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Estate Planning Tools To Protect Your Property And Finances

estate planning

As you perform estate planning with your attorney, several estate planning tools are recommended to protect your property and finances. Learn about these essential tools below, and contact our Orange County estate planning attorney at Ourfalian & Ourfalian if you have estate planning questions.

Why Do Estate Planning?

Did you know that only about 1/3 of Americans had an estate plan before the pandemic? Many of us do not want to think about passing away, but protecting what you worked hard for in life is important if you have property and assets.

Our belongings are distributed to our family members when we pass away according to our estate plans. However, if you do not have one, the state of California will decide who gets what, and few of us want that. This is known as ‘dying intestate.’ 

In California, if you do not have a will, your spouse would receive 100% of community property and ½ to 1/3 of separate property if you have children. Perhaps that is what you want, but it is usually better to lay everything out with an estate plan.  

Ultimately, estate planning means not leaving it to the government to decide how to divide your money and property and which assets go to whom. If you have family members who do not get along, not having an estate plan can lead to a contested will or estate, which can rip a family apart. No matter how large or small your estate is, having a plan set up with some or all of the following estate planning tools is critical:

Will

Also known as the last will and testament, the will is the most essential part of estate planning that people use to control who gets what when they die. Dying without a will means leaving many critical decisions about your assets to the state.

A will can be flexible, and it usually names an administrator or executor to distribute your assets when you pass away. The will must be signed, dated, and witnessed. It also is critical that you were of sound mind when you created the last will and testament.

If you do not have a will, the state of California will name the executor, who is usually a close relative. It is essential to have a will so you can name who your executor is.

While a will is a critical part of your estate plan, it has limits. The biggest issue with having a will is that it goes to probate court, which provides your executor with instructions. However, probate is expensive, so you can use other tools to reduce the need for probate.

Power Of Attorney

Power of attorney allows someone to make crucial decisions in your name. The power of attorney document usually limits what the person can do in your name. However, durable power of attorney can more generally represent your wishes if you are incapacitated. 

For example, with an estate plan, durable power of attorney allows you to name someone to make financial decisions if you are in a coma or otherwise incapacitated. Also, a healthcare power of attorney states who your physicians should talk to if you cannot speak for yourself, and medical decisions must be made.  You can also identify specific instructions related to specific medical procedures or your health in general for your agent to follow.

Revocable Living Trust

A revocable living trust is a legal document that decides how your assets will be handled following your death.  The assets can include real estate, bank accounts, investments, and personal valuable possession. The revocable living trust, contrary to a will, is used to avoid the probate process and to protect your privacy and the privacy of your beneficiaries following your death.  It can also be used to minimize estate taxes after your death. 

Irrevocable Trust

An irrevocable trust contains assets to protect them from creditors and taxes…  Similar to a revocable living trust, an irrevocable trust is established by the trustor to transfer some assets to a designated beneficiary; however, unlike a revocable living trust, the irrevocable living trust cannot be changed or canceled by the trustor once established.  

The main reason for establishing an irrevocable trust is to reduce the size of the trustor’s estate because assets transferred to such trust as exempt from the trustor’s taxable estate.  Setting up an irrevocable trust can be challenging, so contact our Orange County Estate Planning Attorney to help you in the process.

Contact Our Orange County Estate Planning Attorney Now

Using the full arsenal of estate planning tools, your Orange County estate planning attorney can create a plan that reflects your needs and wishes. Please contact our Orange County estate planning attorneys at Ourfalian & Ourfalian now at (818) 550-7777.

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Revocable Trust Vs Irrevocable Trust : Understanding the Differences

revocable trust

Every adult in the San Fernando Valley should have a well-crafted estate plan in place. Yet, many people do not even have a will, let alone other estate planning documents. A survey cited by the AARP found that 6 in 10 U.S. adults lack any estate plan. A proper estate plan should be comprehensive. It should protect you, your family, and your assets no matter what tomorrow brings.  

A living trust is an effective, efficient estate planning tool that can help many people protect their assets. A living trust may be revocable and irrevocable—there are very important differences between these two options. At Ourfalian & Ourfalian, we help families secure their futures. In this article, our Glendale estate planning attorneys explain the key things to know about the differences between a revocable living trust and an irrevocable living trust in California. 

What is a Living Trust?

A trust is a legal relationship between several parties. The grantor/settler is the party that creates the trust. When a trust is created, it is overseen by a trustee who is responsible for receiving and managing the assets. Finally, the beneficiary is the party for whom the assets in the trust are being held. There are many different types of trusts. A living trust is one of the most common examples. Living trusts can be divided into two broad categories: 

  • Revocable Living Trust:  The Cornell Legal Information Institute defines a revocable living trust as a trust in which “the settlor retains the ability to alter the trust or end the trust altogether.” You will often hear a revocable living trust referred to as a revocable trust. As a revocable trust can be easily revised, it is one of the most popular estate planning vehicles. 
  • Irrevocable Living Trust: While less commonly used, it is possible to create an alternative type of living trust called an irrevocable living trust. An irrevocable living trust is not nearly as flexible as it cannot be altered or taken back by the settlor. Still, in certain circumstances, an irrevocable living trust may be an effective way to protect assets.

Differences Between a Revocable Trust and an Irrevocable Trust 

Modification of the Trust 

Perhaps the most central difference between a revocable trust and an irrevocable trust is in the name itself. Revocable living trusts are among the most popular estate planning tools because they can be modified—and even revoked outright—at any time. A core advantage of a revocable living trust is that it allows the settlor (grantor) to retain full control over their property throughout their lifetime. Any assets placed within control of a revocable living trust can be moved or adjusted as the settlor sees fit. 

In contrast, an irrevocable living trust cannot be changed by the grantor once it is put into place. Once the settlor funds and signs an irrevocable living trust, they lose their ability to alter the documents. In other words, they will lose direct control over the property and assets placed within an irrevocable living trust. It cannot be modified. The loss of direct control over property/assets is certainly a disadvantage of an irrevocable living trust compared to a revocable living trust. 

Ownership of the Property 

Another key difference between a revocable trust and an irrevocable trust is ownership of the property. As a revocable living trust stays within the control of the person who created it, the property and assets within the trust are still fundamentally owned by the person. They can control them and they will even be responsible for paying certain taxes on them. 

On the other hand, all assets placed within the control of an irrevocable living trust are the property of the trust. With an irrevocable trust, the grantor has no more direct control over the property and assets included. They no longer own the property at all. The property is owned and controlled by the trust itself for the benefit of the named beneficiaries. 

Protection of Assets 

A revocable trust is a more flexible estate planning tool. It allows the trust grantor to retain control over their property and assets. That being said, there are limitations to what you can do with a revocable trust. Most importantly, a revocable living trust provides limited asset protection during the lifetime of the settlor. As the person who creates a revocable living trust still fundamentally has full control and ownership of the property/assets, creditors can try to make a claim against those assets to resolve an outstanding debt or other financial obligations. 

On the other hand, irrevocable trusts offer strong asset protection. The assets placed within an irrevocable trust are no longer owned by the settlor. In effect, this means that creditors and other parties cannot pursue these assets to resolve debts and other claims. Irrevocable living trusts can be useful asset protection tools in many different circumstances, including when it comes to proactively protecting your estate from the risk posed by future long-term care costs. 

Tax Implications (Estate Tax)

There are tax implications that come with creating a trust. A revocable living trust is taxed differently than an irrevocable living trust. Most notably, this is an issue when it comes to estate tax. The assets placed within a revocable trust are still owned and controlled by the grantor in the eyes of the IRS. Those assets will be subject to an estate tax if the estate tax applies. In contrast, the assets and property placed within the control of an irrevocable trust are no longer owned by the grantor. As such, assets within a valid irrevocable trust are generally not subject to estate tax liability. 

Contact Our Estate Planning Attorney in the San Fernando Valley

At Ourfalian & Ourfalian, our Glendale estate planning lawyers have the skills, experience, and professional expertise to help you with all types of living trusts. If you have any questions about using a revocable living trust or an irrevocable living trust as part of your estate plan, we can help. Contact our estate planning law firm today to arrange your strictly private, no-obligation consultation. With an office in Glendale, we provide estate planning services throughout the San Fernando Valley, including in Pasadena, Burbank, North Pasadena, and Encino.