Filing estate tax return and electing portability when first spouse dies could eliminate future estate tax if the gift and estate tax exemption drops.
How to Create Your California Estate Plan
You have many options on how to set up your estate plan - DIY estate planning websites, traditional law firm or work with an attorney virtually
What is an Estate Plan?
You’ve heard about “Wills” and “Trusts” but maybe you don’t quite know what they are. The dramatic reading of the Will by a crusty old attorney in a wood-paneled darkened law office with the family gathered around an antique mahogany conference table is the stuff of novels and movies. Wills and trusts are good fodder for stories, but do you need one?
The short answer is “Yes, you do.”
Wills and Trusts are the primary documents included in an Estate Plan. Typically, a California Estate Plan also includes a Durable Power of Attorney, Advance Health Care Directive and HIPAA.
- Durable Power of Attorney gives someone you trust the authority to pay your bills if you can’t.
- Advance Health Care Directive gives someone you trust the authority to make healthcare decisions for you if you can’t.
- HIPAA Authorization (Medical Privacy Act Disclosure) authorizes someone you trust to talk to your doctors and nurses.
All of these documents could be needed at any time when you are alive - if you get in a car accident, experience a stroke, or are temporarily or permanently incapacitated.
Durable Powers of Attorney, Advance Health Care Directive and HIPAA are not just for older people. Anyone over 18 will need these essential documents. In fact, more and more parents are requesting these documents for their college-bound children.
A Will or Trust is used when you pass away. Both documents state your wishes about who you want to get your assets when you pass away.
What if You Die Without a Will or Trust?
If you die without a Will or Trust, who gets your stuff?
If you die without a Will or Trust, then your estate is “intestate” and it will have to be distributed according to the California Probate Code - the state’s default distribution. Click here for a short article on what California’s intestacy distribution looks like.
Do You Need a Will or a Trust?
Unless you want to rely on the State of California’s intestate distribution of your assets, you will need a Will or Trust.
If you don’t own many assets and you rent your home, a Will might be good enough.
But, if you have assets that would go through probate, then you need a Revocable Living Trust.
What Goes Through Probate in California?
In California, real property worth more than $61,500 and combined bank and investment accounts worth more than $184,500 will go through probate. In California, probate is bad. It is an expensive court process that exposes your assets, debts and family to the public record and usually takes a year or longer.
With a revocable living trust your estate can avoid probate.
If you have a revocable living trust and transfer the title of your probatable assets to the trust, your family can avoid probate and avoid the expense and hassles of probate.
I Get It - I Need an Estate Plan, How Do I Get One?
There are essentially two ways to set up your Estate Plan. You can do it yourself with DIY estate planning websites such as Legal Zoom, Wills & Trusts or Nolo Press, or you can work with an attorney.
Using Legal Zoom, Wills & Trusts or Nolo Press for Your Estate Plan
If you have a basic estate, online DIY estate websites like Legal Zoom, Wills & Trusts and Nolo Press might be fine. Using Legal Zoom, Wills & Trusts or Nolo Press is inexpensive and basic. And if you have a basic estate, basic documents might work.
Using a DIY estate planning website is also very convenient. You can create your documents on your computer from the comfort of your home - no need to drive several times to an attorney’s office.
The big disadvantage of online document assembly software is the “the documents might work” part. Often with the DIY estate planning websites, there is little or no interaction with an estate planning attorney. Which raises the issue: did you click the right buttons and make the right choices?
The thing about estate planning documents is that you don’t know if the documents will work until it’s too late, which means it’s important to have confidence that your estate planning documents will do what you want them to do.
I’ll grant you, just because an attorney drafts and reviews the documents is no guarantee the attorney will do a good job. In many cases, general practice attorneys draft documents without really knowing what they are doing. But there is a much better chance that attorney-drafted estate planning documents, especially documents drafted by an estate planning attorney, will work better than DIY generated documents.
Another disadvantage of using DIY estate planning websites is that you won’t develop a working relationship with an attorney. What if you have questions? What if you need to update your estate planning documents because you had another child, need to change trustees or guardians, need to change beneficiaries or you buy a new home?
Estate planning is not a static one-time event, it is an on-going dynamic process that will require updates from time to time. Your life, your family, your assets and the tax laws change, and your estate plan needs to be updated as needed to reflect those changes.
DIY Estate Planning
- Inexpensive. (Be sure to calculate the notary fee. You will have to get your own notary to sign the documents.)
- Convenient. You are using online software to create your DIY documents, so you can do it on your computer from the convenience of your home.
- Uncertainty. In most cases, you are making choices in a software program. Maybe you make the right choices. Maybe you don’t. And even if you make the right choices, are the documents you create appropriate and complete enough for your actual needs?
- No Working Relationship with an Attorney. Who can you reach out to with questions, to update your documents or to talk about whether the tax laws have changed?
Using an Attorney to Prepare Your Estate Plan
By definition, attorneys should know what they are doing, and should be able to prepare more customized and effective estate planning documents than a DIY estate planning website. But the reality is that some attorneys are better than others.
If you are going to use an attorney to prepare your estate planning documents, here some things to consider:
- Estate Planning Focus. Working with a dedicated estate planning attorney will increase the likelihood of getting an effective estate plan. Attorneys, like doctors, can be general practitioners or have a specific focus. A real estate attorney, family law divorce attorney, personal injury attorney or litigation attorney probably does not have the expertise and experience to advise you and prepare an effective estate plan for you. Just like you wouldn’t go to an ear, nose and throat doctor for back pain, you may not want to go to a litigator for your estate planning.
- Complicated or Easy Process. For most people, estate planning does not have to be complicated, but attorneys have a reputation for making things complicated. Many attorneys require you to fill out complicated forms before you meet with them. For many, that can become a barrier to starting the process.
Not all attorneys make it complicated. Some attorneys have simplified the estate planning process and have developed a simple and effective approach that makes planning easy.
If the process is simple, you are more likely to see it through and complete your estate plan.
- Meetings. How many meetings are required? Do you have to drive to the attorney’s office for each meeting?
Some of the more innovative attorneys have created systems to work with their clients virtually. If you can work from home, why can’t you meet with your attorney on zoom?
Meeting with your attorney virtually from the convenience of your home makes the estate planning process comfortable and easier.
- Attorney Interaction and Responsiveness. Many attorneys have their staff handle most of the client communications. This could be good if the staff is personable, knowledgeable and responsive. But nothing is worse than emailing or calling your attorney and not getting a timely response.
Some attorneys make it a priority to handle most of the client communications. Working with an attorney who will listen and address your questions in a timely manner leads to a more positive outcome.
- Billing and Price. Old school attorneys still bill by the hour. If you have a complicated estate plan, this may be necessary because the attorney may not be able to estimate how much time is required to do the work. However, most estate plans are not complicated.
Many estate planning attorneys now use fixed fees. Fixed fees are beneficial to most people because they know going in what the price will be. One of the frustrating aspects of working with an attorney is the mystery pricing.
Open-ended hourly billing does not facilitate a comfortable attorney-client working relationship. If you need to ask your attorney a question about an important estate planning matter, do you hesitate to call because you are afraid of being on the clock?
Billable hours inevitably create an adversarial relationship. Fixed fees can remove that adversity and put you and your attorney on the same team.
Some attorneys go beyond the fixed fee and don’t even charge for questions. If you could email or call your attorney with questions and not have to worry about getting a bill for it, you would most likely feel less anxious and more positive about your attorney-client relationship.
- How Long Does It Take? Most attorneys are very busy. However, when you are working with an attorney, the attorney’s focus should be on you and getting your estate plan done.
Some attorneys have an efficient process that allows them to get an estate plan done in two weeks. Some have an inefficient process, or no process at all, and it takes months.
Bottom line. If you have a very simple estate, the DIY estate planning websites may work. If not, you may want to use an attorney. And when looking for any attorney, find one that you can trust and who and makes the process easy. The good news is that you have many options.