Estate Planning is a Process, not a thing. It’s like climbing a tree. One step up at a time until you get to the top of the tree. You have to focus, set a goal of one step/task at a time. Don’t get distracted or you may get frustrated - and not finish.

As an estate planning attorney, I can’t “plan your estate” until I know a few basic, essential things about you. The word “estate” is just another word for property and there are only two kinds of property in the whole wide world - real property and personal property. I need to know details such as:

1. What your estate consists of - which means I need a description of your assets such as bank accounts, brokerage accounts showing asset detail, life insurance policies, retirement plan detail etc. - in my case, I need proof - copies of your statements showing account numbers, balances, stock symbols, company branches, street addresses, websites, contact information, etc.

2. How title is held to each asset

3. Estimated value of each asset. 

4. Certain personal information about you and your immediate family or next of kin.

5. Your decisions about how you want your assets distributed and how you want your financial, personal and family “affairs” handled after your death.

6. Who you want to handle all of the work that has to be completed to carry out your wishes after your death (and/or if you become incapacitated).

   Below are examples of the documents you need to gather which show how title is held to various kinds of assets and their values plus the other information indicated above.

Gather copies of them and/or make a pdf of them all. Some of them are already available in pdf format online within your on-line bank or brokerage accounts.

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1. Complete the New Client Financial and Personal Organizer

You may order an organizer by sending an email to me with a request for the form and with your basic contact information. This is an essential first step in estate planning. If you can’t find your financial documents or information now, what do you think will happen if no one can gain access to your bank accounts and investments online to pay your bills and your family doesn’t even know your basic banking and investment information. Getting your financial documentation together is the responsible and loving thing to do for your family or beneficiaries!

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2. Gather Your Financial Documents

Below are the typical documents we need which will show title to accounts, type of accounts, account numbers, description of assets within the account, CUSIP numbers or stock symbols, current values, tax basis, company websites, contact information and more. This information is essential for us and for your successor trustee.

 1.  BANK ACCOUNTS:

• Full copy of most recent bank or financial institution statement(s) for business and personal accounts [checking, savings, money market, certificates of deposit etc.].  On-line summaries of accounts are not sufficient.  The statement must show vesting of account, account numbers, branch location & phone number(s), balance and specific details of the types of assets within account (checking, savings, money market etc).

2.   INVESTMENTS: 

• Full Copy of your most recent brokerage account statement(s) showing the account vesting, account number(s), detailed asset descriptions, quantities & values within the account. An on-line summary is not sufficient for my needs. If you do not have brokerage accounts, then a copy of your stock, bond or other investment certificates, if applicable, and a copy of the most recent dividend check payment stub showing the transfer agent.

• Full copy of your most recent mutual fund statements showing the same as item 6.

• Copy of any other investment or other asset statements.

• Copy of stock option paperwork -  evidence of title or description of options and valuations, expirations etc.

3. RETIREMENT PLANS AND PROGRAMS:   

• Copy of your current retirement plan asset descriptions and valuations or copy of a description of benefits (IRA, 401K, company plans, pensions, government employee benefit programs, thrift plans, 403B, etc. including any surviving spouse benefits etc.)  

• Copy of beneficiary designation paperwork for each retirement plan or retirement account.  

• Copy of signed Designation of Beneficiary forms and confirmations of beneficiary designations from retirement plan administrators.

4.  LIFE INSURANCE & ANNUITIES: 

• Copy of your life insurance and annuity policies (cover page showing terms of contract is okay). 

• Copy of current “beneficiary designation” paperwork for each policy. 

• Copy of confirmation letter for current “beneficiary designations” from life insurance or annuity company.

5. Real Estate

For many clients, real estate is their most valuable asset. With California real estate, some properties far exceed $1 million. Even condominiums in good locations are worth $750,000 or more. When you look at the statutory probate fees assets which must be processed through probate, then you’ll understand why it’s important to not only have a revocable living trust, but also to make sure that the title is properly vested in the trustee of your trust. Here’s what you’ll need to gather for your attorney for your real estate - whether its residential, commercial, vacant lots, apartment buildings etc.

• Copy of signed and recorded deed(s) to real property (house, vacation home, time shares, rentals, business, commercial etc.).

• Copy of most recent property tax bill(s).

• Copy of your title insurance policy(ies) confirming legal descriptions (from purchase).

• Copy of signed promissory notes and deeds of trust (monies owed to you and monies you owe to third parties such as banks, mortgage companies, lenders or family/friends)

6. Business Ownership Documentation:

• Corporations - corporate formation papers (articles, bylaws, etc.) and your stock certificates, corporation’s stock certificate book or corporate stock administrator’s information; For professional corporations, provide licensing agency’s documentation and approval of corporation (note successor trustee must be licensed professional in area of practice). Estimated current value of your interest in the corporation

• Partnership - partnership agreements and last two years of partnership tax returns with K-1s for all partners (information will be kept strictly confidential). Name, address and phone number of general partner and description of your limited or general partnership interest. Estimated current valuation of your interest (not K-1 interest).

• Limited Liability Company - LLC Ownership Certificates, formation papers (such as articles of organization, operating agreement etc.) and last two years of LLC income tax returns and K-1s.  Name, address and phone number of manager and description of your ownership interests with estimated valuation.

• Sole proprietorships - Fictitious business name statements, professional license if applicable, business checking account statements, business organization documents, business license, anything else relevant to title, description and value and whether the business can be sold after your death.

7. OTHER. 

• Any other documents which you feel are important or that show current value and how title is vested to any other assets. 

8. Previously Signed Estate Planning Documents

• COPY of any current Trusts, Amendments to or Modifications of Your Trust, Wills, Powers of Attorney, Estate Planning Letters, Assignments, Property Agreements, Co-Habitation Agreements and other estate planning documents which you have signed in the past. 

• A Trust that you’ve signed with a former spouse? Perhaps still have a house or assets titled in that former trust? Did your divorce property settlement agreement sever joint tenancies or revoke trusts with teh former spouse? where’s the paperwork on that?

• 9. Marriage, divorce & spousal agreements

• MARRIAGE DOCUMENTS:   Prenuptial Agreements, Postnuptial Agreements and Property Agreements. 

•  If you are divorced, copy of your Judgment of Dissolution or Divorce Decree with copy of Property Division Orders or Property Settlement Agreements and copy of child and/or spousal support orders. Copy of provisions for responsibility for life insurance for spouse or children. 

• NOTE: If you are in the middle of a divorce (your divorce is not final and the property has not been divided and distributed), then there could be a family law restraining order preventing you from completing new estate planning documents - check with your family law attorney to determine to what extent you can complete estate planning work.

3. Debts/Liabilities/Mortgages/Car Loans/Personal Loans

List all your Debts and Creditors: Please list the creditor’s full name, address, phone number and website address, the origination date, original loan amount, current outstanding balance, account number, user name, password to access account online. If you have signed a Deed of Trust and it is recorded against your property, we will need a copy of that. We might be able to get it through our title insurance company accounts.

Make a copy/pdf of your most recent bill showing the monthly payment amount due and the balance due and contact info.

Additional documents may be required after the initial review .

4. Basic Personal Information About You and Your Family

1. client’s full name and all previous names,
2. date of birth
3. address,
4. telephone numbers including cell number,
5. email address,
6. spouse’s name,
7. date of marriage,
8. if previous marriage, then full name(s) of previous spouse(s) and date(s) of divorce (month/year is OK),
9. FULL NAMES OF ALL OF YOUR CHILDREN, DATES OF BIRTH, CURRENT ADDRESSES, EMAIL ADDRESSES, AND PHONE NUMBERS (and NAME OF PARENT if not your current spouse). We do not contact your children at this stage of your planning. But we want this information in the file for NOTICE purposes after your passing.
10. Any other fact or information that you think is relevant to your particular situation, i.e. child out of wedlock, adopted child, child living with you whom you have not adopted, special niece/nephew treated as child etc.

Gather this information and compile it into the New Client Financial and Personal Organizer or simply write it up in a word document and email it to me with copies of the financial documents before your first appointment or bring it to your first appointment.

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  6. Minimum Basic Decisions About Estate Planning

Who Gets What ~ When do They Get It? ~ Who’s in Charge ~ Who Does the Work?

Please order and use the New Client Financial and Personal Organizer to Record Your Preliminary Decisions.

Now that we know what you have in the way of assets, the gross and net value of your assets, your family information and who is going to do all of the work as your successor trustee, you now need to think about the “objects of your bounty” and to make preliminary decisions on “who gets what” from your assets and property.  Many people only give lump sum cash gifts and then designate a percentage of the rest, residue and remainder to several people and then name alternates as their estate plan. Many clients already know that they want their spouse, and then their children to receive everything they own. That’s great. But “what if” you are single? “What if” you are divorced and no children? So many choices. Just go ahead and make some preliminary decisions. Once we meet, we’ll discuss your options.

Unless you know you are going to die within a matter of weeks, you simply must decide on alternate beneficiaries in case all of your primary beneficiaries die in a common accident. You really need to think through the “what ifs” because if the unthinkable happens, and you haven’t provided for your alternate beneficiaries, then your hard-earned money and assets will pass to your next-of-kin under the laws of intestate succession. You may end up with unintended heirs benefitting from you estate and your estate could end up in probate court to determine just who the heirs are. You may not want your parents or your grandparents, or your siblings or a niece or nephew to receive all that you’ve worked so hard to earn over your lifetime. There are more and more only children these days with fewer and fewer cousins and relatives. Everyone’s situation is different. It’s your choice, make it! Don’t let this be a block in your path to finishing your estate planning.

Now is the time to read through your prior will and/or trust and start thinking about changes you want to make and restrictions you want to lift - perhaps your children are grown and responsible now at 21 and you don’t need to have a trust continue until they are 35 years old since they are more responsible than you are now.

When it comes to choosing just which types of gifts to make to your chosen beneficiaries, you do have several options as provided in California Probate Code 21117:

(a) A specific gift is a transfer of specifically identifiable property.
(b) A general gift is a transfer from the general assets of the estate that does not give specific property.
(c) A demonstrative gift is a general gift that specifies the fund or property from which the transfer is primarily to be made.
(d) A general pecuniary gift is a pecuniary gift of money from the general assets of the estate……….
(f) A residuary gift is a transfer of all of the property that remains after all specific and general gifts have been satisfied (and after all taxes, medical bills, debts, liabilities, attorneys fees, trustees fees, appraisal fees, accounting fees, recording fees for real estate, and all other expenses of the trust administration are paid).  This is designated as a percentage of “all of the rest, residue and remainder” of the estate. We call it “what’s left over.”

When considering lump sum cash gifts, keep in mind that these gifts are distributed “off the top” as a priority as outlined below and the remainder beneficiaries may not receive anything or very little if your estate is substantially smaller than when you completed your estate planning. As an example, let’s say you had to undergo years of cancer treatment and incurred a lot of medical bills which depleted your assets. If you provided for large cash gifts to special friends or organizations and gave the residue of your estate to your children, then there may not be anything left in the residue for your children after those lump sum cash gifts after all of your medical bills, debts, liabilities etc. were paid. The point is you need to reconsider your estate planning and your lump sum cash gifts if you’ve used them on a yearly basis.

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Your estate administration is like a bankruptcy where the beneficiaries only receive “what is left over” after all debts, liabilities, and expenses of the trust administration are paid. If there is not enough money to pay all of the general pecuniary gifts, then “abatement” under California Probate Code 21402 is triggered.

PC 21402 (a) Shares of beneficiaries abate in the following order:

(1)  Property not disposed of by the instrument. [FIRST TO GO]
(2) Residuary gifts. [FIRST TO GO]
(3) General gifts to persons other than the transferor's relatives.
(4) General gifts to the transferor's relatives.
(5) Specific gifts to persons other than the transferor's relatives.
(6) Specific gifts to the transferor's relatives. [LAST TO GO]

(b) For purposes of this section, a “relative” of the transferor is a person to whom property would pass from the transferor under Section 6401 or 6402 (intestate succession) if the transferor died intestate and there were no other person having priority.

  This means that the residuary gifts are the first to go and the pecuniary gifts to family members are the most protected and the last to go.

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7. Retirement Plan Beneficiary Designations - Tax Issues.

Retirement plans such as IRAs, 401k, 403b, 401a, thrift savings plans, and others pass to the beneficiary that you designate on the record of the plan administrator’s records. Money goes in tax-free, so when the money comes out, the individual who has the right and choice to withdraw it has to pay taxes on the amount withdrawn at his/her personal income tax rate in the year of withdrawal. That person who has the right to withdraw it could be the owner after retirement or it could be the designated beneficiary after the owner or participant’s death. You need to start thinking about who you are going to designate as the beneficiaries of your retirement accounts if you have them.

These plans and accounts are administered like a contract and they are not subject to probate administration or trust administration unless your designated beneficiary does not survive you, and there are no alternates named, or your alternate beneficiaries also did not survive you. It’s very common for clients who have worked at a company for 20 or 30 years to have several employment retirement plans and life insurance policies and they designated their spouse as the beneficiary when they first started working at the company. Many years passed by, and now they are divorced, some are remarried, sometimes the spouse has passed away, some have children, and some have domestic partners or just special people in their lives for which they would like to provide financial support. This won’t happen unless the proper beneficiary designation is completed.

But wait! It’s not that simple because there is tax planning involved and you really need to consider your whole estate plan and all of your assets before making your final decisions about your retirement accounts.

Another consideration for beneficiary designations is what if the beneficiary ends up being a minor and the amount is $5,000 or more? Then a guardianship will have to be established and when the beneficiary is 18, he/she is entitled to receive it all. Think through this carefully. Would you want your child to have $50,000.00, $100,000.00, $500,000.00 or $1,000,000.00when he/she turns 18?

Have you considered a tax-exempt charity as beneficiary of your retirement accounts after your death? All of the money will be distributed tax-free to the charity. If you are not charitably inclined, then end of discussion. If you are 70 and 1/2 and have a lot of money in your IRA, have you considered giving up to $100,000 to one or more tax-exempt charities, while you are alive, as a Qualified Charitable Distribution? You and your spouse can accomplish that each year if you follow specific rules and procedures. It is a direct transfer of funds from your IRA custodian payable to a qualified charity. It is counted toward satisfying your required minimum distributions (after age 72) and the amount donated is excluded from your taxable income without itemizing your deductions. Since there are tax issues involved, if this is something you are interested in, then it can be discussed as part of your estate planning decisions.

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