What is a will?
Your will is a legal document in which you give certain instructions to be carried out after your death. For example, you may direct the distribution of your assets (your money and property), and give your choice of guardians for your children. It becomes irrevocable when you die. In your will, you can name:
- Your beneficiaries. You may name beneficiaries (family members, friends, spouse, domestic partner or charitable organizations, for example) to receive your assets according to the instructions in your will. You may list specific gifts, such as jewelry or a certain sum of money, to certain beneficiaries, and you should direct what should be done with all remaining assets (any assets that your will does not dispose of by specific gift).
- A guardian for your minor children. You may nominate a person to be responsible for your child’s personal care if you and your spouse die before the child turns 18. You may also name a guardian-who may or may not be the same person- to be responsible for managing any assets given to the child, until he or she is 18 years old.
- An executor. You may nominate a person or institution to collect and manage your assets, pay any debts, expenses and taxes that might be due, and then, with the court’s approval, distribute your assets to your beneficiaries according to the instructions in your will. Your executor serves a very important role and has significant responsibilities. It can be a time-consuming job. You should choose your executor carefully.
Does a will cover everything I own?
No. Generally speaking, your will affects only those assets that are titled in your name at your death. Those assets that are not affected by your will include:
- Life insurance. The cash proceeds from an insurance policy on your life are paid to whomever you have designated as beneficiary of the policy in a form filed with the insurance company – no matter who the beneficiaries under your will may be.
- Assets owned as a joint tenant with right of survivorship. Assets such as real estate, automobiles, bank accounts and stock accounts that are held in joint tenancy with right of survivorship will pass to the surviving joint tenant upon your death, and not in accordance with ay directions in your will.
- “Transfer on death” or “pay on death.” Certain securities and brokerage accounts include a designation of one or more beneficiaries to receive the assets in that account when the account owner dies. The names of the beneficiaries are preceded by the words “transfer on death” or “TOD.” Other assets, such as bank accounts and U.S. savings bonds, may be held in a similar form using the owner’s name and the beneficiaries’ names preceded by the words “paid on death” or “POD.”
- “Community property with right of survivorship.” Married couples or registered domestic partners may hold title to their community property with right of survivorship.” Then, when the first spouse or domestic partner dies, the assets pass directly to the surviving spouse or partner without being affected by the will.
- Living trusts. Generally, assets held in a revocable living trust are distributed according to the instructions in the trust regardless of the instructions in your will- with no need for court supervision. You can name yourself as the initial trustee of your living trust (most people do), and then name a successor trustee to manage the trust if you become unable to do so. With a living trust, your assets are managed for your benefit during your lifetime and then transferred to your beneficiaries when you die without court supervision. For more detailed information, see the State Bar pamphlet entitled Do I Need A Living trust?
- Your spouse’s or domestic partner’s half of community property. In California, any assets acquired by you and your spouse or registered domestic partner from earnings during your marriage or registered domestic partnership are community property. Assets that either of you owned before your marriage or registered domestic partnership, and gifts or inheritances acquired later, are usually separate property. Your will affects all of your separate property assets.
Even if your entire estate consists of assets held in joint tenancy, a life insurance policy and a retirement plan, there are still good reasons for making a will. For example, if the other joint tenant dies before you do, then the property held in joint tenancy will be in your name alone and subject to your will. If named beneficiaries die before you do, the assets subject to a beneficiary designation may be payable to your estate. If you receive and unexpected bonus, prize, refund or inheritance, it would be subject to your will. And if you have minor children, nomination a guardian for them in your will is very important.
What happens if I don’t have a will?
If you die without a will (referred to as intestate), California law will determine the beneficiaries of your estate. If you are married, your spouse will receive all of your community property assets. Your spouse also will receive part of your separate property assets, and the rest of your separate property assets will be distributed to your children or grandchildren, parents, sisters, brothers, nieces, nephews or other close relatives. If you are not married, your assets will be distributed to your children or grandchildren, if you have any or to your parents, sister, brothers, nieces, nephews or other relatives. If your spouse dies before you, his or her relatives may also be entitled to some or all of your estate. Friends or your favorite charities will receive nothing if you die without a will. The state of California is the beneficiaries of your estate if you die intestate and you (and your deceased spouse or domestic partners) have no living relatives.
Can I change or revoke my will?
Yes. You should review your will periodically. If it is not up to date when you die, your estate may not be distributed as you wish. Your will can be changed through a codicil, a legal document that must be drafted and executed with the same procedure that applies to wills. A codicil is an amendment to your will. You must not change your will by simply crossing out words or sentences, or by making any notes or written corrections on it. You may also establish a new will and, in doing so, revoke your old will. If you get married or divorced, or establish a registered domestic partnership or terminate one, you should seek the advice of a lawyer and make a new will. You should also review your will when there are any other major changes in your family (such as births and deaths), when the value of your assets significantly increases or decreases, and when it is no longer appropriate for your proposed guardian or executor or testamentary trustee to act in that capacity. If you have moved to California from another state and have a will that is valid under the laws of that state, California will honor its validity. It is important for you to review your will with a qualified California lawyer; however, since California law will govern the probate of your will is you live here at your death. And if you move out of state, your California will should be reviewed by a lawyer there.
If I have living trust, do I still need a will?
Yes. Your will affects any assets that are titled in your name at your death and are not in your living trust or some other form of ownership with a right of survivorship. If you have living trust, your will would typically contain a pour over provision. Such a provision simply states that all such assets should be transferred to the trustee of your living trust after your death. (This does not mean, however, that your beneficiaries can avoid going through probate for these assets.) Your will can nominate guardians for your minor children as well. Any assets held in a trust for minor children as well. Any assets held in a trust for your children would still be managed by the trustee.
How could a living trust be helpful at my death?
The assets held in your living trust could be managed by the trustee and distributed according to your directions without court supervision and involvement. This can save your heirs time and money. And because the trust would not be under the direct management of the probate court, your assets and their value ( as well as your beneficiaries’ identities) would not become a public record. Your heirs and beneficiaries would still have to be notified about the living trust and advised, among other things, of their right to obtain a copy of the trust. If your assets (those in your name alone) are not in a living trust when you die, they would be subject to probate. Probate is a court-supervised process for transferring assets to the beneficiaries listed in one’s will. After your death, a petition would be filed with the court (usually by the person or institution named in your will as the executor). After notice is given, a hearing would be held. Then your will would be admitted to probate and an executor would be officially appointed. An inventory of your assets would be filed with the court and notice would be given to your creditors so they could file claims. The process would end once the court approved a final distribution of assets. Probate can take more time to complete than the distribution of property held in a living trust. In addition, assets tied up in probate may not be as readily accessible to the beneficiaries as those held in a living trust. And the cost of a probate is often greater than the cost of managing and distributing comparable assets held in a living trust.
Who should draft a living trust for me?
A qualified estate planning lawyer can help you prepare your living trust, as well as a will and other estate planning documents. While other professionals and business representatives may be involved in your estate planning, a living trust is a legal document, which should be prepared by a qualified lawyer.
Should I beware of “promoters” of financial and estate planning services?
Yes. There are many who call themselves “trust specialists,” “certified planners” or other titles that suggest the person has received advanced training in estate planning. California is experiencing an explosion of promotions by unqualified individuals and entities which only have one real goal- to gain access to your finances in order to sell insurance-based products such a annuities and other commission-based products. To better protect yourself: Consult with a lawyer or other financial advisor who is knowledgeable in estate planning, and who is not trying to sell a product which may be unnecessary- before considering a living trust or any other estate or financial planning document or service.
What other estate planning documents should I have?
A durable power of attorney for property management could be helpful if you ever become incapacitated. It deals with assets that were not transferred to your living trust before you became incapacitated and any assets that you receive afterward. With this power of attorney, you appoint another individual (the attorney-in-fact) to make financial decisions on your behalf. This power of attorney, however, cannot replace a living trust because, among other this, it expires when you die. It cannot provide instructions for the distribution of your assets after your death. Your might also consider setting up an advance health care directive / durable power of attorney for health care. This allows your attorney-in-fact to make health care. This allows your attorney-in-fact to make health care decisions for you when you can no longer make them for yourself. In your advance health care directive, you may state your wishes regarding life-sustaining treatment, organ donation and funeral arrangements as well. A health care directive also allows an authorized agent to access your medical information, which could be important in light of strengthened federal privacy laws.