The idea of estate planning is scary. Facing one’s mortality is never easy, but without estate planning all of one’s money, property, and assets, are distributed by the state. California, not the person who passed, determines who gets everything, regardless of the wishes of the person who passed. This is why estate planning is so important.
An exception to this is insurance proceeds, 401Ks, joint bank accounts, and other financial investments that have designated beneficiaries. For these assets, the person or entity that receives them are designated when the accounts are created. Similarly, property that is jointly owned may be given to the co-owner. For example, the family home is community property, and the deceased surviving spouse would become the sole owner if their spouse passes.
The most common estate planning tool is a will. This document will provide the probate court a roadmap on how to distribute one’s assets and property. But, the downfall to wills is that the will’s executor or beneficiaries must go through the probate court process to effectuate the will. The probate court process often requires an attorney and can become a costly and complicated endeavor.
Another option, which avoids this process, is a living trust, which can be set up while someone is alive. This allows a trustee to hold another person’s (called, the settlor) assets for the benefit of the beneficiary, but all three of these people can be the same person. Of course, the living trust should name another trustee and beneficiary after the creator dies or becomes incompetent.
This can be beneficial because the creator keeps full control over all of their assets and property, and while they are alive, they can still use and spend that property. However, since the creator technically does not own that property, when that person dies, there is no probate court process. Instead, those assets are distributed according to the trust documents by the successor trustee, which are crafted by the creator of the living trust.
Another benefit is that those trust documents can control how the beneficiaries spend their inheritance. This can ensure that they do not blow through one’s hard earned money.
As readers can tell, estate planning can be complicated. But, with the help of a professional, once can ensure that after they pass, their wishes will be known and done.