Frequently Asked Questions

How an Estate Planning Attorney can help

Attorneys that are experienced in Estate Planning will ensure that your estate plan will: Provide instructions for your care and that of your loved ones in the event of your disability. Be effective if you move to or own property in another state. Avoid probate and its associated legal costs. Keep your affairs private and confidential. Control all your property, including pensions and life insurance. Allow you to leave explicit instructions for the care of your loved ones. Create protective trusts for your young children, disadvantaged children, adult children, and grandchildren. Provide federal estate tax planning. Effective Estate Planning is easy with the help of an experienced attorney.

When the average person thinks of Estate Planning, the first and sometimes the only term that comes to mind is The Will. It is possible to create an effective will without an attorney, but only when you are familiar with the appropriate rules and laws.

What Is Estate Planning?

Estate planning is a lifelong process in which you evaluate your situation and plan for the future. It includes planning for your retirement, for the possibility of disability, and for death. The estate planning process requires that you consider a wide range of legal, financial, emotional, and logistical issues.

Estate planning can be a positive experience, since it involves reviewing your situation and planning for your future. Although most people also find it unpleasant to think about the possibility of disability or death, advance planning is also a way to show your love and to reduce potential distress later.

Because every person's situation is unique, there is no single "checklist" to follow for estate planning. Proper estate planning also includes financial planning, which is not discussed in this booklet. Financial planners, accountants, and insurance agents can help you identify other estate planning issues not addressed in this booklet.

Emotional Aspects of Estate Planning

The mere mention of certain words -- such as "family," "death," or "disability" -- can evoke a wide range of emotions from anyone. Such emotions can help motivate people to plan for the future, but can also interfere with proper estate planning.

When a family member or friend dies, there is a natural process of grieving, which can interfere with our ability to make decisions. In addition, grief can sometimes impact already-strained family relationships. A person's death often terminates or changes relationships, especially if the deceased person was the only common link between other people. For example, a surviving spouse may have less contact with the deceased spouse's children from a prior marriage.

Many of the emotions we feel after someone's death are natural, healthy, and probably unavoidable. However, some emotional problems could be reduced or eliminated by advance planning. And consideration of the impact of probate proceedings and estate taxes can often avoid hardships.

Death is not the only event you should plan for. Due to illness or accident, many people become incapacitated, either for brief periods or permanently, and cannot make their own decisions. If you are disabled, your family and friends will be emotionally distraught and yet may need to make very important decisions for you.

Making decisions for an incapacitated person is always difficult. The person making the decisions will feel more comfortable if the incapacitated person has left advance instructions and has selected a specific person to make decisions.

Estate planning must address the emotional needs of your family, your friends, and yourself.

Who Will Care for Our Children?

Naming a Guardian for Minor Children: All parents worry about what would happen to their children if both parents died. This concern draws many people to lawyers' offices to start the estate planning process..

If one parent dies or becomes incapacitated, then usually the surviving parent will retain sole custody of any children, unless special circumstances exist. If both parents die, then usually there must be a court action to appoint a legal guardian for the children.

In such a proceeding, the court will always look first to the desires of the parents, preferably expressed in a written Nomination of Guardian. The court is required to appoint a nominated person as guardian unless this would not be in the best interests of the child.

Of course, it is very important to carefully consider who would be the appropriate guardian of your children. Consider many options: will this person be able to care for your children until they are 18 or 21? Even if one person is suitable, might there be an even better choice?

Be sure to ask your "nominee" if they would agree to care for the children if something happened to both parents. Don't risk putting someone in the awkward position of first learning of your nomination after you die. Even the most supportive and caring friend or relative may have good reasons for declining to take on the burden of caring for more children.

You should also nominate alternate choices for guardian, in case your first nominee is later unable to take your children.

Caregiver's Authorization Affidavit: For short-term care situations, the California legislature enacted a new law in 1994 (Family Code Section 6550). A non-parent caregiver can complete the new "Caregiver's Authorization Affidavit" to enroll children in school and to obtain medical treatment for the children. This form can avoid the need for formal guardianship proceedings where a parent is temporarily unable to care for children. Formal guardianship is still preferable if the parents have substance abuse or mental health problems, or if custody or visitation disputes are anticipated.

Protecting Children via Guardianships: During the past several years, I have handled a number of guardianships under unpleasant circumstances, usually because the parents have substance-abuse problems. In these cases, I usually represent a grandparent or aunt of the children; the guardianship is intended to protect the children from neglect or abuse by the parents.

If you or a family member is in this situation, it is vital to obtain legal advice. If the caregiver cannot afford legal advice, contact your county's Volunteer Legal Services Program (for example, the Alameda County Bar Association's Volunteer Legal Services Corporation, at 510-893-1031) Note that some public benefits, including AFDC and Medi-Cal coverage, are often available for the children even if the caregiver's own family does not qualify.

Legal guardianship is essential if there is any risk that the parents might seek to reclaim the children for reasons that are not in the children's best interests (for example, in order to qualify for AFDC or other public assistance benefits, with a substantial risk that the money will be mismanaged or used to buy drugs or alcohol).

A non-parent caregiver faces all the stresses of a parent, plus the extra load of dealing with both the children's anguish and the parents' guilt and anger about the situation. I urge all my clients in this situation to seek counseling and support groups to deal with the unique pressures of their circumstances.

Special Issues for Divorced Parents

After divorce, if either parent dies, then the surviving parent will normally have full custody of the children (even if the deceased parent had primary custody). If one parent believes that the other should not have sole custody, advance planning is essential so that other family members are prepared to petition the court for a guardianship in the event of the custodial parent's death.

In addition, if a deceased parent fails to name a "guardian of the estate" for any property left to a child, the surviving parent will normally be entitled to manage and control the money. Since many marriages fail because spouses do not agree about financial matters, many divorced parents prefer to nominate a different person to manage the child's money. (Generally, the use of a trust or custodianship is preferable to a court-supervised guardianship.)

Probate: What Is It?

In California, the probate court serves several functions. The most common is administration of the estates of persons who die, called a probate proceeding. However, the probate court also handles guardianships and conservatorships. Thus, the same court may decide to appoint a conservator for an incapacitated person, and then may administer that person's estate several years later, after death.

What Is Probate?

Not all of a deceased person's property is subject to the probate process. Life insurance, retirement accounts, and "joint tenancy" property all pass directly to the appropriate beneficiary automatically, without any court confirmation. If the person created a "living trust," any property held in the trust is not subject to probate. A bank account or motor vehicle title may also specify a death beneficiary.

Benefits of Probate

Once the probate "creditor's claim period" expires (generally four months after the executor is appointed) it is very difficult for creditors or others to claim any interest in the estate. For a professional (such as a doctor, accountant, or attorney), probate may bar later lawsuits that would otherwise be difficult to defend without the help of the deceased person.

Drawbacks of Probate

Probate Delay: Formal probate takes at least six months to a year. Sometimes, probate can drag on for several years, or in extraordinarily rare situations, for decades.

Often, these delays are not important. The surviving family members usually have immediate access to joint bank accounts, and rapid access to life insurance proceeds. If special needs exist, the probate court will usually allow preliminary distributions or payment of an allowance to family members.

However, in certain situations, probate delays can create problems. For example, a small business or professional practice must often be sold quickly after death to avoid losing clients. If a deceased person owned stock options related to employment, those options may lapse if not exercised quickly.

Probate Fees: Second, probate can be expensive, because of fees paid to the attorney and to the executor. The actual fees paid to the probate court are minimal, typically about $200 for filing fees. For property other than cash or its equivalent, a probate referee must appraise the property, for a fee equal to one-tenth of 1 percent (0.1%) of the value of the property. (Even if probate is avoided, the IRS may require an appraisal.)

The executor's fee and attorney's fee are much larger. The probate code provides that the executor and attorney may each charge a fee that ranges from about 3 percent of a modest estate to less than 1 percent for a very large estate. These probate fees are computed only on property which is subject to probate (and thus usually won't include life insurance, retirement accounts, or joint tenancy property).

However, if the executor is also the sole beneficiary of the estate, he or she will usually waive the executor's fee, since it is subject to income tax. In addition, the attorney's fee is negotiable; many attorneys charge hourly rates, with the statutory fee set as a maximum fee for ordinary probate legal services.

Finally, even if probate is avoided, the fees might not. An attorney and/or accountant usually must be hired to help administer a deceased person's trust or non-probate estate. In addition, the trustee of a "living trust" is usually entitled to claim a reasonable fee for managing the trust, although many family members do not actually request fees.

Health Care Decisions

If you are incapacitated, someone else must make health care decisions for you. California law defines who can make the decisions if you fail to provide instructions. However, only you know who would be best to make decisions for you, and your comments about medical treatment and life-sustaining measures are important.

Clients are urged to execute an Advance Health Care Directive, naming an agent to make health care decisions and providing some guidance and limits for the agent.

When you complete the Advance Health Care Directive, you should indicate your specific desires regarding treatment, or any circumstances in which you might want life-sustaining treatment withheld. In addition, you may want to specify who may (or may not) visit you in the hospital, and who will be responsible for funeral or burial arrangements.

The Advance Health Care Directive replaced the Durable Power of Attorney for Health Care and the Declaration pursuant to the Natural Death Act (or "Living Will" as it was commonly known) as of July 2000. However, all valid Durable Powers of Attorney for Health Care and Declarations pursuant to the Natural Death Act remain valid. However, any Durable Powers of Attorney for Health Care executed before 1992 have expired and should be replaced with the new Advance Health Care Directive.

Planning for Disability or Incapacity

In addition to the health-care decision making issues discussed in the prior question, you should consider preparing a general Durable Power of Attorney for financial matters, so that someone can manage your property if you are incapacitated. For married couples, consider using the California Statutory Form Durable Power of Attorney, which is immediately effective. For unmarried persons, consider using a custom-drafted Springing Durable Power of Attorney, which becomes effective only after you are incapacitated.

In addition to the powers normally specified in a durable power of attorney, you might consider writing in authority for your "agent" to transfer your assets into a living trust (to avoid probate at your death), and to make small gifts (up to $10,000 per recipient per year) on your behalf to your relatives or others. The power of attorney may also include authority for your agent to make arrangements for your personal care, to store or sell your property, and even to arrange for the care of your pets.

In addition to the legal forms described above, you should carefully review your financial situation and consider purchasing insurance to protect your family in the event that you are disabled.

California's state disability insurance (SDI) provides minimal benefits for only one year. In addition, you should make plans so that your health insurance won't lapse when you most need it.

Nursing Home Costs and Long-Term Care Insurance: Finally, you should consider long-term care insurance, to cover the expenses of nursing-home coverage.

The California Department of Aging produces an excellent booklet on this subject, called "Taking Care of Tomorrow: A Consumer's Guide to Long-Term Care." You can obtain a copy of the booklet from any insurance agent who sells long-term care insurance, or by calling the California Department of Insurance at 800-927-4357.

In 1994, California enacted a new form of long-term care insurance, called "Partnership" policies, which can shield assets from Medi-Cal liens. This insurance is described in the booklet mentioned above.

What Your Family Should Know

It is important to periodically review your records, and decide whether you need to prepare a summary of your property and debts, so that others can effectively administer your estate if you are disabled, or when you die. If you are disabled before you die, your family must know about your debts and insurance, so they can make payments as they become due.

A recent loan application and tax returns often provide a good starting point to identify your assets, but these won't include some important property.

Will your family know the following?

• Location of vital documents (birth, death, marriage, divorce, adoption)
• Location of employment records (and military records, if applicable)
• List of real estate owned (including partnerships/joint ownership)
• Location of deeds, loan documents
• Payment information for mortgages, taxes, insurance
• Name(s) of person(s) most knowledgeable about property
• List of valuable personal property. Make sure your family knows if any of your furniture, artwork, or other personal property items have a special value (emotional or financial); consider the possibility that the family members who already know about these things may not outlive you
• Information regarding employee disability and survivor benefits
• Information regarding Pension/Retirement Benefits: IRA SEP Keough 401(k) Social Security other
• List of bank and investment/security accounts
• Children's savings accounts (including trust and custodianship accounts)
• Investment accounts (broker, mutual funds)
• Business
• Location of corporate records, documents, share certificates
• Information re: management, employees, etc.
• Information relevant to valuation of business
• Names of advisors (accountant, attorney, insurance agent) continued
• Securities/Investments not held in financial institution
• Partnerships (including limited partnerships, investment pools, "tax shelters")
• Mutual funds
• Shares of stock in publicly-traded companies
• Bonds (including corporate bonds, municipal bonds, savings bonds)
• Shares of stock in closely-held companies (together with info re: transfer restrictions or repurchase obligations)
• Intangible property: copyrights, patents, trademarks, other
• Burial/Funeral plans, prearrangements
• Motor vehicles (Description; location of vehicle; location of title; loan and insurance information)
• Stock options: terms; deadline(s) for exercise; location of documents
• Safe deposit box; storage lockers; safe; lock box (Location; Who has key & access rights? Detailed list of contents)
• Insurance Information (Location of policies & related documents; Life Insurance company, policy number, amount; Disability Insurance; Health Insurance (including Medicare/Medi-Cal); Long-Term Care Insurance; What are the "premium due" dates and amounts for each policy?
• Loans, Promissory Notes (Debts you owe; Debts others owe to you; Payment terms, amounts, due dates; location of documents; State your agreement or intent re: forgiveness of debts, or plan to offset from future inheritance)

Other Helpful Sources of Information

Social Security: Every person should request a "Personal Earnings and Benefit Estimate Statement" at least once every three years, to confirm accurate recording of your earnings and to help predict your future benefits. Call 800-537-7005 to obtain a form to request the statement.

Employee Benefits: If you work for a large company or government agency, check with the personnel office for assistance and information about benefits and retirement options.

Books: Check out your local library for many helpful books on estate planning. If you prefer to buy a book, try Harvey Platt's Making a Will and Creating Estate Plans (Longmeadow Press, 1991, $4.95), which is only available through Waldenbooks.

Credit Reporting: To learn how to obtain a copy of your credit report, call TRW (800-392-1122), Equifax (800-685-1111), and/or TransUnion (800-851-2674).

Long-Term Care: The California Department of Aging produces an excellent booklet on long-term care, called "Taking Care of Tomorrow: A Consumer's Guide to Long-Term Care." You can obtain a free copy from any insurance agent who is licensed to sell long-term care insurance, or from the Department of Insurance (800-927-4357).

Choosing an Attorney: If The Castleman Law Firm is unable to represent you in a matter, we can refer you to other qualified attorneys in the area. Or call the Lawyer's Referral Service (LRS) of your local county bar association (see the "Attorney Referral" section of the Yellow Pages):
Alameda County Bar Association LRS: (510) 893-8683
Contra Costa County Bar Association LRS: (925) 825-5700

If You Can't Afford an Attorney: The Alameda County Bar Association's Community Services Committee has produced an excellent 34-page "Legal Services Directory" identifying many free and low-cost legal programs in the county. You can reach the ACBA's Volunteer Legal Services Corporation at (510) 893-1031.