Fundamentals of Estate Planning in California

Proper estate planning (will or trust) in California can save you a lot of money, headaches, and heartaches.

While you are living you can prevent the need to have a conservator appointed- this happens if you lose the ability to make decisions for yourself. Setting this up in advance through a will or trust means your assets are protected - even from you - should you lose the ability to make decisions for yourself. Many attorneys charge upwards of $20,000 to represent you in a California conservatorship proceeding, and if it is contested costs can be much higher.

When you pass away, your estate may go through probate, a long and expensive process in California. Probate can take years, and the costs are prohibitive. The basic statutory fees for probating a one million dollar estate are current;y $46,000. Remember, your house is valued at its gross value for probate, not your equity value. The larger your estate, the more expensive probate becomes.

Even worse, the Probate process comes when you or your loved ones are trying to cope with loss.

In addition, your estate may be subject to the Federal Estate Tax, at rates up to 45%!

A Revocable Living Trust, sometimes known as a Living Trust, generally takes your estate out of probate, and is administered privately. The probate process in California is public- anyone can see what is in your will. This is not true of a living trust. The "administration" of a living trust is equivalent to the probate process of a will.

The cost of a living trust varies depending on which attorney you hire, and how complex your estate plan needs to be. If you own a number of rental houses, for example, the cost will be higher because a new deed needs to be prepared for each property. But if you own property in multiple states and don't have a living trust, you'll have to go through probate in each state!

You can expect to pay around $2,000 or so for a basic Living Trust package in California. Most attorneys will also prepare other documents for you, including a Durable Power of Attorney, and Advance Health Care Directive among others. If you need estate tax planning, planning for special needs children, pets, etc the cost will of course be higher.

Some attorneys charge by the hour, and some offer a flat rate. Like dealing with any other professional, you should be comfortable with your attorney. Many lawyers offer a free initial consultation that allows you to discuss your needs and to see if you are comfortable with that attorney.

The worst thing you can do is to do nothing. The probate process in California can be onerous, involving lots of paperwork that must be done to court standards, and it will come at the worst possible time--when you are dealing with the loss of a loved one. If there is no will specifying where your assets go, those assets will be distributed according to the California Probate Code--which may not be what you want.

Preparing a living trust can ensure that more of your assets go where you want them to go, they go there more quickly, and a properly drafted living trust helps protect you from an expensive an humiliating conservatorship proceeding. Most all Californians will benefit from preparing a living trust, and all Californians benefit from doing estate planning.

Why a Durable Power of Attorney is "Durable" and Why It's Great For Estate Planning

English common law understood that agents were sometimes needed in business and commerce. The president of Ford Motor Company, obviously, cannot be everywhere. He needs agents to conduct business. Also, someone who is on vacation out of the country and cannot sign a contract might appoint an agent to sign that all-important paper.

But under common law, an agent no longer had the ability to act when the principal was incapacitated (the "principal" being the person who confers the power). If the principal had dementia and could not sign an agreement, his agent could not sign either. His agent could have no greater power than the principal.

Now, if you haven't figured this out all ready, we will all feel the effects of aging -- if we are lucky. The symptoms are well known and do not require explanation. One of those symptoms particularly hard to take is the loss of memory; the ability to think as clearly as when we were younger. While this is not always disabling it is during this natural aging process that people often need help. But the English common law helped little if someone was in a coma, or had dementia.

Here Comes the Durable Power of Attorney.

But because helpless people obviously need the assistance of an agent the most, most jurisdictions now recognize a "durable" power of attorney (abbreviated "DPOA"). A DPOA is "durable" because it is in effect even when the "principal" is mentally incapacitated.

While a non-durable power of attorney merely authorizes the agent to act as long as there is no incapacity, a DPOA resolves this problem by allowing a trusted agent, or nominee, to act even if the principal lacks legal capacity -- or in other words when that person cannot legally make decisions on his or her own behalf due to mental disability.

In California, a DPOA must have specific words to be "durable." It must state, as provided in California Probate Code §4124, that: "This power of attorney shall become effective upon the incapacity of the principal", or words to that effect.

Some Benefits of a DPOA

A DPOA has specific benefits; in fact, I would go even further to state that nearly everyone with a formal estate plan should consider having one. Here are some of the benefits:

Often one may avoid an adult conservatorship. A primary benefit of having a DPOA is that it can often substitute for a formal conservatorship, which is often a costly court proceeding requiring continued court supervision.
So if a person is under a disability and has a properly worded DPOA, his or her agent may be able to write checks, manage finances, or to take actions with regard to that person's estate plan (like funding a trust) without specific court supervision.


It can be rapidly effective. A DPOA can be effective immediately, or virtually so, without undergoing lengthy proceedings in Probate Court.

It should be accepted in other states. A valid DPOA should be accepted in other states. California has a specific statute, Probate Code §4053, which specifically recognizes valid DPOAs executed in other states. However, with some states this may not be the case if the document grants a power not authorized in that state. However (and this "however" is big!): The IRS does not make it easy to recognize an attorney prepared power of attorney. There are hurdles set forth in specific Treasury Regulations [See, for instance, Treas. Reg. §601.503] and IRS practice making it difficult for an agent to sign off on tax forms. [IRS Deskguide (Publication 1514)]. However, a California taxpayer with a valid, properly executed power of attorney should not have any problem with the California Franchise Tax Board signing off on a state tax form.


DPOAs are flexible. Specific authorizations, or "powers," can be added or restricted in the governing agreement. The specific provisions are up to the principal.

Of Course, Not All is Perfect...

While very useful, the DPOA is not perfect by any means. One major problem is the possibility of abuse.

While conservatorships are bulky legal proceedings, there is at least court supervision. The DPOA lacks supervision and abuses have occurred, all too often. While conservators must jump through many legal hoops, there is no active court supervision or "hoops" for an agent under a DPOA. For example, California requires that conservators provide a court approved accounting of their financial activities. It also requires that conservators be bonded. But without a specific court order there are no such requirements for a mere agent.

Court proceedings can be filed, but that is often impractical. While court proceedings can be instituted to compel (for instance) the agent to submit an accounting or to revoke the agent's authority, this is done all too infrequently. There is a big difference between a court supervised conservatorship, and filing a petition with the court.

In any event, who is going to file the petition with the court? Remember: The principal is mentally incapacitated! Comatose people generally can't file probate petitions to compel their agents to account!

Sure, there are risks, and they can be addressed somewhat (but not completely) through a well-drafted document and some common sense precautions. A DPOA may not be for everyone. However, everyone should at least consider a DPOA as an element of his or her estate plan. An effectively drafted DPOA can "round out" a comprehensive plan, and fill in the blanks not covered in trusts and wills.

Disclaimer: The information in this article is not legal advice, and the use of it does not create an attorney-client relationship. Any liability that might arise from your use or reliance on this article or any links from this article is expressly disclaimed. This article is not to be acted upon as if it were legal advice, and is subject to change without notice, or may include obsolete or dated information, or information not relevant to your jurisdiction. If you require legal services, you should consult with an attorney.

Corporate Kit Estate Binders

Corporate kit estate binders help to keep everything in one place. Corporate binders usually have important material related to a public or private company, which includes a minute book, share certificate, common seal, stock ledgers, etc. All of these things are kept in a well-built, turned-edge, D-ring minute book binder engraved with the company name. This is a corporate kit binder.

You can maintain your estate planning records with these attractive and functional estate planning kits. Normally, the estate plan binders are stamped with the name of the estate plan or trust. These kits provide ample storage room and index tabs for the organization of your wills, trusts and other estate planning documents and forms. A binder keeps these records in one convenient, organized, and professional unit.

There are different estate binders available on the market, and all available in different colors. The three-ring binder format holds copies of loose papers. It contains a client's customized estate plan and gives explanations of all estate planning documents and information. It is also able to maintain the trust letters and documents given by the law office in the binder. All the files which are needed to keep a business in order are hold in corporate binder.

A corporate binder provides a professional place to file and store the documents and paperwork required to be in fulfillment with business entity laws and regulations. Corporate binders are the most economical way to present an organized and portable source of information. They come in a price range of around $20-$30.

Estate Planning - Living Trusts - Post Mortem Administration

Initial Considerations

The Trustee is obligated to administer the trust assets in accordance with the terms of the written trust documents. You should obtain a copy of the trust documents, including any amendments, and study them carefully.

You should identify exactly who is the trustee of the Living Trust. It is the prerogative of the person named as trustee to accept or reject the nomination. If he accepts, the Trustee should certify this by signing certificates before a public notary. See the forms posted below. Copies may then be provided to any party needing proof of the trustee's authority.

If it becomes necessary to admit the decedent's will to probate, confirm that it nominates you as the first choice to serve as personal representative (i.e. executor). It is common in estate planning to name the same person as trustee and personal representative. Of course, there will be no personal representative if there is no need for probate.

Overview of Trustee Responsibilities

Under the terms of the trust, generally the trustee is to: 1) account for trust property, 2) ensure the payment of the debts and taxes of the decedent's estate, and 3) separate and administer the assets of the trust in accordance with the terms of the trust. Most trusts provide for compensation for services rendered as trustee, unless you voluntarily waive such compensation. Such compensation is paid from the assets of the trust. If you are the sole beneficiary of the trust, you should waive any compensation for serving as trustee.

You should identify what is held by the trust. The assets of the trust consist of only those assets which either (i) were transferred to the trust before the decedent's death, or (ii) go through probate after decedent's death. Any assets in the decedent's name alone, or which were otherwise left out of the trust, may pass into the trust only by going through probate. There are some exceptions to this, such as life insurance proceeds, and jointly owned bank accounts.

As trustee, you are entitled to engage an attorney to advise and assist you with trust administration. The fees charged by such attorney are paid from the assets of the trust.

Unless there is a legal challenge to the validity or interpretation of the trust, the trust is not subject to the review of the probate court. The trustee must, however, make sure that all of the debts and taxes of the estate are paid. The trustee may be personally liable for any failure to pay debts or taxes.

Some Common Trustee Duties

The trustee's duties typically include the following:

a. Power of Attorney. Obtain and hold the original of any Power of Attorney forms signed by the decedent. By law, a Power of Attorney is no longer valid after the death of the party granting the power. Thus, you are no longer entitled to rely on any Power of Attorney granted by the decedent.

b. Death Certificate. Verify all information contained on the decedent's death certificate, including social security number, date of birth, date of death, and address.

c. Life Insurance. Evaluate all possible life insurance, and assert claims for death benefits where applicable.

d. Assets. Prepare a comprehensive inventory, listing all assets in which the decedent or the decedent's trust owned an interest, including approximate values as of date of death, and indicating whether or not such assets were placed in the Trust. Jointly owned assets should be listed separately. Be careful to not overlook anything of value. Even if a probate is not necessary, a complete list of all assets will be critical, for income tax reporting (including basis calculations), and estate tax reporting. Assets which have a readily ascertainable value, such as bank accounts, marketable securities, etc., need not be appraised. However, all material assets not having a readily ascertainable value should be appraised right away, to establish values as of date of death.

e. Safe Deposit Box. Promptly inventory the contents of the safe deposit box, if any, noting the approximate value of each item as of the date of death.

f. Benefit Payments to Decedent. Promptly give written notice of decedent's death to all parties from whom the decedent received benefit payments such as social security, annuities, pensions, etc. Payments received for post-death periods must be returned to the payor.

g. Decedent's Debts. Promptly list and pay all debts and expenses which are uncontested, including expenses of last illness and burial/funeral expenses. You should also pay all legitimate charges on credit cards and credit accounts, all of which should be promptly closed. The trustee should also ascertain whether there are any disputed claims against the estate, and engage an attorney to help resolve the disputed amounts.

h. Personal Income Taxes. The final state and federal joint income tax returns for the decedent and the decedent's spouse are due by April 15 of the year after the year of decedent's death. You should coordinate with decedent's accountant, for preparation of these returns. Such tax returns will be the final joint returns, and the surviving spouse will file under "single" status for future years.

i. Trust Income Taxes. There is often a requirement to file separate income tax returns for the trust itself, for the period of post-mortem trust administration. If the trust will have material income between the date of death and final distribution of trust assets, income tax returns are usually required. In order to file such tax returns, a federal tax identification number must be obtained. To obtain one, your attorney or accountant should prepare IRS Form SS-4, to apply for a federal tax identification number. You should sign and submit this form as soon as possible. Quarterly estimated income tax payments by the trust may also be required. Again, you may need to coordinate with your accountant for preparation of such returns.

j. Death Tax Returns. A federal estate tax return, and state inheritance tax return, must be prepared and filed within nine (9) months from the date of death. All state and federal death taxes owing by the estate must be paid within nine (9) months from the date of death. Return preparation should begin right away, even though no taxes may be owing. In many cases, there are numerous complicated steps which must be taken prior to the filing of such returns, including elections, disclaimers, and asset allocations. For more information on these issues, see the author's separate article: State and Federal Death Taxes.

k. Notice to Beneficiaries. Under the Uniform Trust Code, the Trustee is required to give notice of certain information to all qualified beneficiaries. See the sample Notice to Beneficiaries in our law resources section on our Web site (see link below).

l. Beneficiary Information. The Trustee must identify all beneficiaries, and obtain all pertinent information regarding each beneficiary including address, Tax ID number, and date of birth.

m. Prudent Manager. As Trustee, it is your obligation to manage all assets of the trust. You should immediately secure all tangible property. Residential property owned by the trust should be protected by functioning locks on all doors and a functioning alarm system if available. Property taxes, monetary encumbrances, and insurance premiums should be kept current. Personal items of significant value (jewelry, artwork, antiques, guns, tools, etc.) should be moved to a secure location pending distribution or other disposition. All financial resources must be prudently managed, and you should confer with qualified professional advisors regarding necessary adjustments to existing investments. You are legally obligated to do more than just maintain the status quo, whether or not the decedent or decedent's advisors engaged in active financial management in the past.

n. Record Keeping. You must be able to provide a detailed accounting of all income and expenses of the trust, and all financial resources of the trust. It is critical that you maintain one or more separate bank accounts in the name of the trust for receipt of income, and payment of expenses. You must never co-mingle trust monies with your own personal resources. It is often advisable to establish financial bookkeeping systems using popular computer software (i.e. Quicken, Quick Books, Peachtree, etc.). In any event, well-organized, detailed record-keeping is critical.

o. Preliminary Distributions. Early in the trust administrative process, the Trustee may begin distribution of specific trust assets. In particular, personal property items mentioned in the trust may usually be distributed right away. Be sure to check the trust for any mandatory waiting periods, as most trusts impose a 30 day survival requirement, or other time period beyond which a beneficiary must live in order to receive a trust distribution.

Additional Resources

The foregoing comments will address the majority of issues that initially arise in trust administration. However, there is no uniform procedure for trust administration because each trust is different, and holds different assets. Numerous other rules and procedures may come into play in the administration of a specific trust. For additional information on these issues and other rules and procedures, numerous articles and other information are available at various websites. For the most reliable advice, you should confer with an experienced estate planning attorney.