Guest Column

As warm weather approaches and people begin planning their summer trips, some also give consideration to their estate planning. Those who take the time to plan now, while healthy, will be empowered to make critical decisions about their personal and financial future, the disposition of their property, and the welfare of those they love. Consider the following:

What happens if you die without a will?

If you die without a will, your estate will pass by state laws of interstate succession. In California, if you are married, your assets will be divided among your spouse and children. Your children will receive their inheritance outright at age 18.

Property passing to a spouse will not go through formal probate. However, if you both die at the same time, or if you are single, assets in excess of $100,000 that do not otherwise pass outside of probate (e.g., by beneficiarydesignation, titling, contractual arrangement) will go through court-administered probate proceedings.

Probate proceedings are public record so anyone can access information about your estate and beneficiaries. The process can take from six months to several years to complete, and your beneficiaries may not receive their inheritance until the probate is completed.

By law, court-appointed administrators and attorneys hired to handle the probate are entitled to fees based on the gross value of the probate assets. Under the current statutory fee schedule, if the only probate asset were a Laguna Beach home that was appraised at the median home price of $1.4 million in March 2008, the administrator and attorney would be entitled to statutory fees exceeding $50,000, regardless of what you owed on the property.

What happens if you have a will?

If you have a will, your named executor will distribute your estate to your designated beneficiaries in the manner specified. Although tax planning can be done in a will, and you can control the manner and timing of distribution to beneficiaries, having a will does not avoid the public record, time, and expense associated with probate.

What is a living trust and how is it different from a will?

People often use a revocable living trust to avoid probate, for tax planning, and to control the manner and timing of distribution to beneficiaries. Unlike a will, which is a public document filed with the court, the trust is private. Property held in the name of the trust is not subject to probate proceedings.

You will need to transfer your assets (e.g., real estate) into the trust, generally with the assistance of an attorney. You will continue to control and manage the assets as you do now, but upon your incapacity, your named successor trustee can manage the assets without a court-appointed conservator. Upon your death, your successor trustee will distribute the assets to your beneficiaries according to the terms of the trust.

A "pour over" will is typically used in conjunction with a living trust to catch any assets that may not have been transferred to the trust so that they can be distributed according to the trust's terms. Guardians for minor children are also nominated in the will.

What does a basic estate plan typically consist of?

A basic estate plan typically consists of a revocable living trust, will, power of attorney for financial matters, and advance health care directive.

How much does an estate plan cost?

You should generally be able to obtain a personalized basic estate plan drafted by an attorney for a fee of between $1,000 and $2,500, depending on the complexity. Be sure to findout whether the fee includes "funding" or transferring your assets into the trust.

Why is a power of attorney necessary?

A power of attorney for financial matters enables a designated individual to handle your non-trust assets (e.g., pay your bills from your checking account, transfer assets to your living trust) in the event that you are incapacitated.

What is an advance health care directive?

An advance health care directive allows you to designate an agent to make health care decisions for you in the event that you are incapacitated. In addition to the release and execution of health care records and forms and consent to surgery and the like, it can be used to express your preferences regarding life-sustaining care.

How often should you review your estate plan?

You should review your estate plan at least every two to three years because of changes in tax and other laws. Certainly estate plans should be reviewed when there has been a significantchange in assets, or when there has been a major life event such as divorce, remarriage, or the birth or adoption of a child.

Leslie R. Daff, J.D., M.B.A. is a Laguna Beach attorney specializing in estate planning and administration. She welcomes your questions and comments: LDaff@ estateplaninc.com