Estate Planning & Probate for All Stages of Life

INSIDE

by Kathryn Schofield, Guest Editor

The Estate Planning Issue’s organizing principle is that estate planning is relevant at all stages of life – from childhood to marriage (and second marriage!), buying a house, running a successful business, and yes, old age. This selection of articles is our attempt to bring that home the reality that estate planning is relevant to everyone, including you.

Estate planning has its own lingo, and that alone can be a barrier for people to get their estate planning done. I assure you, non-estate planners out there, estate planning isn’t scary! Here’s a glossary of basic estate planning terms everyone should know (and maybe were afraid to ask). Most make an appearance somewhere in this issue. Disclaimer: this glossary is not a legal treatise. For precision, talk to your friendly neighborhood estate planning attorney.

Glossary

Estate: A person’s stuff. Alive or dead, in a trust or not. All of it, no matter its form. Money, stock, personal property or real property.

Estate plan: A collection of documents giving your directions if you aren’t able to speak for yourself. Estate plans cover what to do with your stuff and your life. Typically, they include a health care directive, durable power of attorney, will and (probably) a trust.

Trust: An agreement that one person (the “trustor”) entrusts another person (the “trustee”) with their stuff and gives them instructions what to do with it. The most common is a “revocable” trust: the trustor can change the terms or terminate the agreement. A revocable trust usually starts out with the trustor and the trustee being the same person. In contrast, “irrevocable” trust terms can’t be changed, and trustees are usually someone else. Irrevocable trusts are handy for tax and benefits planning, because they shift who legally owns and/or controls your stuff.

Settlor: (yes, that is spelled correctly): The person whose stuff it is and executes the trust agreement. Also known as the “trustor.”.

Advance Health Care Directive: Also known as a “living will,” an AHCD sets forth your personal care choices while you are alive. It includes more than when to pull the “pull the plug.” It can include all kinds of things, like if and when it would be ok to move you out of your home or what kind of music calms you down.

Durable Powers of Attorney: A DPOA gives someone else the power to manage your finances. The agent does not have control over the stuff in your trust. The trustee doesn’t have control over any stuff not in your trust. That said, your agent and trustee can be the same person.

Will: You know what this is. Don’t confuse it with a trust.

Separate Property: All of your stuff that you acquired outside of your marriage. An inheritance for example, but also what you accumulated before or after the marriage. Whether or not your stuff is in a trust doesn’t matter. The separate/community property nature of your stuff doesn’t change without an express writing.

Probate: The court process for figuring out what your stuff is and who should get your stuff after you die, if you haven’t spelled it out somewhere else. Probate has a generic hierarchy of who has priority for getting your stuff.

Non-Probate Transfers: Ways to give away your stuff after you die without requiring a judge, such as: a trust, joint tenancy or ownership, and bank account beneficiaries. You still need a Probate if you only have a will.

Executor (or Administrator): The person appointed by the court to manage the stuff you have to have probated. An executor has nothing to do with the stuff in your trust.

CalSTRS (California State Teachers’ Retirement System) and CCCERA (Contra Costa County Employees’ Retirement Association): Examples of pensions (they still exist!). Members of these plans do not receive Social Security.

Conservator/Guardian: Court-appointed person responsible for another person’s stuff (“Estate”) and/or personal care choices (“Person”) when the person lacks capacity to make decisions for themselves. A conservatorship is for adults, a guardianship is for minors. Some other states use the term guardianship for both. There are different types of conservatorships for different situations. A good estate plan avoids conservatorships.

Incapacity: Not being able to take care of yourself or your affairs. Simple idea, very complicated legally. Incapacity can be hotly and expensively litigated if it is in dispute. The trustee and/or agent take over when you become incapacitated, and you get to define what incapacity is in your estate plan. The most common definition is when your doctor signs a letter saying you are unable to take care of yourself and your affairs.

Gift and estate tax exclusion: How much your stuff can be worth, and how much you can give away, without federal tax consequences. This is a huge political hot potato. In 2021, an individual can have (or have given away) $11.58 million when they die without federal tax consequences. States have different rules. A married couple doubles that. Every year a person can give away $15,000 without it counting toward the gift tax exclusion. But there is no tax owed at the time of that gifting. You do have to keep track and tell the IRS.

Medicare v Medicaid v Medi-Cal: Lots of programs exist under each of these monikers, and you are right to be confused. Medicare is medical insurance you get when you retire, or under some other programs like for disabilities. Medicaid is more extensive coverage available to extremely low low-income people. It includes long long-term care in a skilled nursing facility. In California it is called Medi-Cal.

If you think that you don’t need an estate plan, think again. You may not need a complicated one to deal with your stuff, but anyone could get hit by a bus. You will need someone to speak for you at some point. Write down your ideas and talk to an estate planning attorney (please not an online service, but that is a different article).

Ms. Kathryn Schofield is the principal at Schofield Law Group. She practices elder law, including trust litigation and administration, conservatorships and estate planning.