Some Common Questions, Answered

A Revocable Living Trust (RLT) is an estate planning option that allows you to transfer ownership of your assets to a trust and keep your affairs private. Since the RLT is revocable, the Grantor (you) may amend the trust terms or terminate the trust during your lifetime. You are the owner of your trust. If an RLT is properly funded, you can avoid probate.

A Certification of Trust is a type of declaration of trust that excludes the details of what property is held in the given trust and the identity of beneficiaries. The purpose of a certification of trust is to prove that you have established a valid trust to a financial organization, without having to reveal specific details you wish to keep private. It can also be shown to a party involved in the trust in order to establish the terms of the trust. The certificate of trust can establish the existence of terms of the trust, according to California Probate Code §18100.5. This is often used when a trust document or deed of trust is not available and an alternative must be used.

The taking of assets that are titled into the grantor’s (your) name and then retitling them into the title of the grantor’s revocable living trust is called funding a trust. Trust funding is also when assets that require a beneficiary designation and naming it into the grantor's revocable living trust as either the primary or secondary beneficiary. The primary purpose of funding a trust is to make sure that the property that belongs to the grantor is managed under the terms of the trust agreement. This allows the disability trustee to take hold of the accounts that are held under the trust in case the grantor becomes incapacitated. It also ensures that the death trustee can easily manage and have access to the accounts to transfer funds that are held in the name of the grantor. The grantor's property that was not retitled into the name of the grantor's revocable living trust will have to go through probate after the grantor's death.

A nomination of a guardian is not binding on a court, but it carries a lot of weight and will influence the court's decision. Unless there's some glaring reason why the court shouldn't accept your named guardian, it will usually go with your choice. Therefore, it's important that you protect your minor children by naming someone you trust who will raise them in a stable manner with values similar to your own. If you don't name a guardian, then the court will appoint someone without any influence or knowledge of your wishes. Your relatives might disagree on who best should care for your minor children and the court might appoint someone you would never have chosen.

A power of attorney is a document that allows you to appoint someone else to represent you and make decisions on your behalf when you are away or otherwise incapable of making decisions yourself. While this person is referred to as an "attorney in fact," they do not have to be an actual lawyer in order to make decisions for you. A power of attorney may be given the authority by you to handle a number of tasks on your behalf, including the buying and selling of property, paying bills, trading stocks and bonds, filing your tax returns, and hiring people to care for you. You should consider the pros and cons of a durable versus springing POA. A durable power of attorney is effective immediately while a springing is only effective once a person is incapacitated. The problem with the latter is that it may be difficult to determine what constitutes “incapacitated.” While you can appoint nearly anyone to be your agent, it is imperative you only designate this power to someone you deeply trust.

Regardless of your age, you can benefit from creating an estate plan. Even if you have limited assets, it’s is a necessary step to ensure your wishes are upheld and your loved ones are protected. In putting together your estate plan, it’s crucial to avoid making these common mistakes.

1. Not including a will- A last will and testament is an important part of estate planning that allows you to name beneficiaries and guardians for your minor children. It also lets you establish your final plans such as whether to be buried or cremated and your funeral. It’s a mistake to not include a will in your estate plan, but it shouldn’t be the only document you hold.

2. Naming only one beneficiary- Many people have a specific person in mind they wish to name as a beneficiary. But, naming only one person is a common estate planning mistake to avoid. If you fail to name a contingent beneficiary and your first choice passes away before you, it could prevent you from handing down assets in the way you intended.

3. Not updating your documents- Our lives are constantly changing. Some life changes require you to update your estate planning documents. Whenever a major life change occurs such as marriage, divorce, death or the birth of a child, it’s crucial to review your estate plan and make changes. For example, if you’re divorced and remarry someone new, your new spouse should replace your former spouse on your documents.

4. Not creating powers of attorney- Powers of attorney for your financial and healthcare matters, respectively, should be included in your estate plan. Sadly, some people fail to include these documents in their estate plan. This mistake prevents them from having someone trusted handle their financial and health-related matters if they become incapacitated.

What assets Should you Consider Adding to Your Estate Plan- If you reside in California and want your assets to pass to the next generation smoothly, using a trust can be highly beneficial. One of the top advantages is the ability for the assets you place in a trust to avoid probate. However, it’s essential to understand the types of assets you can include when using this tool. The following examples are assets you may want to have in your trust:

1. Real estate- Adding real estate to a trust can be a good idea as this asset is typically one of your most significant. Doing so helps your beneficiaries in dealing with this asset and probate proceedings. If you own a home or commercial property, adding it to a trust may be beneficial.

2. Financial accounts- Another asset that can be advantageous to add to a trust includes individual financial accounts. These might consist of bonds, stock certificates, annuities, and the following:

   • Non-retirement mutual fund accounts

   • Non-retirement brokerage accounts

   • CDs

   • Saving and checking accounts

   • Money market accounts

   • Cash accounts

3. Valuable personal property- If you own valuable personal property that you want to pass on to your heirs, placing it in a trust can be advantageous. Tangible personal property that you may want to put in a trust can include the following:

   • Collectibles

   • Jewelry

   • Art

   • Furniture

4. Business interests- Adding a business to a trust may also be advisable. This action can help reduce the tax burden and your family’s burden of carrying business debts. If you own a small business as a sole proprietor, transferring your business interests to a trust can help avoid having to operate your business under court supervision.