The Four Pillars of Estate Planning

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There are four essential documents that everyone should keep in mind when planning their Estate. Contact the Law Offices of Maria N. Jonsson, PC to speak to our attorney about your unique legal needs.

I. Your Revocable Living Trust

A Trust is a legal entity to which you transfer all your assets and formally title them in your Trust instead of your individual name. Your assets are held by you as Trustee and administered for your own benefit. Upon your death, your designated successor Trustee steps in your shoes and manages and distributes the assets owned by your Trust to the Beneficiaries which you have designated in the Trust to inherit from you. As such, your Trust — and not your Will — should determine who gets what after you are gone.

Assets owned in Trust avoid Probate, with its staggering expense and court delays. The legal fees to undergo Probate are set by the California legislature in Probate Code Sections 10810-10814 and are a percentage of the gross value of the Estate, which is determined by a court-appointed Probate referee. For example, an Estate with a gross value of $1 million will pay $23,000 to both the Estate representative and the Estate attorney; a $2 million-dollar Estate will pay $33,000 to each, and a $5 million-dollar Estate pays $63,000 to each.

The terms and structure of your Trust will be customized to fit your specific circumstances and family dynamic. They will also depend on the extent of assets you transfer into the Trust, as well as the legacy goals which you seek to put in place for those whom you designate to inherit from you through the Trust. Because your Trust is revocable, you can change the terms of the Trust at any time during your life. And, because you are in full control of your assets, the Trust reports to your social security number and your income tax reporting remains unchanged. Moreover, transferring real estate into your Trust does not trigger reassessment of the property taxes.

While you have full control and access to all your Trust assets, those you name as Beneficiaries after you are gone do not have such access and control. This allows you to put in place spendthrift and asset protection provisions that may shield your Beneficiaries from their own creditors.

Schedule “A” to your Trust, which is also your general grant and assignment, will specifically assign to your Trust all your right, title, and interest in your property, but it is no substitute to the process of funding the Trust. This involves changing the title of your assets into your Trust. It is critical to transfer your property into your Trust. Only property which the Trust owns is subject to the terms of the Trust.

Your financial assets (including investment and brokerage accounts, money market accounts, CDs, mutual funds, etc.), your checking and savings accounts, and your shares of stock (either physical certificates or stock held in book-entry) must be retitled into the Trust by using a Trustee’s certificate and a copy of the Trust. Present this document to your investment advisor, your bank, or your stock transfer agent, and they will assist you with titling these assets into your Trust to ensure that your Trust — and not you individually — owns these assets.

You will use the Trustee’s certificate to also change the Beneficiary designation on any life insurance policies where you are the insured and designate your Trust as the “pay-on-death Beneficiary” of the policy, so that the successor Trustee will be able to collect the death benefit and “pool” it into your Trust, where it will be shielded from the Trust Beneficiaries’ creditors.

Conversely, tax-deferred retirement plans, such as tax-deferred annuity contracts, 401(k) plans, 403(b) plans, IRAs, pension plans, profit-sharing plans, or other company-sponsored retirement plans may be eligible for an inherited rollover, which only an individual can do, and a Trust cannot. As such, depending on your specific circumstances, it might be more appropriate to name individuals, rather than your Trust, as the “pay-on-death Beneficiary” for these assets. This is one area where your Estate planner and your financial advisor will work with you as a team to determine the most appropriate and tax-efficient Beneficiary designation.

Real property is subject to the Probate administration of the jurisdiction where the property is physically located, so your heirs may end up in Probate court in multiple jurisdictions/States, as an ancillary Probate would be needed in each State and County where you own real property. To avoid expensive out-of-state Probate administration, your residence and any other real property you currently own or will acquire in the future (including rental property, timeshares, and oil and mineral rights), wherever situated in the United States, should be titled into your Trust via a deed that is recorded in the county recorder’s office where the property is located.

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II. Your Power of Attorney for Property Management

Your power of attorney for property management allows your named Agent to make financial decisions about matters that the Trust does not control if you become incapacitated. Examples of such matters include retirement plans, social security benefits, Medicare/Medicaid, dealings with the IRS (such as the signing of your tax returns), your accounts which are not titled in your Trust, performance on your individual contracts, the DMV, and any other matter not controlled by the Trust. You may designate that this document becomes effective immediately as to your chosen Agent, or you may designate that this document becomes effective only upon your incapacity. A person is considered “incapacitated” if that person is under a legal disability or is unable to give prompt and intelligent consideration to financial and administrative matters or make sound decisions about his or her own financial affairs. A determination of incapacity is generally made by either (1) two licensed physicians who certify in writing that such person is under a legal disability, or (2) by an order of a court appointing a conservator for that person. Although your financial power of attorney “endures” your incapacity, this document dies with you; it is no longer effective and cannot be used after your death. This is when your Will and Trust come to light.

III. Your Advance Health Care Directive

An Advance Health Care Directive gives your named Agent the power to make decisions about your health and well-being, such as: electing medical treatment and procedures, hiring your caregivers, selecting caretaker facilities for you, “life and death” decisions about terminating life support, decisions about organ donation, burial or cremation. This document is used in the event you cannot communicate your wishes on your own, for example, if you are incapacitated, unconscious, heavily medicated, or on life support. Most recently, “remote authorization” provisions are added in this document to allow your Agent to communicate with your medical providers remotely (via Telehealth, Zoom) and to sign documents electronically in the event the Agent is unable to come face to face with the medical provider.

This is an extremely important document that literally places your life in the hands of your chosen Agent. For that reason, it is very important to carefully choose this individual. It should be someone you Trust implicitly with your life, and who has the fortitude to do that which you wish should be done.

This person will not only make medical decisions for you but will also be given access to your medical records, which are otherwise protected under federal law known as HIPAA (Healthcare Insurance Portability and Accountability Act). To facilitate this process, a HIPAA Release is included in this document, which will permit your agent to obtain your medical records -and will release the holder of records from the liability of doing so. This document is also compliant with the California equivalent of HIPAA, which is the California Confidentiality of Medical Information Act ("CMIA").

IV. Your Pour-Over Will

Your Pour-Over Will designates your Trust as the sole Beneficiary of your Probate Estate. As such, it “pours” or “wills” to your Trust any odds and ends that have been inadvertently left outside of your Trust at the time of your death. Because almost all your assets should be titled into your Trust, the Will serves as a “safety net” that “catches” any assets that might otherwise trigger Probate administration. Such property is then distributed under the terms of the Trust.

And, if you have minor children, the Will names a Guardian for your minor children.

There is no “do-over” after one is deceased. For this reason, it is even more important to know how Estate planning relates to you, your family, and those who depend on you, so that you and your family can avoid the ultimate cost — regret.

Contact the Law Offices of Maria N. Jonsson, PC at (310) 935-0706 to discuss your Estate Planning needs with our experienced attorney.

Mediator by Training & Peacemaker by Heart
We believe that an Estate Plan should leave behind not only property, but most importantly – harmony, rather than tear families apart with poorly drafted or ambiguous and confusing terms.
We Work as Part of a Larger Team
We work with our clients' financial planner, CPA, realtor, and insurance broker to implement a well-rounded and thorough legal plan for wealth preservation and inheritance transfer.
Strategic Planning & Attention to Detail
We carefully look at each factor that affects the execution of an Estate Plan – from the perspective of minimizing and eliminating reassessment of property taxes to avoiding post-death conflicts.

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