Estate Planning Basics
What is involved in estate planning?
In order to begin the estate planning process it's necessary to develop information, collect information from the client, relating to the client's estate, but also relating to the client's family, the client's debts, the client's wishes, obviously, and any other components that would effect how the estate would pass. For example, an existence of a disabled child, or the desire to take care of an aged parent. All of that is includable in the mix for purposes of determining what is necessary in order to put together an effective estate plan.
Why do I need an estate plan?
A person needs an estate plan only under circumstances where the estate plan will make a difference. If a person is single and has nothing except perhaps a lot of debts, an estate plan is probably not a worthwhile investment. Yet, we all grow older, we all begin to aquire property and we often marry and have children. I would say that which typically brings a client first to the office is the birth of a child, because the married couple will be concerned about what would happen if they both died, so they want to be able to name guardians. I might also add, that this issue often holds estate planning up because the couple are unable to agree upon which family, or which members of which family, are going to serve in that capacity.
Do I need an attorney or other professional to plan my estate?
I think that historically, the use of an attorney to prepare an estate plan has been the norm, and continues to be the norm. There is a school of thought that suggests that if you have enough complications in your estate, you should include an accountant, or perhaps a trust officer, a investment advisor or an insurance advisor, who would work as a team to prepare your composite estate plan. However, you certainly do not need to consult with a professional in order to prepare a will. You can sit down and write your own will, if you're willing to take that chance.
What is an "executor"?
An executor is a personal representative named in a will to administer the decedent's estate. The executor is responsible only for the administration of the probate estate and is appointed by the court to serve in that capacity. The executor is supervised by the court as he or she discharges his or her settlement duties.
Who should I consider when naming my executor?
Who you should consider is, obviously, someone you trust, and someone who's going to survive you. Typically, the named executor will be the surviving spouse, or perhaps, if the client is elderly, a child or children. In selecting an executor, in addition to making certain that the person would be honest and trustworthy and conscientious, a client--particularly a client who is a widow or widower with multiple children--should consider whether naming one or naming two rather than four or naming all four will have a negative impact on the administration process and the feelings of any of the children who, for example, might not have been selected. So the executorship should be limited to people qualified to act, but also the executorship should take into account certain family sensitivities.
How is an executor compensated?
In California, an executor is compensated by a calculation of a statutory commission based upon the value of the estate. That compensation is an amount to which the executor is absolutely entitled so long as he or she, discharges the duties of executor properly, but the payment can only be made after a court approves the payment. Therefore, as a rule, the executor will get paid at the end of the settlement process. Other states have different approaches, including either a non-court-approved statutory type of compensation formula, or even no formula at all, where the executor can simply charge a reasonable fee. That may be a preferable compensation, depends upon your perspective.
Why do banks and insurance companies have an interest in estate planning?
Banks and insurance companies offer a range of products which can be helpful to support the estate plan of a particular client. For example, insurance products are available to a young couple with minimal liquidity so that if they die together in an accident their estate will be fully funded to take care of their young children until adulthood. Banks offer trust services for clients who would like to have professional institutional trusteeship and investment products that might enhance their estate growth in the future.
Where should I store the documents memorialized in my estate plan?
The original documents that you have arising out of your estate planning should be kept safe. A lot of people use their safe deposit box at their bank. Others unfortunately will leave them at home, either in a lock-up or just in a drawer. The third possibility is to leave the originals with their attorney if their attorney will keep them. We keep them. Why do we keep them? This is because if the original will, trust, and other documents are held at our office or in another attorney's office, the initial process of settling an estate can be expedited.
How do debts figure into my estate planning?
Debts are a very important component of any estate plan because debts represent the down side of what you're trying to give away. They also represent the obligation that your estate must discharge before whatever is left gets distributed out to your beneficiaries. Even more importantly in certain instances is the issue of a mortgage on your personal home, that you perhaps want to leave to a particular person, but that person would be unable to pay the mortgage on the home, and therefore you or that person will have one of two options. Either pay the mortgage off as part of your estate plan, or direct that the property be sold and the net proceeds go to the beneficiary.
