Estate Planning 101: Avoid the Misconceptions Regarding Your Legacy

Many people are confused about estate planning and some of their concerns deserve discussion because they are frequently encountered.

Knowing where trust documents are recorded is important:

• Transfer deeds that transfer real property into the name of the trustee are not filed with the county; they are filed with the county recorder.
• Trusts are not filed with the court; they are administered privately by a successor trustee who takes over when the initial trustee (typically the person who established the trust) becomes incapacitated or passes away. The only exception to trusts being filed with the court, occurs when someone petitions the court for an order regarding the trust and attaches the trust as an exhibit.
• Wills are different from trusts in that they must be stored with the court in the county where the deceased resided. If probate is necessary, the probate file and the will become public record.

Additional Frequent Misunderstandings

Wills

Many believe that when a person has a will, no probate is required.  In fact, having a will may require a probate for the will to be administered. Unless the decedent’s probate estate has a gross value of less than $150,000 or the estate is left to the decedent’s surviving spouse (or registered domestic partner), the will is subject to probate.

Another incorrect assumption is that wills need be notarized. A trust is commonly notarized but wills only need to be witnessed. When creating a will, in addition to the testator, two persons who are disinterested in the terms of the will and are not beneficiaries must witness the signing of the will.  Another option allows the testator to later show each witness the will and acknowledge their signatures after the fact. The witnesses can then read and sign an attestation clause that makes certain declarations for the will to be a “self-proving” will.

Lastly, a copy of a will is not as good as the original. A copy of a will only contains information but is no substitute for the original itself. Unless the court is convinced that the original will is missing but not destroyed – and therefore revoked – a copy of a will is only informational.

Powers of Attorney

Yet another falsehood is that powers of attorney continue to be effective after the person named as the principal in the power of attorney dies. Powers of attorneys become completely ineffective once the principal dies. However, if a person named as an agent in the power of attorney dies, that agent may be replaced, if an alternative agent is nominated in the instrument.

It’s important to understand that not all powers of attorney are equal and some can be rendered null and void. For example, a power of attorney signed by someone who lacked capacity to sign the instrument or who signed under coercion can be found to be invalid. Moreover, a boilerplate power of attorney form will not address numerous issues covered by an attorney drafted power of attorney. An attorney drafted power of attorney specifically addresses issues and purposes identified in the attorney client meeting.

Trusts

Many believe that all trust assets go to the surviving spouse if the couple established a revocable living trust together. This is not always true. Married couples who established their joint living trust before 2002 often have “A-B” or “A-B-C” trusts. These are more complicated to settle. They transfer the first settlor-to-die’s share of the trust into the irrevocable “B” and sometimes “C” trusts.  Trusts of this type were commonly created before 2002 when the Estate Tax had the much lower threshold of $600,000.

Many more estate planning misunderstandings exist. Those who proceed as their own attorney run the risk of making these or other classic mistakes and the result can be very costly.

Understanding estate planning is an important step in securing your family’s financial future. The next step is deciding on the right lawyers. The attorneys at Velasco Law Group have the expertise and respect for reviewing your personal and financial information and will work with you to come up with the right solutions. Take the most important first step to begin planning for the future and contact the Velasco Law Group at one of their three Southern California locations in Long Beach, Downey or Irvine.