yourself, that sets out how you want your assets to be divided. This can include specific allocations [my velvet painting of the dogs playing poker to go to my brother….] or general ones. You can name several alternative beneficiaries. You can set up a trust for minors in a will. The will does NOT include assets you can designate a beneficiary on by contract, like a bank account as one example.

A will goes through “probate” which means it is court supervised. The court transfers title, in a manner of speaking, to your assets and makes sure the bills are paid and the assets go as you directed. What is the big deal about going through probate?

Advantages and Disadvantages of Probate

Advantages of Probate

  • Probate code requires notice to beneficiaries that allows one to object to a proposed action.
  • “Family allowance” takes priority over most creditors claims to support family during administration.
  • Court supervision can provide finality cutting off future litigation of issues. After a notice period, if there are no objections, the court’s ruling is final. If there are objections, the court will consider them in making the ruling but the issue will be decided then. If there is a problem anticipated with a beneficiary, this may be a good way to deal with it.

Disadvantages of Probate

  • Court administration is slow (6 month minimum)
  • and costly (filing fees, probate referee fees; executor and attorneys fees…)
  • Have to wait until Letters are issued to act whereas a Trustee can act as soon as there is a Death Certificate.
  • No privacy
  1. Inter Vivos Trusts
    • Allow for comprehensive asset management, successor trustees.
    • Does not require probate; often can be handled quickly and easily.
    • No estate tax in 2010. In 2009 it was $3.5M. And now, in 2011, is up to $5M. Trust formulas make no sense and may cause a trust to fail. Where you once might have said all to surviving spouse [to take advantage of the marital deduction] with a larger exclusion amount, you may not want to do that. It may mean the children get nothing.
    • Administrative Costs of Trust v Probate:
    • Probate fees: If the probate estate accounted for is $200,000, the attorney’s fee is $7,000 and the Executor’s fee is $7,000. For an estate accounted for of $1 million, the fee is $23,000. If it is not waived by the executor, then, it is double and the fee is $14K and $46K respectively. This is a one time fee for the entire process, not an annual fee
    • Trustees fees: Often but not always set by the terms of the trust. These can be adjusted by the court if the fee is unfair either to the trust estate or the attorney. If there is no fee set in the trust, they can be negotiated otherwise but it may be a percentage of the trust estate or hourly work by the attorney. May well end up exceeding any probate fees amount, particularly if they are required to manage a trust on an on-going basis where fees would be awarded annually.
    • Management of assets
      • Trusts provide for succession of Trustees in the event of my death or incapacity.
      • Wills can take 6 weeks before Letters are issued so the Executor can act on behalf of the heirs.
      • All your assets can be in a trust
  2. Powers of Attorney

A power of attorney is a written instrument in which one person (the principal) designates another (the agent) to act on the principal’s behalf. Like a revocable trust, a power of attorney enables a client to entrust the management of his or her financial affairs to another.

Durable: If a power of attorney is made “durable,” it remains in effect even when the principal later loses capacity.

Springing: It is not effective UNTIL the incapacity of the principal.


  1. Of the three major legal options for surrogate lifetime financial management (revocable trust, durable power of attorney, conservatorship), a durable power of attorney (DPOA) for financial management is the simplest to implement. The instrument establishing the DPOA can be easily prepared and executed. No transfer of title to assets is required, court supervision is unnecessary, and administrative requirements are minimal.
  2. Like a revocable trust, the DPOA’s lack of court supervision ensures the principal’s privacy and minimizes delays in financial transactions.
  3. A DPOA is also quite flexible. The powers granted to the agent may be as broad or as narrow as the principal wishes
  4. Allows a trial run of management by an agent.
  5. A DPOA is particularly useful when surrogate financial management is desired for only a short time.


  1. May or may not be accepted by third parties
  2. Huge risk of abuse by Agent. May not know for years that there was abuse by the Agent at which point huge damage will be done,
  3. Limited to lifetime management, not after death.
  1. Conservatorships for Financial Management

Although a revocable trust may be used to manage the property of a settlor who is too ill to do so, a conservatorship of the estate can perform the same function. A conservatorship of the estate is a court-supervised proceeding for management of the financial affairs of an incapacitated person.

Advantages of Conservatorship

Because a conservatorship of the estate is supervised by the probate court, it provides the most complete protection of the client’s interests. Conservatorship proceedings contain several procedural safeguards, including appointment of an independent court investigator, bond and accounting requirements, and the need for prior court approval for certain significant transactions. Court supervision also protects the conservator, giving the conservator the means to obtain court approval before acting on sensitive issues.

Disadvantages of Conservatorship

Court supervision means public not private matters; delays of action; fees and costs; and it terminates on your death, possibly making a tough transition of management of assets.

  1. POD or Totten Trust accounts
    1. X, Trustee for Y is a Totten Trust.
    2. X, beneficiary of Y is a Payable on Death account.
    3. Unlike a joint account, a beneficiary of a Totten trust or
      POD account has no access to the funds in the account
      during the account holder’s lifetime. Prob C ยง5401(b)-(c).
    4. A Totten trust or POD account is similar to a revocable
      trust in that the settlor may revoke the trust or account at
      any time before death.
    5. A Totten trust or a POD account can be useful as a simple
      means of making small cash gifts that the client does not
      want to appear as part of his or her will or revocable trust.
    6. Funds in these accounts can be paid to the designated beneficiary immediately after death without waiting for probate administration or distribution from a trustee. The 40-day waiting period for collecting a small estate does not apply.
  2. Small Estate Procedures
    1. $100,000 or less to non-spouse
    2. Does not include assets held in joint tenancy, assets passing
      to a surviving spouse or registered domestic partner, revocable
      trust property, motor vehicles, motor homes, vessels.
    3. Available 40 days after death.
  3. Joint Tenancy assets

Joint tenancy is sometimes considered an alternative to a revocable trust for distribution of assets on death. Although a joint tenancy avoids probate more easily and cheaply than does a revocable trust, it lacks the trust’s flexibility [no contingent beneficiaries…] Joint tenancy may protect an asset from my creditors claims as it passes immediately to the surviving joint tenant and, unless it was done in fraud of creditors, my creditors cannot go after the money in that account. There are considerable gift, estate and capital gains issues that affect joint tenancy and it is not something to be done without consulting an attorney. See the “Tax Considerations of Joint Ownership” in Articles & Updates.


Give this some serious thought. When you are ready to prepare and estate plan, please give me a call. I am here to help.

CALL: 925-362-1010