Do you think estate planning isn’t for you, or that trusts are just for rich people? You might want to think again. A trust is not just a way to distribute your assets or property. It can do much more.
Your estate is all the property you own at the time of your death: real estate, pension accounts, bank accounts, stocks and securities, life insurance policies, and personal property like your car, jewelry, or artwork.
In a trust you specify the conditions of how and when your assets will be distributed upon your death. Placing assets into a trust may also allow you to reduce your estate and gift taxes and to distribute assets to your heirs without the cost and delay of probate court, which administers wills. Some plans also offer greater protection of your assets from creditors and lawsuits.
Four different legal documents specify your wishes: a will, living trust, durable power of attorney, and advanced health care directive.
- Will: Specifies your last wishes and appoints someone to carry them out, transfers your assets to beneficiaries after your death, and names guardians for minor children. It is administered by probate court.
- Living trust: Specifies your last wishes and appoints someone to carry them out. It transfers your assets into a trust while you’re alive so they pass to beneficiaries once you’re gone. It names guardians for minor children and avoids probate court.
- Advanced health care directive: Names someone to manage your health care, and states in advance your decisions about life support and organ donation.
- Power of attorney: Names someone to handle your financial and legal affairs and act in your best financial interest. You can specify under what circumstances it goes into effect, the most typical being when you become incapacitated. If you are already a caregiver and lose mental clarity from aging or a health crisis, this can be a crucial document.
Your CalPERS Special Power of Attorney is a separate document which should already be in place to conduct your CalPERS business.
An experienced attorney can provide you with tax-planning strategies based on the needs and demands of your estate.
Once you have a trust in place, remember to keep it current. Review it annually and update it after a major life change such as a birth, death, marriage, or real estate purchase. And of course, with any birth, death, or marriage changes, don’t forget to update your CalPERS information, such as your beneficiary.