A comprehensive living trust estate plan will consist of several documents. These documents address a variety of situations that may come up. Our living trust estate plan consists of the following documents:
- Living Trust. The living trust is the main document. It provides for the management of your estate while you are alive and well and while you are alive but incapacitated. It also provides for the management and disposition of the estate following your death. It names the successor trustees and the beneficiaries of your estate.
- Pourover Will. The pourover will is a backup document for the trust. It basically provides that all of the assets of the probate estate pass to the living trust. Without a pourover will, assets left outside the trust, by accident or design, will pass pursuant to the laws of intestate succession. The beneficiaries of the estate in an intestacy may be different than the intended beneficiaries named in the trust. If this were to happen, your testamentary objectives may be thwarted. With the pourover will, although the assets left outside the estate may have to go through probate, at the end of probate they will be transferred to the trust. This preserves the integrity of your estate plan, assuring that your intended beneficiaries actually receive their full inheritance, even if some assets were left outside the trust.
- Durable Power of Attorney for Finances. With this document you name your spouse or other persons as your attorney-in-fact (or agent), to manage your assets if you become incapacitated. The Power of Attorney will control only those assets left outside the trust. If an asset was left outside the trust by accident, the agent can transfer it to the trust while you are alive, thereby avoiding a probate of such asset when you die. Similarly, some actions cannot be performed by a trustee. For example, your agent could sign your income tax returns or manage retirement assets for you, thereby eliminating the need for a conservatorship proceeding.
- Property Agreement. California is a “community property” state. As such a married couple can have community property, husband’s separate property or wife’s separate property. Generally, community property is anything acquired during the marriage from earnings and separate property is anything acquired either before marriage or acquired by gift or inheritance from a third person. The property agreement is a contract between the husband and wife which establishes the character of assets as either community property or separate property, depending on the facts and circumstances. Often a married couple will hold assets as “joint tenants”. Joint tenancy is a separate property interest. In the estate planning context it is usually more beneficial for a married couple to hold their co-owned property as community property because of the double basis step-up. Yet, sometimes, the couple do not retitle the property into the trust. Upon the death of one spouse, the question becomes whether or not the property was community property (which enjoys the double basis step-up), or separate property interests (which does not enjoy the double basis step-up). The title of the property (showing joint tenancy) creates a presumption that joint tenancy was intended and therefore the double basis step-up is lost. The Property Agreement contains language which rebuts the presumption that joint tenancy was intended and thereby provides a legal basis for using the double basis step-up available for community property.
- Assignment (of Tangibles). This is a simple document which transfers legal title of your untitled tangible personal property (such as the household furniture and furnishings, jewelry, and other personal effects) to the trust.
- Certification of Trust. In this document you make certain representations about the trustees and the powers of the trustees while not disclosing the beneficiaries of the trust. A financial institution will take this certification in lieu of a complete copy of the trust. With the certification, you can provide the financial institution with the information it needs about the trust, while preserving your family’s privacy with regard to the beneficial interests.
- Advance Directive For Health Care. This document is important if you are unable to make a medical or health care decisions for yourself. In this document you name agents for health care decisions who will make the medical decisions for you, including whether or not to “pull the plug” if your condition is a hopeless one and you are merely being kept alive by artificial means.