Core Estate Planning Documents

This handout is designed to illustrate the need for certain core estate planning documents for someone who resides in California and answer some questions you may have with respect to each document.


What documents should I have prepared to cover my basic estate planning needs?

A. Living Trust
B. Will
C. Assignment of Assets
D. Durable Power of Attorney
E. Advance Health Care Directive


What is a Living Trust?

A living trust is a written document which allows you (the grantor or trustor) to name the beneficiaries who will receive your assets upon death. Further, it enables you to specifically state how the beneficiaries will receive the assets (i.e., in trust or outright, at what ages, any requirements to receive the assets, etc.). In order to create a valid trust, you must choose a person or entity – known as the trustee – to hold the assets on your behalf. Generally with a living trust, the person who creates the trust also serves as the trustee during life. The grantor has full access to the trust assets during life and has the ability to change the terms of the trust at any time before death so long as he or she is mentally competent. After the grantor dies, a secondary trustee (a person or institution) is named to manage the assets and distribute them to the beneficiaries according to the terms of the trust.

Why do I need a Living Trust and how is it different from a Will?

By creating a living trust, you can potentially avoid the court process known as probate and ensure your information (what assets you have and who the beneficiaries are) remains confidential. Additionally, any assets titled in the name of the living trust can be managed and distributed by the trustee according to your directions without court involvement. Conversely, if you rely solely on a Will to transfer assets at death, the named executor must file papers with the court to distribute the decedent’s assets to the beneficiaries and the information becomes public knowledge. The potentially lengthy and costly probate process can be avoided by using a living trust; however, this does not negate the need for a Will (as discussed below).


What is a Will?

A Will was historically used to indicate who would receive your assets upon death. More commonly today, a Will serves a few main purposes when used in conjunction with a living trust. First, the Will states that any assets not titled in the name of the living trust should automatically be transferred to the trust upon death. This is known as a “pour-over will.” Second, the Will allows you to name guardians for any minor children. Lastly, a Will names the executor responsible for filing an estate tax return.


What is an Assignment of Assets?

An “assignment of assets” (“Assignment”) is a document which evidences the assignor’s intent to transfer title of one’s assets to the name of a living trust.

Why do I need an Assignment of Assets?

The terms of a living trust only apply to assets that are titled in the name of the trust. For example, if you have a piece of real property that is not titled in the name of your trust, the property would pass through your Will at death and be subject to probate. But, if the property is held in the name of your trust, probate is not required for the property to pass to your heirs. You should transfer title to most of your assets to the name of your living trust, but if you die without doing so, your executor may be able to use the Assignment to avoid probate. Additionally, the Assignment states the transferor’s intent that personal property for which there is no evidence of the owner on record, such as jewelry and household belongings, be distributed according to the trust terms.

If there is no Assignment, any assets not titled in the name of the trust will be subject to probate.


What is a Power of Attorney?

A “power of attorney” (“POA”) is a document which allows you (the “principal”) to designate individual(s) to act on your behalf, generally with respect to business and financial matters. The designated individual(s) is known as the agent. The power of attorney may be broad or more limited in scope, also known as a general POA and special POA, respectively. A general POA gives the agent the right to make decisions with respect to all financial matters, whereas the special POA limits the rights of the agent to specific matters. Some examples of powers given to the agent include the right to transfer assets to the principal’s living trust and the ability to prepare and sign tax returns on the principal’s behalf. Generally, a POA is effective upon the principal’s incapacity, known as a springing power of attorney, but can be made effective as soon as it is signed. If effective immediately, the POA will remain in effect until the principal becomes incapacitated. More typically, it may state that it remains in effect even if the principal becomes incapacitated and will last until death – this is known as a durable power of attorney.

A POA only applies with respect to assets not titled in the name of your living trust. Any assets held in the name of the living trust will be administered by the trustee.

What if a person does not have a Power of Attorney?

If you do not complete a power of attorney and you become incapacitated, a court will likely need to appoint a conservator of the estate to handle your financial matters.


What is an Advance Health Care Directive?

An “advance health care directive” (“AHCD”) is a form you can complete to let your physician, family, and friends know your health care preferences. In addition, it allows you to name a specific person or persons (an “agent”) to ensure your health care preferences are followed should you become unable to make your own health care decisions. More specifically, an AHCD can be used to indicate preferences for end-of-life decisions such as whether to remain on life support, burial wishes, receipt of pain medication, and organ donation. Any health care decisions not specifically stated in your AHCD will be left to the discretion of your named agent.

What if a person does not have an Advance Health Care Directive?

If you do not complete an advance health care directive or a similar valid document designating an agent to make health care decisions in case of your incapacity, the physician and/or hospital will determine the most appropriate person to make such decisions (usually family or close friends). In some cases, a conservator will need to be appointed by the court to make such decisions.


What do I do once I have completed my estate planning documents?

We recommend you retain the original documents in a safe place for your records. You should provide copies of your powers of attorney for financial matters and health care decisions to the individuals named as agents. You may also consider discussing your estate plan with your successor trustees so they understand your wishes while you are still alive. To the extent you have minor children you should have a discussion with those appointed as guardians. Finally, you should ensure your assets are properly titled in the name of your living trust.

Kelly M. Cruz © 2012