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Estate Planning

Estate Planning is the process of preparing legal documents, such as wills and trusts, which enable a person to direct how his or her assets will be distributed upon death or managed in the event of that person's incapacity. A properly crafted estate plan should result in the efficient transfer or management of assets, in an effort to reduce costs to beneficiaries, as well as to avoid taxes incurred due to a person's death.


The most basic document for memorializing a person's estate plan, a will is written to direct who is to receive a person's assets and to name a person to be in charge of implementing the plan. A guardian for minor children typically is named in a will. When a person dies without a written estate plan, either a will or trust, state law provides a plan for distribution of trust assets called "intestacy." The following terms may be found in a will:

Testator: The person who writes the will to state his or her plan.

Beneficiaries: The persons who will receive the assets as gifts/inheritances.

Executor: The person responsible for winding up the financial affairs for the testator, including
paying bills, filing tax returns and distributing assets to beneficiaries.

Guardian: The person named to take physical custody of, and provide care for, minor children.

Trustee: The person named to control and manage assets for beneficiaries. See Living Trusts below for a detailed description of trustee under that topic.

Living Trust

A Living Trust is used in estate planning, in place of the will, as the main document for stating a person's direction for distribution of assets to beneficiaries. It differs from a will in a very significant way, in that a beneficiary will receive his or her inheritance via the Living Trust without probate (a court proceeding), thereby saving family, friends and other beneficiaries time and money. See Probate below for further description.

A Living Trust is created with a document, either a trust agreement or declaration, and the preparation process is similar in many respects to that for a will. However, a Living Trust must be "funded" with assets during thetrust maker's lifetime in order to avoid probate. A Living Trust is funded by changing assets' title documents or beneficiary designations on financial accounts. SeeTrust Funding below for further description. A Living Trust is also used for management of assets, either for the trust maker, due to his or her incapacity, for minor children or for young adult beneficiaries who are legally unable or inexperienced to receive an inheritance "in-pocket" at the time of the trust maker's death. The following terms may be found in a Living Trust document or relate to the trust formation process:

​The person who creates the trust, i.e., the trust maker. A married couple may create a trust together and both would carry this title in the document.

The trustee is the person who holds legal ownership (title) rights to assets held by a Living Trust. Generally, the trust maker is the trustee during lifetime. For married couples, the surviving spouse typically continues as the sole trustee until his or her death or incapacity. Since the trustee retains all rights to ownership, the trustee is the signer on all trust accounts and is recognized by financial and real estate/title companies as the responsible person for buying, selling, leasing or managing assets. Therefore, the trust maker does not relinquish legal control of the assets funded into the Living Trust because the trust maker is named as the original trustee of the Living Trust.

Successor Trustee
​A successor trustee is named in the Living Trust document as the replacement for the original trustee, either because of incapacity, resignation or death of the original trustee. The successor trustee acts like an executor under the will and assumes responsibility for paying bills and taxes, controlling assets and distributing inheritances to beneficiaries named in the Living Trust. The successor trustee also acts as the manager of assets and payer of bills for young or inexperienced beneficiaries until whatever ages have been set out in the trust for those beneficiaries to receive their inheritances directly, without further restrictions. Two or more persons may be named as first choice for Successor Trustee and then are called "co-trustees." When co-trustees are named their unanimous decision-making may be required, depending on state law or terms of the trust. While it may not be uncommon for a married couple with two children to name both as successor co-trustees, providing their children equal legal control over their inheritances, naming co-trustees should be considered carefully in order to avoid unintended delays in trust administration.

Age of Distribution to Beneficiaries
​When beneficiaries named in a Living Trust are minors or financially inexperienced, a continuing trust should be provided for each of such identified beneficiaries. It is not uncommon, for example, to require that a beneficiary must attain age twenty-five or thirty before an inheritance is distributed to such beneficiary (particularly the children of a trust maker). Until the beneficiary attains the age chosen by the trust maker, the named beneficiary is entitled to benefit from the assets retained in his or her trust, which assets are controlled by the successor trustee. Payments from the beneficiary's separate trust are authorized for the beneficiary's health, support, maintenance and education. Choosing an age for distribution to beneficiaries may depend on the candidates available to act as successor trustee until the beneficiary reaches the age selected. A trust maker may be more comfortable choosing an older age of distribution to beneficiaries when there are trustworthy candidates for successor trustee, such as close family members, who will exercise complete legal control of the beneficiaries' assets until the age specified in the Living Trust.

Trustee's Powers
A trustee, whether the original or successor trustee, holds broad powers in controlling and managing trust assets, including, powers to buy and sell assets, borrow, loan, mortgage, lease, vote securities, resolve claims by or against the trust, hire and litigate, all with unrestricted access to trust assets. However, the trustee exercises such powers on behalf of the beneficiaries as a "fiduciary" and is bound to act in a prudent manner. Since Living Trust documents typically provide for waiver of a bond for the trustee, choosing a successor trustee involves a decision regarding the perceived honesty of the person to be named in the trust. If there are any doubts in that regard, it is prudent to consider an institutional or bonded trustee, subject to a thorough background check of the proposed professional trustee.

Initially, the trust maker is the person entitled to use or consume the trust assets. For married couples joining in one Living Trust together, the surviving spouse typically is the only beneficiary until his or her death, although each trust maker is entitled to name beneficiaries other than a spouse. Upon the death of the trust maker, the beneficiaries named in the trust, usually children, family members, friends or charities, are entitled to receive or consume the assets of the Living Trust. Although children are named as beneficiaries in a Living Trust document, as "successive beneficiaries" they gain no additional legal rights until the death of the trust maker.

Revocable Trust
A Living Trust is called a revocable trust because the trust maker is able to change the terms of the trust, or revoke the trust entirely. Upon the death of the trust maker, the terms of the trust can not be changed and at such time the trust may become an irrevocable trust. Depending on the type of trust form selected for a married couple, the entire Living Trust may be amended or revoked after the death of the first spouse (Simple Trust or Disclaimer Trust) or part of the trust attributable to the deceased spouse may become irrevocable at the death of the first spouse (A-B or Marital Trusts and the disclaimed portion of the Disclaimer Trust).

​A person who is able to make his or her own financial or personal decisions is said to have "capacity" and a person who is not able, either because of mental or physical constraints, is incapacitated. In a Living Trust, the trust maker names a person to assume control and managment of Living Trust assets on the trust maker's behalf, in the event the trust maker is determined to be incapacitated, thereby avoiding a court process called a "Conservatorship" (or adult "Guardianship"). The person named to assume control and management of such assets is either the original co-trustee, such as the spouse, or the successor trustee, who is the same person named to assume control of trust assets after the death of the trust maker. It is common for the Living Trust to define when a trust maker will be determined to be incapacitated, usually by reference to the opinions of physicians, as well as to authorize health providers to discuss medical information with the person named as co-trustee or successor trustee for that purpose (known as a "HIPPA" waiver).

Trust Funding of Assets
A Living Trust holds title to assets that have been transferred to the trustee of the Living Trust either by a change to a title document, an assignment or through beneficiary designation. It is extremely important to fund the Living Trust with a trust maker's probate-type assets, in particular real estate (the residence and other properties), bank accounts and brokerage accounts. There are some assets that do not get transferred to a Living Trust during the trust maker's lifetime, such as retirement or deferred income accounts, and beneficiary designations may identify the trust as the beneficiary under specific factual situations (in most cases, the surviving spouse is named as first beneficiary for a retirement plan account).


​Probate is a state court proceeding required when a natural person dies holding title to assets, such as a residence, bank accounts and brokerage accounts. Probate expenses, including court costs, attorneys' fees and executor/administrators' fees, may vary from state to state, but generally extract a significant percentage from inheritances intended for beneficiaries, family members, friends or charities. The probate court process takes time and beneficiaries do not receive full inheritances until the probate process is concluded. Prior to common usage of Living Trusts, it was difficult to avoid probate, and, therefore, making a will was better than doing nothing (in which event state laws of intestacy dictacte who are beneficiaries). Utilizing a Living Trust to transfer assets to beneficiaries without resort to probate is recognized under laws of all states.

Most Estate Planning Lawyers will recommend a Comprehensive Estate Plan to a client, which consists of the following documents:

  • Living Trust or Traditional Will
  • Pour-Over Will
  • Durable Power of Attorney for Financial Management
  • Advance Health Care Directive/Durable Power of Attorney for Health Care/Health Care Proxy/Living Will
  • Trust Transfer Deed or Quitclaim Deed
  • Assignment of Tangible Personal Property
  • Trust Schedules
  • Trust Funding Instructions

Living Trust or Traditional Will
As explained above, a Living Trust document replaces the traditional will for identifying beneficiaries of the trust maker's assets and for naming the person(s) responsible for carrying out the trust maker's instructions. Since utilizing a Living Trust to transfer assets at death is a relatively new technique (not easily accomplished until the early 1970's), a traditional will may be more commonly used in some states for naming beneficiaries and the executor. Therefore, a person should make either a Living Trust or a traditional will, but not both. See Pour-Over Will below for further description.

Pour-Over Will
When a Living Trust is selected instead of the traditional will, a "pour-over" will is included in an estate plan for ensuring the coordination of an estate plan through the Living Trust document. The pour-over will names the Living Trust as the beneficiary for any assets not funded into the Living Trust during the trust maker's lifetime, such that those assets are said to "pour over" into the Living Trust after the trust maker's death. These assets added to the Living Trust are administered under the terms of the trust. A pour-over will does not avoid probate. A distinct set of rules apply to determine if the assets that must pour over into the Living Trust will go through the probate process or if the transfer of those assets to the trust can occur through another statutory procedure, such as the Small Estate Affidavit procedure in California.

Durable Power of Attorney for Financial Management
The "springing power" may be utilized as the type of Power of Attorney for Financial Management for estate planning purposes in that such power does not take effect unless the maker, called the "Principal," is determined to be incapacitated. In other words, if the Principal is unable to make his or her own financial decisions, commonly determined by two physicians, then the Power of Attorney authorizes the Agent identified in the document to make financial decisions and to control the Principal's assets, but only for the benefit of the incapacitated Principal. This Power of Attorney form applies only to assets that are not funded into the Living Trust, such as retirement plan holdings, and is a companion to the Living Trust document which names the successor trustee to assume control of trust assets if the trust maker, as original trustee, is determined to be incapacitated. An "immediate" Power of Attorney for Financial Management may be utilized as an estate plan document, but usually is limited to naming spouses as Agents or is selected after careful consideration since it may be uncommon to name another person to control the Principal's assets while the Principal is still able.

Advance Health Care Directive/Durable Power of Attorney for Health Care/Health Care Proxy/Living Will
The document utilized to name an Agent to make health care decisions for another person, called the "Principal," goes by different names but has the same function- i.e., this document authorizes health care professionals, such as doctors and hospital personnel, to communicate with the Agent about choices to be made for a patient's health care. In most cases, the Agent interacts with health care providers because the patient is unable to do so. The purposes of these forms are twofold: 1. to name an Agent to make decisions of behalf of the Principal; and, 2. to provide directions to the Agent in making those decisions. The most extreme decision this document allows the Agent to make is to discontinue artificial means of prolonging the Principal's life. These forms also allow for burial and funeral instructions as well as the Principal's intention relative to organ donations.

Trust Transfer Deed or Quitclaim Deed
A Living Trust is utilized to reduce the cost and time delay involved in transferring assets to beneficiaries after a property owner's death, which very often involves real property such as a residence. In order to effectively implement a Living Trust estate plan it is imperative that the legal title to real property be changed from the name(s) of the individual(s) owner(s) to the name of the Living Trust. A Trust Transfer Deed or Quitclaim Deed is the document used to change title of real property to the Living Trust. It is not uncommon to name the orginal trustees as well as the Living Trust in the Quitclaim Deed so that the former individual owners are identified as new trust owners, for example, "John Smith and Mary Smith as Trustees of the Smith Family Trust." Since the former individual owners retain the same legal ownership rights they had before establishing their Living Trust, there is no change in true ownership rights when the legal title is changed over to the Living Trust (as a device to avoid probate).

Assignment of Tangible Personal Property
This document allows the trust maker to state his or her intention that the Living Trust should also contain the tangible personal property items which very often do not have title documents to prove ownership of such assets, such as jewelry, works of art, furniture and household effects.

Trust Schedules
It is important to keep a current listing of Living Trust assets so that the successor trustee may locate all estate assets. Schedules are provided for that purpose as well as to evidence the trust maker's intent that the Living Trust owns the assets listed. The trust maker's intent to transfer title to his or her assets to the Living Trust may become an issue if the title documents held by the financial institution do not reflect Living Trust ownership, perhaps due to mistake by the trust maker or financial institution.

Trust Funding Instructions
In order for beneficiaries to avoid an expensive and time-consuming probate court process, a Living Trust must be funded properly. In addition to current funding issues, such as changing title for real property, bank accounts, stock and brokerage accounts during the trust maker's lifetime, a trust maker may need to address post-death funding issues. For example, a Living Trust may include provisions for a continuing trust in order to control inheritances for minor children or financially inexperienced adults. In such cases, assets that were not funded into a Living Trust during the trust maker's lifetime, such as retirement plan accounts or life insurance policies, may need to be funded into the Living Trust after the trust maker's death. Typically, an estate plan includes such trust funding instructions in a separate letter for the trust maker.

Redondo Beach, CA
​(310) 543-2545
1150 Foothill Blvd. Suite J​
​La Canada, CA 91011​
(818) 949-0100; FAX (818) 949-0104​
Robert K. Smith,​
​Estate Planning, Probate and
Tax Attorney​