You would not be alone. Too many people procrastinate about estate planning. They are busy, or they don’t think they own enough, or they’re not old enough or they are confused and don’t know who can help. Then, when something happens, their families have to pick up the pieces.

If you own assets titled in your name and you don’t have a plan when you die, your estate will go through probate and your assets will be distributed according to state law, and that is probably not what you would want.

Doesn’t A Will Help?

A will contains your instructions for what you want to happen to your assets after you die, and it lets you nominate a guardian for minor children. However, it does not provide any help if you become incapacitated, because a will cannot go into effect until after you die. It is not a complete plan.

Additionally, a will does not avoid probate. In fact, it may guarantee probate. Only the probate court can verify that your will is authentic, remove your name from the titles of your assets and transfer them to the new owner.

Does Everything I Own Go Through Probate?

Not necessarily. Many people also own some assets that transfer to a co-owner when they die and others that will be paid to a beneficiary. Generally, these do not go through probate, but there can be problems with both.

Assets in a living trust also avoid probate, which is one reason why they are so popular. But, a trust in a will, called a testamentary trust, does not prevent probate because the will must be probated before the trust can go into effect.

What’s So Bad About Probate?

Probate is an orderly court process that makes sure your debts are paid and your assets are distributed to your heirs. However, most people want to avoid it for several reasons:

1. It can be expensive.
2. It takes time, often a year or longer.
3. It is a public process, meaning court records are public so any interested party can find out details about your estate, including heirs or those left out.
4. Your family has limited control of the estate.

What Are Problems With Joint Ownership?

The kind of joint ownership most people have is “joint ownership with right of survivorship.” Many rely on it as a way to avoid probate, and when one owner dies, his/her share will transfer to the other owner without probate. However, if the surviving owner doesn’t add a new joint owner, or if both owners die at the same time, the property must go through probate before it can go to heirs.

Often joint ownership just postpones probate and includes additional risks as well:

1. It could cause you to disinherit your family. You may want someone other than your co-owner to inherit your share. However, if you die first, the asset will immediately transfer to the surviving owner, who can do whatever he or she wants with it.
2. Your assets are exposed to your co-owner’s debts.
3. It is easy to add a co-owner but difficult to take someone’s name off the title. If the person doesn’t agree you could find yourself in court.
4. If you add a minor as a joint owner, the only way to sell or refinance later is through a court guardianship, which will not end until the minor becomes an adult.
5. If your co-owner becomes incapacitated, you could find yourself with a new co-owner – the court. If you need your co-owner’s signature to sell or refinance and he/she is incapacitated, you will have to ask the court to appoint someone to act for your co-owner.

What About Beneficiary Designations?

Life insurance policies, IRAs, retirement plans and some bank accounts let you name a beneficiary. After you die, the proceeds will be paid directly to your beneficiary without probate. At least that is how it is supposed to work.

If, however, your beneficiary dies before you or you both die at the same time, the proceeds will have to go through probate so they can be distributed with the rest of your assets. If your beneficiary is incapacitated or is a minor when you die, the institution paying the funds will usually insist on court supervision. If you list “my estate” as beneficiary, the court must determine who that is.

If your beneficiary receives the proceeds, he or she may not be responsible enough to handle such a large sum of money and/or may be unwisely influenced by others.

What About Powers of Attorney?

Many powers of attorney become invalid at incapacity. However, a durable power of attorney does extend through incapacity, but, will be invalid after you die.

That is because some financial institutions will not accept any power of attorney; others will insist that it be on their own forms. The reason is they have no way of knowing if you have changed your mind and they most likely will not want to be held liable for giving access to your assets to someone you may not want to have them. If it is accepted, it still may not work the way you want. Giving someone power of attorney can be like giving that person a blank check to do whatever he/she wants with your assets.

What About A Living Trust?

Assets in a living trust avoid probate at death, prevent interference at incapacity and provide control of minors’ inheritances. It brings all of your assets together under one plan, preventing unintentional disinheriting and ensuring the distributions you desire. Assets that remain in the trust are protected from beneficiaries’ creditors, ex-spouses, predators and irresponsible spending. For these reasons, more and more a living trust is generally preferred over a will, and is often the perfect foundation for most families’ estate plans.

Basic Elements of Good Estate Planning

1. It is an on-going process not a one-time event. Estate plans need to be updated as situations and laws change.
2. You need clear and specifically delineated instructions for distributing your assets after you die.
3. You need to nominate a guardian and inheritance manager for minor children.
4. You need to provide for those others who depend upon you.
5. You need to protect your assets and make specific instructions for your care should you become incapacitated.
6. You need to provide for the transfer of business at retirement, disability and death.
7. You need to account for family members who may be irresponsible with money or need future protection from creditors or divorce.
8. You need to include life and other insurance to provide for your family and protect your assets.
9. Lastly, you need to coordinate your assets so that each person receives the inheritance you want them to have.

For more information on Dying Without An Estate Plan In California, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (714) 384-6500 today.