Overview of the Tax Cuts and Jobs Act of 2017

The TCJA introduced several key changes, including reduced individual tax rates, business tax relief, and higher estate tax exemptions. These provisions, which have been in place for nearly a decade, will change significantly starting January 1, 2026.

 What’s Changing?

Individual Tax Rates: The TCJA reduced individual tax rates, but these rates are set to increase in 2026, affecting a broader base of taxpayers.

• Business Tax Relief: The tax relief provided to businesses will expire, increasing the tax burden on business owners.
• Estate Taxes: The estate tax exemption, which currently allows estates valued up to $13.61 million to be passed on tax-free, will be cut roughly in half. For married couples, the exemption will drop from $27.22 million to approximately $14 million.

 Impact on Business Owners

If you own a business or are not a W-2 earner, your taxes are set to increase. The qualified business income deduction, which allows a 20% deduction on pass-through income, will also expire, significantly impacting your tax planning.

 Proposed Changes and Preparations

In addition to the expiration of the TCJA, proposed fiscal year 2025 changes under the Biden administration could further impact taxes. It’s crucial to start preparing now:

1. Review Your Estate Plan: Ensure your estate plan takes into account the lower estate tax exemptions. Consider strategies like making substantial gifts before the exemption decreases.

2. Consult Your Financial Advisor: Work closely with your financial advisor to understand how these changes will impact your financial situation. Plan to accelerate income or deductions where beneficial.

3. Tax Planning for Business Owners: If you own a business, consider the timing of income and deductions to optimize your tax position before the changes take effect.

Conclusion

Navigating these changes can be complex, but with careful planning, you can mitigate their impact. At Alexander Legacy Law, we’re here to help you understand and prepare for these tax changes.

Contact Us Today

If you have any questions or need assistance with your estate planning in light of these upcoming changes, don’t hesitate to contact me, Jonathan Alexander. Schedule a consultation today, and let’s ensure your estate and financial affairs are in order.

Contact Alexander Legacy Law at (949) 334-7823 for more personalized assistance.

Ensuring Your Wishes Are Honored

A Revocable Living Trust allows you to specify exactly how and to whom your assets should be distributed. This can be especially crucial if you have specific needs, such as providing for a loved one with special needs, or if you have other particular considerations for asset distribution. By clearly outlining your wishes, you can ensure that your assets are managed and allocated according to your intentions.

Maintaining Confidentiality

One of the significant advantages of a living trust is the privacy it affords. Without a revocable living trust, your estate may go through probate, a court-supervised process that can make your assets and beneficiaries’ details public record. In California, for instance, probate can take about two years, during which time all your financial and familial information becomes accessible to the public. A living trust helps keep your affairs private and away from the public eye.

Efficiency in Asset Distribution

Another compelling reason to create a Revocable Living Trust is the efficiency it brings to the asset distribution process. Probate can be lengthy and costly, but with a living trust, your assets can be transferred to your beneficiaries without the delays and expenses associated with probate. This streamlined process ensures your loved ones can access their inheritance more quickly and with less hassle.

Impact of Funding a Trust on Taxes

Once you establish a living trust, it’s essential to fund it by transferring your assets into the trust. This involves retitling assets, such as real estate, bank accounts, and investment accounts, in the name of the trust. For example, if Jonathan Alexander creates a trust, his assets would be retitled as “Jonathan Alexander as Trustee of the Jonathan Alexander Living Trust.”

From a tax perspective, a Revocable Living Trust doesn’t significantly alter your tax filing process while you’re alive and capable. The trust’s assets are reported under your Social Security number, and any income or losses are included in your personal 1040 tax return. However, the 1099 forms and other documents will be issued in the name of the trust, reflecting the trustee’s title.

Changes Upon Incapacity or Death

If you become incapacitated, your trustee may need to obtain a new Employer Identification Number (EIN) for the trust. This new EIN signifies that the trust is now a separate taxpayer, and any income or losses will be reported on a 1041 Fiduciary Tax Return. Upon your passing, an EIN will always be required for the trust or your estate, ensuring that all financial activities are properly reported on the appropriate tax return.

Take Control of Your Estate Planning Today

Establishing a Revocable Living Trust is a proactive step toward ensuring your assets are managed and distributed according to your wishes, while also providing privacy and efficiency. If you have questions about setting up a living trust or need assistance with your estate planning, contact me, Jonathan Alexander, your dedicated estate planning attorney. I’m here to guide you through the process and help you secure your financial future. Schedule a consultation today by calling (949) 334-7823 to take control of your estate planning journey.

Adding Kids to Your Home Title

Many think adding their children to their home title is a smart move to bypass the complicated probate process after passing away. It seems like a simple solution: just add your child as a co-owner, and they’ll automatically inherit the property, right? Not so fast—there are several important factors to consider.

The Tax Implications

When you add your child to your home title, you’re essentially giving them a portion of your home. This can have big tax implications, like gift taxes if the value exceeds a certain amount (currently $18,000 in 2024). Plus, you might be giving up valuable tax benefits that come into play when you pass away, such as the “step-up in basis.” This rule allows the property value to be recalculated at its current market value upon inheritance, potentially saving on capital gains tax. By adding a child to the title now, you might inadvertently create a larger tax bill for them later.

Potential Legal and Financial Risks

Adding a child to your home title doesn’t just involve taxes; it could open up a can of worms in other areas of your life, too. For example, if your child has financial troubles, undergoes a divorce, or encounters legal issues, your home could unexpectedly become part of those disputes. Additionally, if your home still has a mortgage, transferring part ownership could trigger a “due on sale” clause, complicating matters further.

The Alternative: A Living Trust

So, what’s a better way to ensure your home passes to your child without these headaches? Consider setting up a living trust. This legal tool allows you to transfer ownership of your home into a trust, which you control during your lifetime. Upon your passing, the home can be passed on to your beneficiaries without going through probate, avoiding many of the issues associated with direct gifting.

Real-Life Consequences

To drive the point home, consider this real-life scenario: a person gifts their commercial property to their children during their lifetime to avoid estate taxes. However, this well-intentioned act resulted in a huge tax burden for the children when they sold the property because they inherited the parent’s low tax basis. Had the parent simply held onto the property and allowed it to transfer upon their passing, the children could have benefited from a stepped-up tax basis, significantly reducing their tax liability.

Final Thoughts

While adding your child to your home title might seem like a quick fix to avoid probate, it’s crucial to consider the long-term implications. Taxes, legal risks, and loss of control are just a few potential drawbacks. Before making any decisions, it’s wise to consult with a professional who can help you navigate the best path for your family’s unique situation.

Ready to explore safer, more effective ways to pass on your home to your children? Let’s discuss how setting up a living trust or other estate planning strategies can offer peace of mind for you and your loved ones. Contact me, Jonathan Alexander, at (949) 334-7823 for a personalized consultation. Together, we can ensure your estate planning aligns with your wishes and protects your family’s future.

As a single parent, you constantly juggle numerous responsibilities while ensuring your children’s future is bright and secure. I understand that your primary goal is to safeguard their future. I’m Jonathan Alexander, an experienced Orange County Estate Planning Attorney, with a passion for helping individuals, families, and business owners protect their assets and loved ones. Let me guide you through how estate planning, including the creation of a revocable living trust and a children’s emergency plan, can offer comprehensive protection for your children.

Understanding the Value of Estate Planning: A Story of a Caring Single Parent

Let me share a story about Lisa, a hardworking single mother I had the pleasure of assisting. Lisa built a thriving business and accumulated substantial assets, all to ensure her children’s future financial security. But she was concerned about the fate of her children and her estate if she were suddenly unable to care for them. She wanted certainty—assurance that her children would be taken care of, and her assets would be smoothly transitioned without the prospect of lengthy court procedures or family disputes.

Implementing an Effective Estate Plan

I helped Lisa understand how a revocable living trust and a children’s emergency plan could provide the peace of mind she was seeking.

Revocable Living Trust: Protection and Control Over Your Assets

A revocable living trust, I explained, would allow Lisa to remain in control of her assets during her lifetime and specify how they would be managed or distributed upon her passing or incapacitation. The beauty of a revocable living trust is that it avoids probate, which is often time-consuming and expensive. It also keeps the details of her estate private.

If Lisa were to become incapacitated, her designated successor trustee could step in to manage her assets, thus avoiding court-supervised conservatorship. And since it’s “revocable,” she can modify it anytime, giving her the flexibility she needs.

Children’s Emergency Plan: Providing Immediate Safety for Your Children

I also emphasized the importance of a children’s emergency plan. In case Lisa were to be involved in an accident or become suddenly incapacitated, this plan would designate a trusted person to have immediate temporary authority over her children. This safeguard would ensure that her children would never end up in the hands of Child Protective Services or become a point of contention within the family.

Achieving Peace of Mind

With my guidance, Lisa was able to create a comprehensive estate plan. Today, she rests easier, knowing her children’s future and her hard-earned assets are secure. She’s confident that her legacy will live on, and her children will have the stability she worked so hard to provide.

How I Can Help

Like Lisa, you’re striving to secure your children’s future. I can help you navigate the complexities of estate planning, creating a plan that suits your unique situation. This way, you can have peace of mind knowing your children’s future is secure, even when life throws unexpected curveballs.

An Act of Love and Legacy

To me, estate planning is a profound act of love. It’s a way for you to tell your children, “I’ve planned for your future because I care.” Estate planning allows you to pass on more than just your material assets—it lets you transmit your values, lessons, and life experiences to your children.

Reach Out Today

Setting up a comprehensive estate plan might seem daunting, but you don’t need to face it alone. I am here to guide you through the process, ensuring your children’s future is secure, and your wishes are honored. Call me today at (949) 334-7823 to schedule an appointment. Let’s take that vital step towards securing your children’s future.

Estate planning is truly one of the most significant gifts you can give to your children. It ensures their financial security and serves as a beacon of your enduring love and care for them, regardless of life’s unexpected twists and turns.

As you embark on this journey, remember that it’s not just about financial wealth transfer—it’s about preserving and passing on your legacy. Your estate plan can include personal letters to your children, communicating your hopes, dreams, and values. These pieces of you will serve as lifelong reminders and guidance long after you’re gone.

Let’s Secure Your Children’s Future

I have helped single parents like you secure their children’s futures. I am committed to working closely with you, crafting an estate plan that ensures your wishes are met and your children are protected.

The prospect of no longer being around to guide and provide for your children is daunting, and it’s something no parent wants to think about. However, it’s essential to plan ahead for these unforeseen circumstances. By doing so, you ensure that your love continues to shield your children, no matter what the future holds.

Take the first step today. Call me today at (949) 334-7823 to schedule an appointment. Let me help you with this crucial task of creating a comprehensive estate plan that guarantees the future you’ve always desired for your children.

Remember, estate planning is more than just a financial decision—it’s a decision about your legacy. As a single parent, you’ve always been there for your children. By working with me, you can ensure you will continue to be there for them, no matter what life brings.

With my help, you can secure your legacy, protect your children, and achieve the peace of mind you deserve. Your children’s future is worth it, and together, we can make sure it’s as bright as they deserve.

One Sunday evening, the couples attended a neighborhood gathering where they met a wise estate planning attorney. During their conversation, the attorney explained the benefits of establishing a trust, especially for families like theirs with children and a home.

Tom and Mary were intrigued and decided to take action. They scheduled a consultation with the attorney, who guided them through the process of creating a trust. They learned that by establishing a trust, they could bypass the lengthy and costly probate process, maintain their family’s privacy, and ensure their children’s financial well-being.

By setting up a trust, Tom and Mary could also appoint a trusted individual to manage their assets on behalf of their children if something were to happen to them. This gave them peace of mind, knowing their children would be taken care of according to their wishes.

Jack and Susan, on the other hand, felt overwhelmed and decided to postpone creating a trust. They continued with their busy lives, not realizing the potential consequences of their decision.

Years later, both couples were faced with unexpected events that left them incapacitated. Tom and Mary’s trust proved to be invaluable, as their assets were seamlessly managed, and their children were financially secure. Their family’s privacy was preserved, and their wishes were honored.

Jack and Susan’s family, however, faced a different reality. With no trust in place, their assets were subjected to the lengthy probate process, and their family’s affairs became public. Confusion and disagreements arose among their children, adding stress and heartache during an already difficult time.

The moral of this story is that establishing a trust can provide numerous benefits for married couples with children and a home. It’s never too early to take action and secure your family’s future.

As an estate planning attorney serving Orange County, California, I understand the unique needs and concerns of families like Tom and Mary’s. My goal is to help you create a comprehensive estate plan that will protect your loved ones, preserve your assets, and give you peace of mind. Don’t wait until it’s too late – contact me today to discuss the benefits of establishing a trust and start safeguarding your family’s future.

Call (949) 334-7823 today for confidential consultation.

In 2008, the U.S. Congress passed House Resolution 1499 designating the third week in October as National Estate Planning Awareness week. 

According to Caring.com’s 2022 Wills Survey, over 66% of Americans believe that having an estate plan is important, but only 1 in 3 Americans have a will or a trust.  Many of the respondents stated that they meant to establish an estate plan but had simply procrastinated.  Others who took the survey confessed to believing a common misconception. They believed that they did not own enough property or money to bother putting drafting an estate plan. 

Why Should You have an Estate Plan?  

You should have an estate plan drafted so that you can decide who inherits your money and property and who can make financial and health care decisions for you if you become sick or disabled.  Remember, if you do not establish an estate plan, the State of California has one for you.  It’s called probate and it is time consuming and expensive. 

What are the Essential Elements of an Estate Plan?

• A revocable living trust and pour-over will.  These two documents are the cornerstones of a well-drafted estate plan.  The proper use of a revocable living trust will help you avoid the expense and delay of probate. A pour-over will provides additional protection if not all your assets are transferred (funded) into your trust and allows you to name guardians for any minor children.
• Durable Power of Attorney appoints an agent who may handle your financial affairs in the event of incapacity.
• Advance Health Care Directive appoints someone to make health care decisions when you cannot and can even contain health care instructions.  
• HIPAA Authorization vests a person of your choice with the authority to view all your medical records.
• Insurance is something that all responsible adults must have.  Make sure that you have the right amount of coverage in place if you die.  You would not want to leave minor children and/or a spouse who rely upon you without financial support.  If you do have coverage, make sure your loved ones have your policy information if they need to make a claim.  
• Personal Inventory.  Compile a list of all your accounts and other important information that would be necessary to handle your affairs in the event of incapacity or hospitalization. This includes:
  • Social security card, passport, and birth certificate.
  • Bank accounts.
  • Investment accounts.
  • Credit cards accounts.
  • Loan accounts.
  • Digital accounts.

How Should you Encourage Your Loved Ones to Create an Estate Plan?

Now is the perfect opportunity.  Simply remind them that it is Estate Planning awareness week.  You can then segue into a discussion about how having an estate plan in place will provide protection against their own incapacity by designating agents of their choice to make financial and health care decisions.  You might mention that a properly drafted estate plan will save time and money by helping their families avoid probate.  Please do schedule your own appointment with a qualified California Estate Planning Attorney to create your estate plan and take the time to speak to your parents, friends, relatives, and co-workers about the importance of estate planning.  For their benefit and the benefit of their families.  

Where Can You Get More Information about Creating a Plan?

Call Orange County Estate Planning Attorney Jonathan Alexander at (949) 334-7823.  Mr. Alexander has decades of legal experience and can guide you through the estate planning process by answering all your questions, explaining the law clearly and without legalese or jargon.  Call today to schedule a confidential consultation. 

For more about Mr. Alexander, please read his bio linked here to learn more about him, his practice, and his estate planning philosophy.      

• Name the individuals who will inherit your property (your “beneficiaries”).
• Avoid probate (a time consuming and expensive court proceedings where a judge determines who inherits your money and property).
• Avoid conservatorship (a court process where a judge decides who controls your money and property is you lack the mental capacity to do so on your own).
• Exercise control over children’s gifts. You can create highly customized distributions strategies that incentivize beneficiaries to reach milestones (e.g., graduating college) and even provide protection from your children’s creditors and/or divorcing spouses. 
• Keep your affairs private and out of the public judicial system (i.e., Probate court).  Wills are public, a properly funded revocable living trust will preserve your family and loved ones’ privacy. 

A revocable living trust is the center piece of a properly drafted comprehensive estate plan.  For more information about living trusts, read: 14 Benefits of a Living Trust. 

To speak with a qualified California estate planning lawyer, call the Law office of Jonathan Alexander, Esq. today at (949) 334-7823.

Mr. Alexander has 20 years’ experience and is ready to help you create a legacy that protects your family and loved ones. Call us today.

The person who creates a trust is called a grantor. The person who carries out the terms of the trust is called the trustee.  The persons or organizations who receive property or money from a trust are called beneficiaries.   

The trust is, in essence, an agreement between the grantor and the trustee.   The grantor transfers ownership of his or her property and money to the trust. That is, the assets inside your trust are now your held by trustees in a fiduciary capacity for the benefit of the trust’s beneficiaries. The trust describes how the property and money are to be distributed to beneficiaries.  The trustee carries out the terms of the trust to ensure that beneficiaries receive their gifts.       

There are several types of trusts.  One of most commonly used trust in estate planning, especially in California, is the revocable living trust.   If you would like to learn more about why your estate plan should be centered around a living trust, read 14 Benefits of a Living Trust.

To get your estate plan started today, call estate planning attorney Jonathan Alexander at (949) 334-7823.  

Law Office of Jonathan D. Alexander, Esq.

A living trust is one of the most efficient estate planning tools available but there are some common misconceptions. According to a survey made by Caring.com only 42% of responders have created or prepared an estate plan.

There are three reasons why someone may put off their estate planning:

• They’re procrastinating.
• They don’t know how to do it.
• They believe they don’t have enough assets.

While these are understandable, it is in your best interest to start creating your estate plan today. Most of my clients establish revocable living trust centered estate plans because they provide a litany of benefits including flexibility, asset protection, privacy, and avoid the exorbitant expense of probate court.

1. What Is a Living Trust?

A living trust is a legal document created during an individual’s lifetime where a designated person, the trustee, is given responsibility for managing that individual’s assets for the benefit of beneficiaries. A living trust’s primary purpose is to avoid probate and/or to provide asset protection.

2. Why Establish a Living Trust?

Aside from protecting your assets, living trusts serve many purposes. My clients use living trusts to avoid probate, plan for incapacity or death, and to distribute their property quicker, faster, and cheaper as compared to probate.

I recommend to my clients that they include a pour-over will to catch any assets left out of the trust, although your main goal should be to put as many assets in as possible.

3. What Is Probate?

Probate is a legal process supervised by a court of law where it validates your will and determines how it is going to distribute your assets to your beneficiaries. Probate can be an expensive and time-consuming process before your beneficiaries get access to the assets.

Most people prefer to avoid probate since it can lead to confusion, stress, and more legal fees. In these cases, having a living trust can ease some of the complications in the process since assets in a trust do not have to go through probate.

4. What Assets Can You Put into a Living Trust?

You can place several asset categories in a living trust, such as the following:

• Real estate
• Jewelry
• Fine art
• Intellectual property (digital property)
• Mining rights
• Cars or other vehicles
• Bank accounts
• Cryptocurrency

5. How Does a Living Trust Work?

The process of creating a living trust is not as complex as it may seem; it just takes good guidance to get everything in order.

First, the person who establishes the trust is called the “grantor.” In this case, you, as the grantor, would transfer ownership of your property into the trust. During the trust creation process, a trustee is appointed. The trustee is the person responsible for managing the trust in the best interest of the trust’s beneficiaries.

Once you become incapacitated or die, the trustee ensures all the assets are distributed according to your wishes. Since a living trust can avoid probate, the assets may reach the intended beneficiaries much faster.

6. What Are the Two Main Types of Living Trusts?

• Irrevocable Trusts: In an irrevocable trust, you are giving full control over your assets to your trustee, and you cannot change an irrevocable trust’s terms without a judge’s permission. The benefits of this trust type include reducing the taxable estate.
• Revocable Trusts: As opposed to irrevocable trusts, you can adjust, amend, or cancel a revocable trust at any time during your life as you consider appropriate. You may also name yourself as the initial trustee to keep controlling your assets while you’re living.

The grantors of the revocable living trust (e.g., you and your spouse) are almost always the initial trustees. That is, you act as the grantor (creator) of the revocable living trust and the initial trustee. Upon your death, the surviving spouse serves as the remaining trustee and finally upon the survivor’s passing a secondary trustee (named in the living trust) will serve as trustee.

7. What Are the Advantages of Living Trusts?

Some of the most important advantages of having a living trust include the following:

• More privacy to your assets since living trusts are not considered public records.
• More difficulty to contest than a will.
• Saved time and money since assets in your trust do not have to go through probate.

8. Are Living Trusts Different than Wills?

Living trusts tend to be confused with last wills. A will is an individual’s written declaration of his or her wishes about the transfer of his or her property after death. A will’s primary function is to pass your property to people that you choose. A will also ensures that there are guardians for your minor children.

A will won’t, by itself, allow you to bypass probate. In California an estate worth $150,000 is subject to probate.

There are some scenarios where a will may suffice.

• You have minor children and your primary intention is to merely arrange for guardians.
• You do not own a home or real estate
• You are not concerned about the cost of probate, or your estate is smaller than the probate limit ($150,000 in 2021)
• You require the assistance of a judge to determine complex creditor issues.

For a young couple with no assets and a baby a will may be fine. Once the couple buys a house, starts investing, and gets more assets a more comprehensive revocable living trust centered estate plan will be a better fit.

9. What Do You Need to Begin Creating Your Living Trust?

You should complete a list of your assets and beneficiaries then contact my office immediately for a consultation. My team and I make the estate planning process a breeze and I offer a 100% satisfaction guarantee.

Establishing a living trust centered estate plan will help you protect your assets, keep the transfer to your beneficiaries private, and ensure they get to your family sooner than later.

Contact us today!

One of the first things we tell our clients is that the key to better protection for your assets is to prepare and fund your trust correctly. If you do not take the right steps, your family may end up in probate court.

Failing to properly prepare will cost you more money. I want you to avoid common mistakes that are made when setting up a living trust centered estate plan. Below is list of common mistakes that you should avoid.

1. Not Funding Your Trust

Many people believe they can sign their trust document and rest easy until they pass away. Keep in mind your trust is not going to do anything for you or your family if you do not fund your trust properly.

Funding involves the transferring ownership of your assets to your trust. The method of transfer typically depends on the asset type.

If you fail to transfer assets to your trust that are subject to probate (real estate, investment accounts, cash, sole proprietorships, partnerships, jewelry, furniture & more) your heir will end up in probate court. While probate court is not evil, it is time consuming and expensive.

2. Leaving Assets Out of Your Trust

Leaving assets out of your trust is one of the most common mistakes on this list. You may leave an asset out for any reason, although people typically just forget. Remember that any asset left out of the trust may have to go through probate, which can be an inconvenience for your beneficiaries.

If you want to avoid as many issues as possible, update your trust periodically and ensure you’re getting all the assets you need there.

3. Not Setting Up Your Trust Document Correctly

You may need to set up your trust document according to your state’s requirements. If you take an online trust form, you may skip some of these particular state requirements, which can invalidate your document in the end.

Additionally, you must ensure your living trust is completing your objectives, which can be avoiding probate, minimize taxes, or others. Regardless of your objective, your trust must include the required information to achieve it.

4. Setting Up a Living Trust and Forgetting About Other Estate-Planning Documents

Living trusts are one of the greatest financial tools for people, but they’re not meant to be a replacement for every other document. While trusts have several benefits for people, they still have some limitations that can be covered by other estate-planning documents, such as a will or a pour-over will.

I counsel my clients to put a comprehensive estate plan in place that is centered around a well-drafted revocable living trust.

5. Failing to Review and Update Your Trust

People tend to forget to update their trust regularly for any changes. Keep in mind your life can change five, 10, and 20 years from now; you may start a family, get a new job, move to a different state, and more.

We recommend people to revise their trust documents at least once every three to five years and every time there’s a major life change for them. If you keep track of your trust as life goes on, you’re going to ensure you’re including new assets and adjusting your status accordingly.

6. Choosing the Wrong Trustee or Not Choosing a Trustee at All

Your trustee must be a capable and mature person in every scenario. Many people make the mistake of choosing a close family member or friend as trustee because they believe it’s the right thing to do. However, if these people don’t know how to manage your estate properly, your family may have to go through some legal issues in the future.

When setting up your revocable living trust you must choose an initial trustee (typically you and your spouse, if married) and a successor trustee. The successor trustee will serve if you become incapacitated or die. Failing to name a successor trustee is a common error that is easily avoided.

7. Not Reading Your Trust Document

It may not seem like a common mistake, but many people do not read their trust documents. There may be some sections of your trust document you do not understand. Any estate planning attorney worth his salt will be able to explain every section to you in plain English.

8. There Any Other Important Estate-Planning Documents

As mentioned before, a living trust cannot replace every other estate-planning document. Some of the most vital estate planning tools include a pour-over will, a durable power of attorney, a HIPAA authorization form, an advanced health care directive, and a property agreement (to name a few).

If you only set up a living trust and forget about the rest, you may lose control over some other important aspects of your last wishes for your family; these aspects include guardians, executors, access to medical records in case of incapacitation, and more.

9. How Can You Avoid These Mistakes?

While there are many mistakes to make while setting up a living trust, they are easily avoided.

If you want to ensure that your living trust is drafted properly, funded, and is designed to minimize tax exposure while protecting your heirs call my office today and schedule a consultation.

In estate planning terminology, the person who died is the decedent. The property he or she leaves behind is the decedent’s estate. To transfer or inherit property often involves going to probate court. It’s complicated dealing with the courts and a decedent’s property. Probate is time consuming and can be expensive but there is some good news. With proper estate planning you can avoid probate. Every Californian should understand how.

It doesn’t matter who you are. If you own real estate, have kids or a spouse you should have an estate plan in place. If you don’t have some type of estate plan, your family and others who may inherit your property may suffer. They will be at the mercy of California’s probate system.

To avoid probate, most of my clients choose a comprehensive estate plan. A comprehensive plan includes the following documents:

• Will,
• Living trust,
• Durable power of attorney for finances, and
• An advance health care directive.

My mission with this blog is simple: To educate you about the importance of estate planning. Spending a little time and money now will save your loved ones heartache, delay, and expense.

Here’s what you’ll learn in this post:

• How to Get Started
• What is Probate
• The Assets that Pass Through Probate (and those that don’t)
• Reasons to Avoid Probate
• How to Avoid Probate
• Is a Will Enough for You
• Whether you need a Living Trust
• How to Identify your Assets (creating a personal inventory)
• Special Real Estate Issues
• Resources to Actually Start Planning

10. How to Get Started with Your Estate Plan. Three Steps and the Foundational Estate Planning Documents.

Estate planning consists of 3 steps:

• Identifying your assets,
• Deciding who gets your assets, and
• Deciding how to transfer your assets to your beneficiaries after your die.

The foundational estate planning documents are:

• Wills,
• Living trusts,
• Durable power of attorney for finances, and
• Advance health care directives

Most folks also have retirement accounts and insurance policies. Your estate plan must also arrange the transfer of these accounts and policies. You must ensure you’ve named the proper beneficiaries on any policies and accounts.

Below I’ll explain how to identify your assets and beneficiaries. First, we’ll dig into some definitions.

Every well-crafted estate plan includes a will. A will is an individual’s written declaration of his or her wishes about the transfer of his or her property after death. A will’s primary function is to pass your property to people that you choose. A will also ensures that there are guardians for your minor children.

A will won’t, by itself, allow you to bypass probate. In California an estate worth $166,250 is subject to probate. Only assets of certain type count in this calculation, see paragraph 8 below.

A living trust is a legal document created during an individual’s lifetime where a designated person, the trustee, is given responsibility for managing that individual’s assets for the benefit of beneficiaries. A living trust’s primary purpose is to avoid probate.

If you create a living trust and transfers your large assets to the trust, you can avoid probate. At your death, the trust owns the asset not you. If you fund your trust the right way, your estate will fall under the $166,250probate threshold. Funding is another way of saying transferring.

A durable power of attorney for finances is a legal document that authorizes your agent to make decisions about money and property. If you become ill or injured and cannot manage your finances, you’ll need help. A durable power of attorney for finances allows you to name a trusted person to:

• Pay bills,
• Make bank deposits,
• Manage investments,
• Collect insurance or government benefits and
• Handle other money issues on your behalf.

An Advance Health Care Directive is a legal document that allows an individual to choose an agent to make healthcare decisions on his behalf in the event that he cannot. This document allows you to do two things:

1. State your desire about the use of life sustaining medical treatment, and
2. Name a health care agent for making health care decisions about your doctors, medications, and procedures you might need.

9. What is Probate?

If you die in California with an estate valued at more than $166,250, the estate must go through probate. Despite what you may have heard, probate isn’t evil. It is a judicial process created to a distribute person’s assets after his death according to a will. During probate a judge supervises the settling of an estate.

Probate originated to prevent fraud when someone dies. A court supervises the process to enforce the wishes in a decedent’s will. The court identifies assets and makes sure the right people get them. The downsides to probate are that it is a public process, time consuming and it can be expensive.

Probate consists of the following steps:

1. Filing a petition in probate court,
2. Issuing notices to heirs and creditors,
3. Proving the will if necessary,
4. Collection of the estate’s property,
5. Paying valid creditor claims,
6. Paying taxes, if necessary, and
7. Closing the estate by the probate court.

The entire case can take between 9 months and 1.5 years. Sometimes, it takes much longer.

You should understand that some assets are not subject to probate. These assets do not count towards the $166,250probate threshold.

8. Which Assets Pass Through Probate and Which Do Not?

Not every asset passes through probate. The “probate estate” is the property that is subject to probate. When I meet with a client for the first time, we identify the probate estate. We create two columns on a spreadsheet and start distributing assets. The first column is “Probate Assets” and second column is “Non-Probate Assets.”

This is a critical distinction for estate planning. The probate court only cares about the probate estate. Judges don’t oversee non-probate assets transfers. Wills and trusts do not distribute these assets. For these assets you’ll need ensure you’ve designated the correct beneficiaries.

Wills and trusts distribute the assets in the “Probate” column. Correct beneficiary designations distribute the assets in the “Non-Probate” column.

Moving Assets Out of the Probate Column

You can move the assets out of the “Probate” column with proper estate planning. When you place assets in a living trust you can remove them from the probate estate. That’s the point of creating a living trust.

The labeling exercise above demonstrates the value of the living trust. Failure to create and fund the living trust will land you in probate if you meet the $166,250threshold.

You can create a living trust and transfer assets to the trust. You do that by make the living trust the legal owner of each asset. Transferring assets into a trust can be tedious. You should transfer only high value items to your trust.

Remember, assets with designated beneficiaries or some form of right of survivorship aren’t part of the probate estate. You don’t need to transfer them to your living trust to avoid probate. This includes your life insurance policies, retirement accounts, payable-on-death accounts, and transfer-on-death accounts.

Now, for the nitty gritty on probate and why you should avoid it with proper estate planning.

7. Reasons to Avoid Probate: It’s Expensive, Time-Consuming, and Lengthy.

The cost is reason enough to avoid probate. In California the cost of probate depends on the value of the probate estate. The probate fees go to the attorney and to the court-appointed executor. The fees are maximums set by statute. Executors often waive fees, especially if they are inheriting assets. Most attorneys, on the other hand, request the full fee. To estimate probate cost, assume the executor and attorney demand the max fee.

The court values the probate estate at fair market value. The price someone would pay on the open market today. For homeowners probate is expensive. Here are some examples:

Your home is worth $1,200,000 but you owe $400,000 at the time of your death. The court will value the property at $1,200,000 not the $800,000 you have in equity. Your probate fee equals $25,000. The fee is 4% of the first $100,000 (or $4,000). Then 3% of the next $100,000 (or $3,000). Then 2% of the next $800,000 (or $16,000). Then 1% of up to the next $9,000,000 (here 1% of the remaining $200,000 or $2,000) A total of $19,000.

• A probate estate worth $300,000 has a probate fee of $9,000.
• A probate estate of $1,500,000 has a probate fee of $28,000.
• A probate estate worth $5,000,000 has a probate fee of $63,000.

Remember, your probate estate consists only those assets in “Probate Asset” column. See paragraph 8 above.

This is the primary reason to avoid probate. With proper estate planning, you can avoid probate. And a fraction of the cost. I offer my clients the convenience of flat fee billing. I also provide a 100% satisfaction guarantee. Visit my service fee page for more (and schedule a free consultation while you’re there).

Besides the cost, my clients prefer to avoid probate because it’s public. No one relishes the thought of their private life (or death) becoming public record.

My clients prefer the privacy afforded by a living trust. Assets in a living trust are not subject to probate. You won’t have to file your trust in court. Your beneficiaries may need to disclose it or at least a summary of it to certain parties. These third parties may include insurance companies, county assessors, and stock plan administrators. This summary is the certification of trust. These third parties will request a copy of the certification. It provides them comfort that they are doing business with an authorized individual.

Finally, probate does not benefit your heirs and it is time consuming. By statute, probate must last at least four months to provide notice to creditors. Probate usually lasts from 9 months to 1.5 years and sometimes much longer.

6. How to Avoid Probate?

As you have read above, only probate estates valued at more than $166,250are subject to probate. You’ve also learned that not all assets are part of the probate estate.

To avoid probate, you’ll need to ensure that your probate estate is small. You do that by placing your large assets that are subject to probate in a living trust. You’ll also ensure that non-probate estate assets have the proper beneficiary designations.

If you take these steps, you’ll avoid probate. You can, of course, do the work yourself. Or you can save yourself time, considerable legwork and headache, and hire me to help you. Click here to schedule a free consultation.

5. Whether a Will Enough for You?

Now you have a feel for probate and how to avoid it. The next question is: Which type of estate planning is right for you?

Do you need a comprehensive estate plan or is a will enough?

The attorney answer is, as you may have guessed, it depends. There are a few situations where a person may use a will without a living trust:

• You have minor children and your primary intent is to arrange for guardians,
• You don’t own a home,
• You don’t want a living trust or cannot afford one,
• You’re not worried about the cost of probate,
• You need a judge to help figure complex issues with creditors.

A will is a fine start to estate planning. For a young couple with a new baby setting up a will is part of starting a family. Once they buy a home, start investing, and get more assets a comprehensive estate plan will be a better fit.

The same goes for folks with a smaller estate. They can put a will in place now and upgrade later. A word of caution, if you don’t get around to upgrading your estate plan, your heirs may find themselves stuck in probate.

4. Who Needs a Living Trust?

Is a living trust right for you? It could be. There are many benefits to doing a living trust. In California, a living trust isn’t a public document. There is also the fact that it makes your estate much easier to manage for your heirs. You can customize a living trust to meet the personal needs of your family.

Most of my clients use a living trust because they fall into one or more of these 5 categories:

• Own a home in California,
• Own investments worth more than $166,250,
• Own a very large estate. In this instance, a living trust with tax planning provides significant benefits,
• Are in a second (or third) marriage. Blended families have special estate planning issues,
• Have a child with special needs.

3. How to Identify Your Assets & Beneficiaries: Creating a Personal Inventory

Regardless of the type of estate that you create. You’ll need to gather some critical information. You will need to draft a personal inventory. A list of your assets and property.

Identifying your property will help you determine the type of estate you need. If you don’t own real estate or investments valued over $166,250, a will might suffice. But, if you have a home, vacation house, and investment account, a living trust is the best choice.

Below at paragraph 1 I’ve linked to my resources page to get you started with your estate. I’ve included a “Personal Inventory and Net Worth Calculator” spreadsheet. Filling it completely will get you started on the right track.

If you don’t have a personal inventory in place, it may take your spouse or loved ones months or years to sort out your estate. Besides the time it will take, you wouldn’t want your loved ones to miss out on assets they never knew you owned.

To complete the inventory, you’ll be describing:

• What you own
• Where it is
• How you own the asset. For example, the name on the account.
• How much the asset is worth. This need not be an exact figure. An estimate is fine.
• How to access the asset online. Make sure you have a list of your digital life. Include usernames, passwords, and email accounts.

2. Important Real Estate Issues

To get your estate planning rolling, you will need to know how you own your home. That is, how do you hold title to your property? If you’re not sure don’t worry. Most people don’t know.

You can find this information on your grant deed. This the document that transferred legal ownership from the prior owner to you. If you cannot locate the grant deed, you can order a new copy.

Most California counties allow you to order a copy of your deed over the phone, online, or in person. To order a copy of your deed you’ll to provide:

• Your name,
• Prior owner’s name, and
• Your parcel or tax identification number from your tax bill.

On your grant deed, you can see how you hold title. Your deed might have one of the following:

• Michael, as his sole and separate property (SP)
• Michael and Maria as joint tenants with right of survivorship (JTWROS)
• Michael and Maria, husband and wife, as community property (CP)
• Michael and Maria, husband and wife, as community property with a right of survivorship (CPWROS), or
• Michael, Maria, and Joe, as tenants in common (TIC)

The grant deed describes the parties’ ownership and what happens when one of them dies. Let’s examine each of the forms of ownership described above.

If you own property as separate property this means you can give it away to whomever you wish when you die. Be aware that California is a community property state. If you paid the mortgage on a separate property with community property wages, your spouse may have an ownership share.

Most couples own property as joint tenants. This means that they both have an equal share in the property. When one owner dies, the survivor owns the entire property. This is the legal principle called “the right of survivorship.” The surviving joint tenant gets the entire property and can avoid probate. Property owned in joint tenancy cannot be left by will or trust.

Owning a property as community property means you’re married or in a registered domestic partnership. Mazel tov! Like joint tenants each party owns a one-half interest in the property. Unlike joint tenants, community property owners can pass their share by will or trust.

Community property with a right of survivorship allows survivors to bypass probate. It also provides capital gains tax benefits.

Owning a property as tenants in common means that each of the owners owns a percent of property. This ownership share is a called an “undivided interest.” An undivided interest means that each tenant in common owns part of the property. The parts are not identified. Each owner has the right to use and possess the property regardless of the percentage owned. Tenants can pass his or her interest in the property at death through a will or trust.

1. Resources to Get Your Estate Plan Started

I’ve created a resources page to get you started. It’s linked here. It includes a personal inventory and net worth calculator.

The next step is to arrange a time to meet with me to get your estate plan started. I look forward to helping you protect your loved ones and create a lasting legacy. Please click here to schedule a meeting.

An error in the funding process could result in your assets going through probate, a process most of my clients wish to avoid due to its public nature and the expense. It is important to note that every situation is unique. I always recommend that you schedule a consultation with me to discuss your specific facts.

You should also consider that your living trust and estate plan should be periodically revised. Over the years, your life changes. Your living trust should be updated accordingly. A living trust is not a static document. It should be amended to account for major life events and changes in the law.

1. What Happens When You Fund a Living Trust?

The process of funding a trust involves transferring ownership of your assets from you to your trust. Transferring an asset into the trust may depend on the asset type. For example, you may need to name the trust as a beneficiary rather than simply transferring the title of ownership.

Once you finish setting up and funding your trust, the assets inside it are now your held by trustees in a fiduciary capacity for the benefit of the living trust’s beneficiaries. As the initial trustee, you may manage your assets in a way you consider appropriate.

2. Why Fund Your Trust?

If you do not properly transfer your assets to your trust, your heirs will likely end up in probate court. A living trust is drafted, in large part, to avoid probate. Failure to fund undermines the living trust’s primary purpose.

When you fail to fund, you are also not giving your trustee any power to manage your assets. If you become incapacitated or die, your trustee will not be able to carry out the terms of your trust without first going through probate.

Funding your living trust ensures you distribute your assets properly among your beneficiaries when you die. Any assets that are subject to probate that did not get included in the trust may end up in front of probate court judge. The judge will then determine to whom the assets are transferred.

Funding your trust is a vital part of the process, and you must not overlook it. If you complete the process, not only do you avoid probate, but you’re going to ensure your property goes where you want it to go once you die.

3. Can You Amend a Living Trust?

Absolutely, you may revise your living trust. In fact, you should review your living trust’s terms at least once every three years or as soon as you experience a major life change (having a child, marrying/divorcing, getting a new job, etc.).

You may modify or amend your living trust at any time, but you should seek help from a qualified estate planning attorney. If you want to make significant changes, it may be a better option to restate rather than merely amend your trust. Finally, you may revoke your trust if you consider it appropriate. Make sure to consult with an estate planning attorney determine the best option for you.

4. Do You Have to Fund Your Trust Yourself?

No, in fact I recommend that you consult with an estate planning attorney to assist you with your estate plan design and walk you through the funding process.

I explain to my clients exactly how to transfer each asset into their living trusts. I do offer complete funding, but most of my clients handle some of the funding themselves. In either event, your estate plan will include funding instructions for many different asset types.

5. Is Funding a Trust Difficult?

Typically, the process of funding your trust is simple enough. However, it can be time-consuming.

If you are doing the funding yourself, you will most likely have difficulty with the transfer deed process. Working with the county recorder’s office, filling out the forms properly and filing transfer deeds is laborious.

For this reason, all of my estate plan packages include at least one transfer deed (typically for the family residence). I do offer complete funding on an a la carte basis.

When clients perform their own funding, the problem that I see most often is procrastination. This can lead to significant problems in the event of untimely death or incapacity. My goal is that every client has the peace of mind that comes with knowing that your assets are protected and that they will be transferred according to your wishes in the event of your incapacity or death.

6. How Do You Transfer Assets Without Titles, e.g. Personal Effects?

Tangible personal includes clothing, artwork, picture, collectibles, jewelry, books, watches, household furnishings, sporting goods, and hobby paraphernalia. My clients’ estate plans always include a declaration that tangible personal property has been transferred to their living trust in the initial section of the document.

7. How Do You Fund Real Estate?

Due to the complexity of properly transferring real estate into a living trust, I recommend that you hire a qualified estate planning attorney to assist you.

8. How Do You Fund Cash Accounts or Business Interests?

Each banking institution may have different guidelines and forms for transferring your accounts into your trust. The first thing you must do is ask your bank what you need to get started. Your bank will have you fill out its forms. Your bank will also likely request a “Certificate of Trust” to verify the existence and authenticity of your trust.

As for transferring business interests into your trust, there are several options. Business interests include partnerships, corporations, LLCs, and more. I recommend that you consult with an estate planning attorney to properly transfer your business to your living trust.

9. How Do You Fund Retirement and Life Insurance policies?

In general, you should never transfer ownership of a qualified retirement or pension plan or individual retirement account to your living trust. You should also ensure that your primary and contingent beneficiary designations are up to date and accurate.

There are several instances when you may want to name your living trust as a beneficiary of your life insurance policy, but you should consult with an estate planning attorney to confirm proper designation and funding.

10. Are There Any Assets You Should Not Include in Your Trust?

In general, retitling retirement account plans into a living trust is not recommended due to potential adverse tax consequences.

Transferring cars or motor vehicles is also generally not recommended. While you can easily change the title of ownership for these assets, doing so can require you to pay additional taxes or transfer fees.

Funding your living trust is critical to your estate plan’s success. With a properly funded living trust you will avoiding probate, maintain your privacy, segregate your assets, control guardianship, minimize estate taxes, and ensure that your assets and transferred to your loved ones in accordance with your wishes. With a living trust you can amend or restate the terms at any point during your lifetime. Proper funding requires a little organizing and some planning.

The best way to protect your legacy is establish a comprehensive estate plan and make sure it is properly funded. To learn more, contact my office today for a free consultation.

1. It allows you to avoid probate.
2. The transfer of your assets can remain confidential. If you merely have a will or no estate plan at all your estate may require administration through the public probate process.
3. Allows more efficient administration of your estate (makes it easier for your heirs to receive assets you’ve left them).
4. You can control your assets through your living trust in the event that you become incapacitated. If you merely have a will or no plan, a court will interfere and may control your assets.
5. You get peace of mind that one set of instructions can control your assets.
6. You can avoid unintentional disinheriting.
7. You can control when your beneficiaries inherit. You can keep assets in trust until your beneficiaries reach certain milestones (graduating college) or until they reach a certain age.
8. Beneficiaries’ inheritance can remain in trust and receive protection from creditors, divorce proceedings, spouses, irresponsible spending, and future death taxes.
9. You may use tax planning to reduce or eliminate federal (or state, where relevant) estate taxes.
10. Allows you, and not the probate court, to control minor children’s inheritance.
11. Special provisions make living trusts more difficult to contest than wills.
12. Prenuptial protection can be included.
13. Living trusts are revocable and can be modified while you are competent and alive.
14. You may choose professional assets management by selecting a professional trustee.

If you’re ready to learn how a living trust centered estate plan can help you and your family, book a confidential consultation.