Estate Planning Basics

By Jeremy Liem

 

The three most common types of estate plans are Wills, Trusts, and Intestacy.

 

Intestacy


A person dies intestate when they do not have a Will or a Trust set up to manage the disposition of their property.   The rules for intestate distribution are codified in California's Probate Code.   

Intestacy rules also apply when a person owns property that is not included in their estate plan.   These rules are administered when the estate goes through Probate.

 

The intestate distribution rules are exactly what one might expect for default rules.  The decedent's estate is divided equally among the decedent's relatives at the closest living generation.  For example,  if the decedent has two children, both living, the estate is divided between them equally.  If the decedent has two children, one living and one previously deceased, half goes to the living child, and half goes to the children of the previously deceased child.  If the decedent has no living children, but two living grandchildren, the estate is divided between the two grandchildren equally.

 

Will

 

A Will gives you the opportunity to deviate from the default estate distribution rules.  It also helps to inform your heirs of the way you would like your property to be distributed.  Without a Will, your heirs will have to either sell your property and divide the proceeds, or come to an agreement on the value of property to ensure proper distribution.

 

Although California recognizes some handwritten Wills (including fill-in-the-blank Wills), they come with many risks, and need to meet many of the same requirements as a formal Will.  Although you may mean well, handwritten and fill-in-the-blank Wills can create extra problems and expenses when it comes time to administer the Will.  For those reasons, handwritten Wills are heavily discouraged.

 

Trust

 

A Trust is the best estate planning tool for nearly every person, regardless of the size of their estate.  This is because a Trust avoids the probate process and the high legal fees associated with it.  If you would like to learn more about those benefits, we have written an article entitled "Do I Need a Will or a Trust?".

 

A Trust is essentially a private agreement.  The person establishing the trust (Settlor) gives property to someone (Trustee) to manage for the benefit of someone else (Beneficiary).  In the case of a Living Trust, the person establishing the Trust plays all three roles, Settlor, Trustee, and Beneficiary.  You give your property to yourself to manage for your own benefit.  This acts as an estate planning tool when you nominate successor Trustees and successor Beneficiaries when you pass away.  Once you pass away, the successor Trustee will step into your shoes to manage and distribute your property to the successor Beneficiaries according to the terms of the Trust.

 

If you would like to discuss the best method for planning your estate, or have any other questions, please give us a call, or send an email by filling out the following form.