Understanding the Role of a Will and Its Limitations in California Estate Planning

A will, also known as a last will and testament, is a fundamental document in estate planning. It allows you to specify how your assets should be distributed after your death, name guardians for your minor children, and appoint an executor to carry out your wishes. However, while a will is an essential component of an estate plan, it has limitations that make it insufficient on its own for many California residents. Here’s a closer look at what a will does and why it may be limiting.

What a Will Does

1. Asset Distribution A will outlines how you want your assets, such as property, money, and personal belongings, to be distributed among your heirs after you die. This ensures that your wishes are followed and can prevent disputes among family members.

2. Guardian Appointment If you have minor children, a will allows you to designate a guardian to care for them if both parents pass away. This is crucial for ensuring your children are raised by someone you trust.

3. Executor Appointment A will allows you to name an executor, the person responsible for managing your estate, paying off debts, and distributing assets according to your instructions.

Limitations of a Will

While a will is an important document, relying solely on it for your estate planning can be limiting. Here’s why:

1. Probate Process A will must go through probate, a court-supervised process to validate the will and oversee the distribution of assets. Probate can be lengthy, expensive, and public, potentially delaying the distribution of assets and exposing your estate to additional costs and scrutiny.

2. Limited Control Over Asset Distribution A will does not allow you to control how and when your beneficiaries receive their inheritance beyond immediate distribution. For example, if you want to provide for a child’s education or protect assets from creditors, a will cannot accomplish this. Trusts, on the other hand, offer greater flexibility in managing and distributing assets over time.

3. No Protection for Incapacity A will only takes effect after your death and does not address what happens if you become incapacitated. Comprehensive estate planning includes documents such as durable powers of attorney and healthcare directives to ensure your financial and medical decisions are handled by someone you trust if you are unable to make them yourself.

4. Potential for Disputes Wills can be contested, leading to family disputes and lengthy legal battles. Incorporating other estate planning tools, such as trusts, can help minimize the risk of disputes and provide clearer instructions for managing and distributing your assets.

5. Lack of Privacy Because probate is a public process, the contents of your will and details about your assets become part of the public record. This can expose your private affairs to public scrutiny. In contrast, trusts allow for a more private transfer of assets, keeping your financial matters confidential.

While a will is a crucial element of any estate plan, it has significant limitations that can make it insufficient on its own for many individuals and families in California. To create a comprehensive estate plan that addresses all your needs and provides greater control, flexibility, and privacy, consider incorporating additional tools such as trusts, powers of attorney, and healthcare directives.

Estate Planning Basics

Welcome to the world of estate planning! Whether you're just starting out or realizing it's time to get your affairs in order, understanding the basics is the first step toward securing your legacy. In this beginner's guide, we'll break down the fundamental concepts of estate planning to help you navigate this essential process with confidence.

Understanding the Basics: Estate planning involves selecting decision makers to handle your affairs when you’re unable and creating a roadmap for the distribution of your assets and the fulfillment of your wishes after you're gone. The key components include:

1. Living Trust:

   A living trust is a tool that allows you to manage assets during your lifetime, even if you become disabled, ensuring a smoother distribution process after your passing while avoiding probate.

2. Last Will and Testament:

   Your will is a legal document used as a “safety net” to catch assets you forgot to title in the name of your trust.

3. Power of Attorney:

   This legal document designates someone to make financial decisions on your behalf if you become unable to do so. It's a crucial aspect of planning for unforeseen circumstances.

4. Healthcare Directive (Living Will):

   Specify your healthcare preferences in advance with a living will, ensuring that your medical treatment aligns with your wishes, even if you can't communicate them yourself.

The Importance of Beneficiary Designations: In addition to your estate planning documents, above, many assets, such as life insurance policies and retirement accounts, allow you to designate beneficiaries directly. Keeping these designations up-to-date is crucial to ensuring your assets go to the intended recipients.

Considerations for Parents: If you have minor children, your estate plan should include provisions for their care. This involves appointing a guardian in your will and potentially setting up a trust to manage their inheritance until they reach a specified age.

Starting Your Estate Planning Journey: Now that you have a basic understanding, the next step is to consult with an experienced estate planning attorney. They can help tailor a plan to your unique situation, they can provide expert advice as it relates to taxes, and they can ensure that your wishes are legally sound and well-protected.

Estate planning might seem daunting, but with the right guidance, it becomes a proactive and empowering process. By taking the time to understand the basics and seeking professional assistance, you're not only securing your legacy but also providing peace of mind for yourself and your loved ones.

March 2020 Webinar on Estate Planning

At the end of March, Matt was featured in a webinar hosted and sponsored by the reSolve Group. He talked about the different estate planning tools that are available to us all and that are especially critical to employ amidst this battle to contain the COVID-19 pandemic.

What is... a Holographic Will?

This is part of an on-going series of blog posts titled the "What Is..." series, where we attempt to explain, in simple terms, common estate planning terms and concepts. To read other posts in this series, click here.

“I’m going on vacation next month, so I sent an email to my family to tell them my wishes in case something happens to me while I’m away.”

We hear this a lot. People want to make sure their family members know what they want to happen with their things or who they want to serve as a guardian for their kids, so they send an email. They put it in writing, thinking that it’s better than nothing. And, thinking that typing up something is more official than handwriting it.

Spoiler: handwriting a will is more likely to be legally binding than typing an email that isn’t signed. In fact, if it’s handwritten, signed, and dated, that’s better than typing it. This is known as a hand-written, or holographic, will.

In California, the legal requirements for a valid holographic will are: 1) that it needs to be signed;  and 2) the “material provisions” are in the handwriting of the individual. There is no requirement for it to be dated; however, if the holographic will is not dated and there is any doubt as to whether certain provisions are controlling, then the holographic will may be invalid to the extent of the inconsistency (e.g., no one is sure which document was drafted later in time).

Additionally, if there are any questions as to whether the individual lacked capacity, the will may be deemed invalid. For example, someone who is going into surgery might hand-write a will, but this may bring up questions as to whether that person was on medication or otherwise lucid enough to make the decisions at the time it was written.

Holographic wills were recently in the news as Aretha Franklin was not believed to have a will or a trust. Instead, it was discovered that she had written out her wishes by hand on several different occasions. Michigan, where Aretha Franklin resided when she died, like California, recognizes holographic wills. The question will be whether what she wrote was valid, and which handwritten document would be controlling.

Holographic wills serve a valuable function when your options are limited. If available, the best option is to talk to a lawyer about your wishes and ensure that you have a comprehensive estate plan that benefits you and your loved ones both in the case of incapacity and in the case of death. Call us for a free consultation.

Why Hire an Attorney Instead of an Online Provider?

Most estate planning attorneys frequently hear some form of this question: can’t I just do this myself online?

You certainly can create your estate plan yourself. And it’s pretty simple and affordable online.

In our experience, though, the most frequent response we get during a consultation is “I hadn’t thought of that!” To us, that’s what an attorney brings to the proverbial table. Attorneys ask questions to learn the nuances of your particular family dynamics, your goals, and any situations that you may not have thought about. Also, attorneys have the benefit of experience dealing with many other estates, and bringing that experience into planning your estate. This is not about the value of your assets, it’s about understanding goals, making sure you have documents in place that reflect what you want, applying current law, and avoiding potential pitfalls.

Some clients ask us to do a “trust review,” which means looking at the will or trust they already created because they want to modify some aspect of it. Clients are often surprised to see that the will or trust they created online isn’t going to do what they intended it would do. With estate planning documents, wording is the key to everything. With computer generated trusts and estate planning documents, a word or phrase in the wrong place can make the difference between your child being able to use her inheritance toward college education and having to go to court to “unlock” her inheritance because there was a badly worded restriction placed on it. There’s no such thing as a cut and paste estate plan; your life and your family are unique and your estate plan should reflect that.

We’ve also been on the other side of estate planning—the trust administration and probate side that takes place after someone has passed away. We know that you and your loved ones should have the space to grieve instead of trying to interpret the terms of a trust or navigating the probate process. We are here to ensure that you have the peace of mind that an expert is here to assist you through this tough time.

And we’ve been in the in-between—incapacity. We know what it’s like to walk into a bank or call the insurance company with your loved one’s estate planning documents to try to assist your loved one. We know the reality of what the bank or insurance company is going to say to let you get that done. An attorney ensures you have what you need so you can avoid frustration and don’t need to go to court.

Which gets us to one of the main components of hiring an attorney—the attorney-client relationship. When you retain an attorney, that attorney owes you certain duties. Some are the duty of confidentiality, the duty of loyalty, the duty of competent representation, and the duty of zealous advocacy. If a lawyer breaches any of its duties to a client, the lawyer can be held accountable. Lawyers are required to uphold very high standards when it comes to representing clients and their interests. When you use an online service, no attorney-client relationship is formed. No duties are owed to you. You (or your loved ones) cannot hold anyone accountable if things do not turn out how you wanted them to. All you have is a document that you drafted.

That’s the key: hiring an attorney gives you peace of mind through expertise and experience. An attorney will be there in times of crises, when an online provider will not.

We think that we would be those attorneys to give you peace of mind in your estate planning; and if you’d like to find out more, contact us for a free consultation.

Why Would A Married Couple Need an Estate Plan?

A friend of ours recently contacted us with a question that comes up frequently enough that we wanted to share it with you:

We are married and everything that we own is held jointly/as community property. We own a house, but we don’t have any kids and we don’t have debt. Do we need a will? Do we need a trust? Why?”

To the first question: Yes. You need a will whether you have a trust or not. (Click here to read our post explaining what a will does. And click here to read about intestacy.)

To the second question: Yes. Because….

1. Incapacity. Incapacity doesn’t just mean “coma,” (although that counts too). It could be that you went into surgery and had a bad reaction to the anesthesia so you can’t quite function as you ordinarily would. Or, it could be dementia. It could be temporary, it could be permanent. But a will doesn’t let you address incapacity situations. A trust allows you to plan for incapacity. It allows you to plan for who will take care of your assets and use your assets for your benefit when you are still living. Just because your spouse is on title doesn’t mean your spouse has all the necessary authority to care for you in the event of your incapacity. (Click here to read our previous post explaining incapacity.)

2. Contingency planning. Wills do not address all contingencies. But trusts allow for lapses and contingency planning. What if your spouse becomes incapacitated after you do? What if your intended beneficiary is still a minor (younger than 18 years old)? What if your intended beneficiary has a substance abuse or gambling issue later on? What if your intended beneficiary has special needs and requires means-tested government assistance? What if your beneficiary predeceases you? These issues can be planned for in a trust in advance.

3. Probate. You’ve probably heard the term “probate” with some negative connotation. (Click here to read our previous post explaining probate.) If you have a trust, you avoid probate. Probate takes about 18-24 months; it’s a public proceeding; and it’s expensive.

So even if you are married and hold everything jointly, that may only ensure that your spouse receives your assets upon your death. But so many other scenarios can occur. We might recommend you consider a trust given your situation and desires. All of our recommendations depend on your specific family and estate planning goals. To ascertain what is best for you we would need to meet with you, in a free consultation, to understand your goals, assess and explain your options, and provide you with a recommendation tailored to your situation. Call or email us today.

What is... a Will?

This post is the first part of a series of blog posts we are launching that we call the "What is..." series. This blog series will explain common estate planning terms and instruments in concise, easy to understand posts.

A will is a document that tells the world what someone wants to happen to their money, their things, and who should care for their minor children when they die.

In a will, you can name specific people you want to receive specific items, like your favorite baseball or a piece of jewelry. You can also name whether you want anyone to get a certain amount of money. (The people you name are called beneficiaries.) You also should indicate what you want to be done with any remaining things or money (your assets) that are left over after you’ve specified what happens.

A will also allows you to designate a guardian for your minor children if you and the other parent die before any child turns 18 years of age.

In a will, you also nominate an executor. This person is responsible for carrying out the wishes listed in your will, paying any outstanding debts (think of the balance on your credit card bill!), taxes, or other cost.

The will does not cover things that have designated beneficiaries built in. For example, a life insurance policy or a retirement plan (401(k) or IRA) allows you to designate a beneficiary. The will does not change who you listed on those accounts.

So why can’t you just write your own will?

Legally, you can. California recognizes handwritten wills when certain conditions are met.  

But here’s the problem: a will only goes into effect when a person dies. It only covers one scenario. For example, a will does not go into effect if a person is incapacitated. A person is incapacitated if he or she is in a coma, or suffers from dementia, or even while under anesthesia in surgery. Essentially, any time someone cannot make his or her own decisions, that person is considered to be incapacitated.

A will also requires that your estate go through probate court. Probate is a court proceeding, and like most court proceedings, it means that your will (including your assets listed in the will) becomes public. It means that your executor has to spend time and money to make sure that your bills and taxes are paid, and that your stuff gets where you want it to go. Probate costs money because there are fees associated with the process, like executor fees and attorneys fees. In California, there’s a statute that states how much money the executor and his or her  lawyer can get in probate.

How can you make sure that you are covered if you’re incapacitated? How can you ensure that you avoid probate? The short answer is that creating a comprehensive estate plan built upon a living trust might be the answer.

To determine what kind of estate plan you and your family needs, please contact us for a free initial consultation at info@shafaelaw.com.

What is an Estate Plan and do I need one?

This is by far the most common question we receive. The word "estate plan" seems like it means so many things, and it's difficult for people to nail down what it entails. You know why? Because it does mean so many things.

An estate plan is a general term that encompasses all of the tools one can use to plan for two events: a) their eventual death; or b) their potential incapacity. Most people contemplate option a), albeit very passively. Option b) is one people very often forget about. Incapacity is when you cannot make your own financial or medical decisions. Think: coma, dementia, etc. You're still alive, but someone else needs to make decisions for you. In that event, someone else needs the legal authority to make decisions on your behalf. You can either give it to them ahead of time in a power of attorney, or someone can petition a court to grant them that authority in a conservatorship proceeding.

In planning for your death, there are two basic ways to pass on (distribute) your assets upon your death. One, by using a last will. Two, by employing a living trust. The former requires a court process called "probate", whereby a judge overseas all of the affairs of your estate administration (paying your creditors, selling estate assets, and eventually distributing your assets to your rightful beneficiaries). The latter is a private document that keeps the courts (and the public) out of your estate administration. The probate process can be expensive. For example, the fees (paid to your executor and their attorney) can be as high as $46,000 for an estate valued at $1,000,000. Most properties in the Bay Area are at or above that amount. So you can see that an estate in the probate process can be quite expensive. The probate process can also be lengthy. Most probate administrations take an average of 18 to 24 months to complete.

Now that we've covered what an estate plan might entail (trust, will, powers of attorney), who needs one? Well, in one word: everyone. Everyone will die someday, and you never know when/if you'll ever be incapacitated. The more nuanced question is, "Do I need an estate plan that includes a living trust?"

If the answer to any of the following questions is "yes" then you probably need an estate plan that includes a living trust.

1. Does the total value of your assets (cash, personal property, real estate, cars, investment portfolio, etc.) exceed $150,000 in the aggregate?
2. Do you own real estate valued over $50,000?
3. Do you have children under the age of 18?
4. Have you divorced someone with whom you had children?
5. Are you in a mixed marriage (one or both of you have children from a previous relationship)?

Please keep in mind that if you think you don't need an estate plan with a living trust, if you're over 18 years of age, you at least need a last will and a power of attorney. For example, if your child is about to head off to college, they're over 18 years of age, and they unexpectedly fall into a coma, you have no legal authority to make decisions on your child's behalf absent a power of attorney or court order.

If you'd like to speak in further detail about your personal situation, please do not hesitate to contact us for a free consultation.