Estate Planning

In California, you have the option to set up a Will, a Living Trust, or both as a part of your Estate Plan. These are both legal documents that allow you to leave assets and property to your loved ones. However, that’s essentially the only function they share in common. Which one should you use? Should you use both? The answer depends on which document(s) can best be leveraged to help you fulfill your estate planning goals

For many family members, the decision to disperse their assets, such as a the family home, can be filled with diverse emotions. Taking the time to first have a conversation with your family members about their expectations and desires and then creating a clear and legally binding plan will ensure everyone's wishes are respected.



What is a Will and Testament

This is a legal document that states how your assets should be distributed. It can also name an executor of your estate as well as a guardian for your children. This can be done on your own, but should be signed in the presence of two witnesses who will not benefit from your estate. It becomes effective upon your death and must go through probate court.

Your will should include the following:

  • The identity of an executor who will manage your estate from the time you die until the probate process is complete;

  • The identity of a guardian for your minor children, if you have any; and

  • The names of your beneficiaries and what you want to leave to whom

What is a Living Trust

There are two primary types of living trusts- revocable and irrevocable. To create a living trust, the settlor or trustor (the person who creates the trust) must put property into the trust (usually by changing the title), name a trustee to manage the assets, and name at least one beneficiary. You can serve as the trustee of your trust. A living trust is revocable unless you expressly declare it irrevocable.

Your living trust will become effective as soon as you sign it, and it will normally become irrevocable as soon as you die. Your trust assets will not go through probate. Your successor trustee can continue managing the trust assets as usual, with no interruption caused by probate proceedings. That is the main benefit trusts have over wills is that trusts do not need to go through probate court; therefore, assets can be distributed faster. Consult your financial planner or attorney to learn which type is best for you and your family.

4 Primary Ways to Pass Your Home Down

Drawing up a clear estate plan can ensure your property is distributed in a way that suits both you and your family’s best interests. There are several ways to pass on your home to your kids, including selling or gifting it to them while you’re alive, bequeathing it when you pass away or signing a “Transfer-on-Death” deed in states where it’s available. All of these options can have both legal and tax implications, so it’s important to think through each of the possibilities to make sure the property doesn’t become a burden for your kids.

  1. Selling outright to a family member

    Document all terms and agreements of the home sale. Hire at least one real estate agent and one real estate attorney to help make sure documentation is filed correctly on closing day. Double check you’re complying with tax laws. By selling your home to a family member or friend, you’ll be helping them establish wealth and equity for the future but make sure to do it strategically and legally.

  2. Gifting to a family member while you are still living

    If you have a large estate, consider gifting during your lifetime as a strategy to help reduce estate taxes. In addition, those gifts can grow in value in their hands, rather than yours, which helps reduce your taxable estate. On the other hand, if you held onto those assets and you passed away in 10 years, a large portion would be taxed.

  3. Bequeathing to a family member after your passing

    Bequests typically transfer cash, accounts, real estate or personal property upon the owner’s death. They can be conditional, meaning they become effective if certain terms are met. Typically these instructions are laid out in a person's will.

  4. A deed transfer after your passing

    The deed gives specific rights to its parties, both in how they own the property and, in some cases, at what point they take ownership of it. In California, there are several ways to hold real property. These include sole ownership, community property, community property with the right of survivorship, tenants in common, joint tenants, and transfer-on-death.

Each of these options has pros and cons and can vary by state. Always check with a qualified financial professional and attorney to ensure your rights, as well as those of your family members, are protected and that all laws are followed.





NG Assistant