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What Is Estate Planning?

Estate Planning is the comprehensive approach to planning how you will dispose of your assets upon
death as well as how your assets will be managed in the event of your incapacity while your are still
living. In California, the vehicles for transferring assets upon death most commonly include a will and a
revocable living trust, but can also include forms of title ownership causing legal transfers. As noted
above, a major concern is not just how to dispose of your assets upon your death, but also how your
assets will be managed if you come to lose the requisite mental faculties to properly manage your
assets. If you become incapable of making decisions affecting your assets due to coma, dementia
resulting from Alzheimer’s disease, or other such causes, the probate court in the county where you live
may name a conservator to manage your legal affairs. Most people desire to avoid a conservatorship
because of the loss of control over how their assets may be handled. This is one reason why many
people choose a living trust as their primary estate planning vehicle, because it can provide for a smooth
transition of trustees to manage assets without the imposition of a court-imposed conservatorship.
Another reason is that many people desire to avoid the court supervised process known as probate
whereby the instructions of a will are carried out and estate assets are transferred. There are, however,
some instances where a probate may be preferable because of the fact that the process is supervised
by the court.

Some people erroneously believe that the use of a living trust will save or defeat taxes over the use of a
will as the primary estate planning vehicle. This is not true. The method of transfer (by will or by trust) has
nothing to do with whether there will be a taxable estate at your death. Rather, whether you leave a
taxable estate depends solely upon the value of your estate, to what extent you may have already used
some or all of the unified gift and estate tax credit, and the status of the estate tax laws at the time of your
death. The primary difference is that in most instances, unless your estate is very small, if a will is the
method of transferring your assets, the process of that transfer must be overseen by the probate court, i.
e., your will must be “probated.” The major reason why many individuals desire to avoid probate is
because of the court costs and attorney fees associated with the probate process. Probate fees are set
by statute as a percentage of the estate. However, the process of transferring assets according to the
instructions of a trust, as opposed to a will, also called “trust administration” still generally requires that
the trustee obtain the advice and assistance of a trust administration attorney as there is still a good
deal of work to be done. Generally, however, this may be less expensive than the more formal process of
probate.

In any event, even if the revocable living trust is chosen as a person’s primary estate planning
instrument, that person will in all cases still need in addition to the trust, a simple will to “pour over” into
the trust any assets left outside the trust upon the settlor’s death. This is known as a pour-over will.

A comprehensive estate plan will usually also include other instruments such as transmutation
agreements between spouses to determine the character of various property, a power of attorney to deal
with certain contingencies relating to property in the event of a spouse’s incapacity, and a health care
directive, which is also a specialized type of power of attorney instrument whereby the person may direct
how he or she wants medical treatment to be administered under certain circumstances.

The State Bar of Virginia publishes several informative pamphlets on estate planning, wills, and
revocable living trusts. Clients and prospective clients are encouraged to read these estate planning
pamphlets.