December 7, 2011
Probate attorneys in California work extensively with wills and trusts, as well as in situations where one was never created. But for the typical citizen, these topics can seem quite mysterious. When you throw in words like “estate” (only rich people have those, right?) and “probate” (is that when liquor was illegal?), things can get even more confusing. Here, a probate attorney from California walks you through some of the most common estate planning terms.
Assets are anything that you have that can be owned or controlled in a way that produces value. Obviously, money is an asset, but so too are property, vehicles, businesses, stocks and bonds, other investments, retirement accounts, life insurance, personal items, and more. If it can be converted into cash, it is considered an asset and should be accounted for in your estate plan. If no will is created, the probate court may end up doing this accounting after your passing.
A beneficiary is the person who is named to receive inheritance, such as all or part of a life insurance policy or the ownership of assets of a trust. The word is often used to describe heirs when they have been specifically named.
An estate is not simply some rambling mansion on acres and acres of land in some exotic locale. Really, your estate is determined by adding up all of your “assets” and subtracting your “liabilities.” The difference is your net worth and is what will be passed on to your heirs.
An heir is someone who may receive part or all of your estate upon your death. This term is defined by law (and can therefore vary from state to state) and used to designate who will inherit your estate, i.e., personal items, property, money, etc. Your heirs at law and your beneficiaries may or may not be the same.
While you would generally consider your home to be an “asset” to be passed on to your “heirs,” it can pose a liability. These are outstanding bills and debts that need to be cleared up, during the probate process or with the assistance of a probate attorney. Some costs will be ongoing throughout the process, such as the mortgage on that home, property taxes, and many other administrative expenses.
This is a very specific document explains your end of life wishes. It is used in many states, but not California. In California these end of life wishes are included in your Advanced Healthcare Directive (AHCD). The AHCD covers things such as who will be in charge of making medical decisions for you, as well as outlining what decisions you would like to have made.
When an individual dies owning property in their individual name, whether he or she has a will or without having made clear, legal wishes about his or her “estate,” the courts must step in to supervise the process of making sure the deceased’s financial obligations are taken care of and determine how best to divide the “assets.” This is done through a process called probate during which everything is accounted for and decisions are made based on the state’s probate code or the deceased’s will. The probate process is costly, time consuming and fully public (anyone can go look at the probate file!).
There are a number of different types of trusts that can be created as a part of your “estate” plan. These are used to transfer your property, money, etc. to another person before or after your death and to centralize management of your assets if your become incapacitated. This may seem redundant when using a “will,” but there are a number of benefits to creating a trust, one of which is that it can save a tremendous amount of money for you and your “heirs.” Using a trust also keeps your affairs private.
Aside from seeing “the reading of the will” on some television drama, many people are still uncertain of what this mysterious document is all about. Also sometimes called a testament (as in “last will and testament”), a will is a legal document that determines how your “estate” will be managed after your death. It names an “executor of the estate” and outlines your wishes for “inheritance” and “beneficiaries.” In a nutshell your will states your wishes for who gets what and how they get it.
There is a lot to know about estate planning law, and this quick list will at least familiarize you with some of the most common terms. If you are currently administering an estate and aren’t sure what to do next, you may benefit from contacting a probate attorney in California.