When One Spouse Handles the Money: Why Every Couple Needs a Plan for the Unexpected

In many marriages, one spouse naturally takes the lead on finances. They’re the one who tracks the investments, pays the bills, talks to the accountant, and keeps the family's financial house in order. The other spouse may be loosely informed, but mostly relies on their partner to “have it handled.”

This arrangement works—until it doesn’t.

What happens if the financially savvy spouse becomes incapacitated… or passes away unexpectedly? The surviving or temporarily overwhelmed spouse is suddenly left to navigate accounts, documents, and decisions they may not fully understand. In moments of grief or crisis, this can lead to confusion, anxiety, and potentially irreversible financial mistakes.

Financial Dependency Is More Common Than You Think

It’s not unusual. In most couples, one partner naturally takes on the “CFO” role. They might enjoy spreadsheets, track net worth, or simply feel more comfortable making financial decisions. Their spouse might prefer to focus on other responsibilities—or may find the financial world overwhelming or uninteresting.

But when only one spouse knows how everything works, the other is left vulnerable if the unexpected occurs.

When the Financial Spouse Is Unavailable

Here’s what we commonly see when the financial spouse becomes incapacitated or passes away:

• The non-financial spouse doesn’t know how to access key accounts

• Bills and tax deadlines are missed due to lack of organization

• Investment decisions get delayed or mismanaged

• Family members or children step in—sometimes helpfully, sometimes not

• Panic and fear take over, making an already difficult time worse

A well-organized estate plan can prevent these outcomes and give both spouses peace of mind.

Build a Plan that Supports the Non-Financial Spouse

Here’s how to prepare:

1. Create a Living Trust: A trust allows for a smooth transition of financial control in the event of incapacity or death, without the delays and costs of probate. It also helps ensure your wishes are clearly spelled out in one document.

2. Designate Trusted Advisors: Identify and introduce your spouse to your financial advisor, estate planning attorney, and accountant. These professionals can act as a support system when you’re no longer available.

3. Organize Key Documents and Logins: Maintain an organized file—physical or digital—that includes bank account info, investment logins, insurance policies, mortgage details, and passwords. Your spouse doesn’t need to memorize it all—they just need to know where it is.

4. Communicate Clearly: Schedule a yearly “financial check-in” where both spouses review the big picture together. This simple practice helps demystify finances and creates shared understanding over time.

If you’re the financial spouse, one of the greatest gifts you can leave behind is not just wealth—it’s clarity. With a comprehensive plan and trusted advisors in place, your spouse won’t have to spiral in the face of chaos. They’ll have a roadmap, a support system, and the confidence to carry on.

It’s not just about managing money—it’s about protecting the people you love most when they need it the most.

How a Living Trust Works Quietly in the Background—Until You Need It Most

For many California families, the idea of “avoiding probate” sounds good, but the mechanics can feel mysterious or even overwhelming. What if setting up a trust meant losing control of your assets or changing how you manage your finances? Fortunately, that’s not the case. A properly prepared living trust is like an insurance policy you don’t have to think about—it sits quietly in the background of your life, doing absolutely nothing until the moment you need it most.

No Disruption to Daily Life

When you create a revocable living trust, you still own and control your assets. You can buy and sell real estate, trade stocks, access your bank accounts, and spend money just as you did before. Your property tax basis remains unchanged in California thanks to Proposition 13, and you don’t trigger a reassessment when transferring your home into your living trust. There’s no impact on your income tax filings either—you continue filing the same way, using your personal Social Security number.

In other words, your living trust makes no noise, causes no friction, and doesn’t interfere with your financial life in any way. It simply holds legal title to your assets while you retain full use and control.

Springs into Action at the Worst Possible Time—So You Don’t Have To

While a living trust does nothing while you’re healthy and capable, it springs into action when you’re not. If you become incapacitated, the person you’ve named as your successor trustee can step in and manage your finances without court intervention. This means no conservatorship process, no frozen accounts, and no stress for your family.

Likewise, when you pass away, your successor trustee can manage and distribute your assets privately, according to your instructions, without the long, expensive, and public process of probate. In California, probate can easily take 12–18 months, involve thousands in legal fees, and result in total loss of privacy. A living trust avoids all of that with a smooth transition of control.

Quiet, Flexible, and Private

One of the greatest strengths of a living trust is its flexibility. You can amend or revoke it at any time while you’re alive and competent. You’re not locked into anything. But while it’s flexible, it’s also durable—it can carry out your wishes even when you no longer can. It’s private, too: unlike a will that goes through probate and becomes a public record, a trust administration happens outside of court, quietly and efficiently.

It’s There When You Need It

Think of a living trust like a standby generator. It sits unused when the power’s on—but when the lights go out, it automatically takes over. It doesn’t demand attention. It doesn’t change your routines. But in a time of crisis, whether due to incapacity or death, your trust will be there to protect your loved ones and keep your affairs running smoothly.

For peace of mind and practical protection, a living trust is one of the most powerful tools a family can have—because the best legal documents are the ones you rarely think about, until you’re glad you have them.

The Trust-Funding Habit: Why Retitling Assets Is the Golden Rule of Estate Planning

A revocable living trust is often sold as a “probate-avoidance machine,” but that machine only works if you fuel it. The fuel is proper asset titling—commonly called trust funding—and it is the single best-practice that separates airtight estate plans from expensive courtroom surprises. Below is a 500-word field guide you can share with clients (or use as a personal checklist) to keep the engine running.

1. Understand What “Funding” Really Means

Creating a trust document does not move a single dollar. Funding is the separate, follow-up step of retitling or assigning each asset so that the trust, not the individual, becomes the legal owner. Think of the trust as a bucket: signing the trust builds the bucket; funding it drops your property inside.

2. Prioritize Probate-Sensitive Assets

Start with assets that would otherwise be stuck in court:

• Real estate – record a new deed naming “John Smith and Jane Smith, Trustees of the Smith Family Trust dated ….”

• Non-qualified brokerage accounts – complete a change-of-ownership form with your custodian.

• Business interests – amend LLC operating agreements or issue new stock certificates to reflect trust ownership.

Retirement accounts and life-insurance policies usually bypass probate via beneficiary designations, so they stay titled individually but should list the trust (or sub-trusts) as contingent beneficiaries when appropriate.

3. Use a Pour-Over Will, Not a Parachute

A pour-over will “pours” any stray assets into the trust at death, but it does so through probate. Relying on the will as a safety net defeats the purpose of the trust. Think of it as an emergency patch, not everyday attire.

4. Mind the Bank Accounts

Many clients skip checking and savings accounts, assuming small balances aren’t worth the paperwork. Yet California’s “small-estate affidavit” caps out at $184,500 (2025 figure), and balances fluctuate. Spend ten minutes at the bank now to avoid months of declarations later.

5. Keep the Funding Ledger Current

Create a simple spreadsheet with three columns—Asset, Date Titled to Trust, Confirming Document—and store it digitally alongside PDF copies of deeds, confirmation letters, and account statements. Review the ledger at tax time; if you added a new brokerage account or refinanced the house, update the entry.

6. Coordinate With Professional Advisors

CPAs, financial planners, and bankers each touch pieces of the puzzle. Share the funding ledger and remind them that new accounts must open in the trust’s name. Consider granting your lawyer limited, view-only access to investment portals so funding can be verified without endless email chains.

7. Audit After Life Events

Marriage, divorce, relocation, or purchasing rental property triggers an immediate funding check. Out-of-state real property often needs a sister trust or ancillary deed to avoid two probates—one in California, another where the property sits.

8. Educate Successor Trustees Up Front

Your successor trustee inherits the funding duty for post-death assets like final paychecks or refund checks. Include funding instructions in your trustee binder so they know how to endorse checks to the trust’s EIN and avoid personal liability for missed items.

Drafting a trust is the first chapter; funding writes the rest of the story. By retitling assets promptly, maintaining a funding ledger, and looping in advisors, you ensure that the legacy you designed on paper delivers real-world results—namely, privacy, speed, and harmony for your beneficiaries. Contact us today to assist you.

A Comprehensive Estate Plan to Avoid Probate

An effective estate plan does more than just distribute your assets—it preserves your family’s peace of mind, minimizes court involvement, and ensures your wishes guide decisions if you become incapacitated. In California, four primary documents form the backbone of a thoughtful, evergreen plan: the living trust, pour‑over will, durable power of attorney, and advance health care directive.

1. Revocable (Living) Trust
A revocable trust holds title to your assets during life and names successor trustees to manage or distribute them at your incapacity or death. Because assets titled in the trust avoid probate, your family benefits from privacy, speed, and reduced legal fees. You retain full control—adding or removing assets, changing beneficiaries, or revoking the trust entirely—so it flexibly adapts as your career, family, or financial situation evolves.

2. Pour‑Over Will
Even with a trust, some assets—such as newly acquired property or certain payable‑on‑death accounts—may remain titled in your name. A pour‑over will “catches” these stray assets, directing the court to transfer them into your trust at death. While any assets passing under your will will still go through probate, the pour‑over mechanism ensures virtually all of your estate ultimately falls under your trustee’s instructions, preserving your overall plan.

3. Durable Power of Attorney (Financial)
If serious illness or injury prevents you from making financial decisions, a durable power of attorney authorizes a trusted agent—often a spouse, adult child, or advisor—to manage banking, investments, real estate transactions, and bill payments on your behalf. “Durable” means it remains effective even if you become mentally incapacitated. Without this document, your family could face court-appointment of a conservator, a public, often costly, and time-consuming process.

4. Advance Health Care Directive
Also known as a “living will” plus health care power of attorney, this document expresses your preferences for medical treatment—such as life‑sustaining measures, pain management, or organ donation—and names a health care agent to make decisions if you cannot speak for yourself. By capturing both your values and your chosen surrogate, an advance health care directive spares loved ones the agony of guessing your wishes during a medical crisis and guides providers to honor your care goals.

Protecting Minors and Building a Legacy

Beyond assets and health, estate planning addresses the care of minor children. Trusts can include provisions to set aside funds to support education, extracurriculars, or milestones, under the oversight of a trustee you choose. You may also establish charitable trusts or or other charitable vehicles within your plan, weaving philanthropic goals into your legacy and reflecting the values you wish to perpetuate.

Why These Tools Matter for Professionals

For busy professionals juggling demanding careers and family responsibilities, this suite of planning documents provides structure and certainty. You’ll ensure that:

• Probate is minimized, freeing your heirs from lengthy court proceedings.

• Your financial and medical decisions proceed seamlessly, even if you’re incapacitated.

• Your children and loved ones are cared for according to your instructions.

• Your long‑term goals, from wealth transfer to philanthropy, become reality.

By putting the living trust, pour‑over will, durable power of attorney, and advance health care directive in place, you create an enduring framework—one that protects your family today, safeguards your wishes tomorrow, and cements a legacy that outlasts a lifetime.

Funding Your Living Trust: Best Practices for 2025

A trust is only as good as the assets inside it. Follow this checklist to ensure your living trust actually works:

1. Real estate – Record a new deed (with a Preliminary Change of Ownership Report) transferring title from you to You, Trustee of the [X] Living Trust.

2. Bank & brokerage accounts – Open or retitle accounts in the trust’s name; keep the tax ID the same if the trust is still revocable.

3. Life insurance & annuities – Update beneficiary designations; often the trust is primary for minors or spend-thrift heirs.

4. Retirement plans (IRA, 401(k)) – Usually do not retitle, but name contingent beneficiaries to preserve stretch options. Missing—or stale—forms are a leading cause of botched plans.

5. Business interests – Assign LLC or partnership interests to the trust and amend operating agreements if required.

6. Tangible personal property – Use a general assignment; list high-value items separately.

7. Update & audit annually. Moves, refinances, new accounts, or refinancing can knock assets out of the trust. Keep a running schedule and store copies in one secure, shareable location.

A fully funded trust avoids probate, simplifies disability management, and delivers inheritance exactly as you intend. Need a funding walkthrough? Shafae Law is here to assist you.

Why Californians Still Want to Avoid Probate in 2025

Even with the new AB 2016 rules that let heirs transfer a primary residence worth up to $750,000 without a full probate, the process still isn’t something most families should face if they can help it.

Here’s why:

• Time drag. A routine Bay-Area probate still averages 12–18 months, and congested county calendars can push that past two years.

• Cost creep. Statutory fees run 4-6 % of gross estate value—before appraisers’ fees, bond premiums, and extraordinary attorney work. On a $1 million house, probate can easily top $50 k.

• Loss of privacy. Court files are public. Anyone can see your inventory, debts, and who gets what.

• Frozen control. Until the judge appoints a personal representative, no one can sell, refinance, or even insure estate assets.

• Family friction. Public notice invites disgruntled relatives or creditors to lodge formal objections—slowing things further.

• Geography limits. The $750 k break applies only to a primary residence. Vacation homes, rentals, businesses, and non-real-estate assets over the small-estate limit still trigger a filing.

A properly funded revocable living trust sidesteps all of this: it’s private, faster, and usually cheaper than probate, no matter the estate’s size. Ready to keep your family out of court? Shafae Law can craft a plan that fits your life and your legacy.

Protecting Your Home and Your Legacy

If you’ve set up a living trust, you’ve already taken a big step toward safeguarding your assets. But did you know that simply transferring the title of your home into your trust might not be enough? To ensure full protection, you should also update your homeowner’s insurance policy to list the trust as an additional insured.

Why Add Your Trust to the Policy?
When you transfer real estate into a trust, the trust officially becomes the owner of the property. Insurance companies generally want the named property owner—your trust—to be listed on the policy. This helps ensure there are no coverage gaps if you ever need to file a claim. By taking this extra step, you help protect both yourself and any beneficiaries of the trust.

What Happens if You Don’t?
If your trust isn’t on the policy, the insurance company might question coverage if the house is damaged by fire, natural disaster, or other unexpected events. In a worst-case scenario, your insurer could even deny a claim because the “owner” (the trust) isn’t specifically named. Having the trust added to your policy ensures everyone is on the same page.

How to Update Your Policy
Start by contacting your insurance agent. Explain that your home is now owned by a trust and request the trust be listed as an additional insured. This step is usually straightforward, but it’s a good idea to confirm in writing to prevent any confusion later. Your insurance premium might remain the same or change slightly—your agent can give you the details.

Next Steps
If you need help adding your trust to your homeowner’s insurance, or if you’re thinking about establishing a trust and want to explore your options, our boutique estate planning firm is here to guide you. We’ll help you protect both your home and your legacy for the next generation.

Managing Your Digital Assets: A Key Part of Estate Planning

When it comes to estate planning, most people focus on the big-ticket items like homes, retirement accounts, and family heirlooms. But in today’s digital age, an often-overlooked aspect of your estate is your digital footprint.

What Are Digital Assets?

Digital assets are more than just email accounts and social media profiles. They encompass everything from your financial accounts and online subscriptions to your digital photos, cryptocurrency, and even your personal websites or blogs.

Here’s a breakdown of common digital assets:

• Social Media: Facebook, Instagram, X (Twitter), LinkedIn, and TikTok accounts.

• Financial Accounts: Online banking, investment platforms, cryptocurrency wallets, and Venmo/PayPal accounts.

• Subscriptions and Services: Streaming services (like Netflix and Spotify), cloud storage (such as Google Drive or Dropbox), and online shopping accounts (Amazon).

• Digital Content: Digital photos, music, videos, and e-books.

• Professional Accounts: Websites, blogs, or YouTube channels that may generate income or hold significant intellectual property.

Why You Should Include Digital Assets in Your Estate Plan

Without the proper estate planning, access to digital assets can become a legal and practical headache for your family after you pass away. Many tech companies, to comply with Federal privacy laws, have strict privacy policies, which could prevent your loved ones from accessing your accounts absent a court order. For example, your family may not be able to retrieve valuable data stored in a cloud account, or close out financial accounts that aren’t linked to physical documentation.

In the Bay Area, where tech plays an essential role in both professional and personal lives, this can be especially important for young adults working in industries that rely on digital platforms.

Steps to Manage Your Digital Assets

Here are some essential steps to incorporate digital assets into your estate plan:

1. Create a Digital Inventory: Start by making a list of all your digital accounts, from social media profiles to financial and business accounts. Be sure to include login credentials, passwords, and security question answers. This list should be stored in a secure location that your trusted decision maker can access, like a password manager or secure physical document.

2. Set Your Preferences: For social media accounts, check if the platforms offer legacy options. For example, both Facebook and Apple allow you to assign a legacy contact to manage your account after your death. Be clear about whether you’d like accounts memorialized or deleted.

3. Include Digital Assets in Your Will and Trust: Make sure your estate plan outlines specific instructions for digital assets. You can specify how your digital financial assets should be distributed and who should have access to your personal accounts.

   In California, you can appoint someone to handle your digital assets as part of your estate plan. This person will ensure your wishes are followed regarding the management or deletion of your accounts. They should be tech-savvy and familiar with handling digital platforms.

   Even without appointing someone specifically for this, be sure your estate planning documents contain appropriate provisions for any of your trustees to have the adequate legal authority to handle digital assets. For example, if your trust was established in the 1990s, it’s possible those provisions were not a consideration.

4. Keep Your Plan Updated: As technology evolves, so does your digital footprint. Update your digital inventory and estate plan regularly to reflect any new accounts or assets.

In a tech-centric region like the San Francisco Bay Area, neglecting your digital assets in your estate plan could leave your family with unnecessary complications. By taking the time to organize and plan for the distribution and management of your digital assets, you’re ensuring that your legacy, both physical and digital, is protected.

If you’re ready to secure your digital estate, contact our firm to discuss how we can help integrate your digital assets into your comprehensive estate plan.

What Happens if You Don’t Properly Fund Your Revocable Trust

Creating a revocable living trust is a key component of many estate plans. It offers benefits such as avoiding probate, maintaining privacy, and allowing for smooth management of assets in case of incapacity or death. However, simply setting up a trust isn’t enough. If you do not properly fund your trust—meaning, if you don’t transfer ownership of your assets into the trust—the trust cannot effectively accomplish its intended purposes.

1. What Does It Mean to "Fund" a Revocable Trust?

Funding a revocable trust involves transferring ownership of your assets from your name into the name of the trust. This is essential because while the trust document itself outlines how assets should be managed or distributed, it can only govern assets that are legally owned by the trust. If you do not transfer ownership of your assets into the trust, those assets may not be subject to the trust’s terms.

To fund your trust, you need to:

• Retitle assets, such as real estate, bank accounts, and investment accounts, in the name of the trust.

• Designate the trust as the beneficiary of life insurance policies (in certain situations), or other accounts, if appropriate.

• Transfer tangible personal property (such as vehicles, jewelry, and valuable collectibles) into the trust, often through a general assignment document.

2. The Consequences of Not Funding Your Trust

If you fail to properly fund your trust, the benefits of having a revocable living trust are significantly reduced. Here are the major consequences of not funding your trust:

a. Your Estate May Still Go Through Probate One of the primary reasons people create revocable living trusts is to avoid probate—the court-supervised process of distributing assets upon death. Assets that are properly funded into a trust can be distributed without going through probate. However, if you don’t transfer your assets into the trust, those assets will likely still have to go through probate. For example, if you own a home but fail to transfer it into your trust, the home may need to go through probate, subjecting your beneficiaries to delays, costs, and public scrutiny.

b. Loss of Privacy Assets distributed through probate become part of the public record, meaning that anyone can view the details of your estate. A funded trust keeps this information private, shielding your assets and beneficiaries from public disclosure. Without proper funding, the probate process makes the details of your estate a matter of public record.

c. Inability to Manage Assets During Incapacity A key benefit of a revocable trust is the ability for a successor trustee to step in and manage your assets if you become incapacitated. If your assets aren’t properly transferred to the trust, the successor trustee may have no authority over them. This could force your family to go through a court-appointed conservatorship to manage your assets, which is costly, time-consuming, and often emotionally difficult.

d. Increased Costs for Your Heirs If your assets must go through probate because they were not properly transferred to your trust, your heirs may face additional costs, including court fees, attorney fees, and administrative expenses. These costs can quickly add up, reducing the overall value of your estate that will eventually go to your beneficiaries.

e. Potential for Conflict Among Heirs A properly funded trust helps streamline the process of distributing assets according to your wishes. If your assets aren’t in the trust, it can create confusion and lead to conflicts among heirs. For example, if some assets are in the trust and others aren’t, it can lead to disputes about what should be included in the distribution or how assets should be divided. This is especially true in blended families or situations where heirs may have conflicting interests.

3. What Assets Should Be Funded Into Your Trust?

Almost any asset you own can be transferred into a revocable living trust. Key examples include:

• Real estate: Transfer your home and any investment properties into the trust to avoid probate and simplify distribution.

• Bank accounts: Checking, savings, and money market accounts can be retitled in the name of your trust.

• Investment accounts: Stocks, bonds, mutual funds, and brokerage accounts can be transferred into the trust. However, retirement accounts such as IRAs and 401(k)s generally should not be retitled in the name of the trust, but you may choose to name the trust as a beneficiary.

• Life insurance policies: You can designate your trust as the beneficiary of life insurance policies to ensure that the proceeds are distributed according to your wishes.

• Tangible personal property: Items such as cars, artwork, jewelry, and other valuables should be transferred into the trust through a general assignment document or by retitling, if applicable.

Some assets, like retirement accounts or annuities, may have specific tax implications if transferred directly into the trust. It is important to work with an estate planning attorney to determine the best strategy for these types of assets.

4. How to Ensure Your Trust is Properly Funded

Properly funding your trust is crucial to making it work as intended. Here are steps you can take to ensure your trust is fully funded:

• Inventory Your Assets: Begin by making a comprehensive list of all your assets. This will help you identify which assets need to be transferred into the trust.

• Retitle Assets: Work with your attorney, bank, or financial institution to ensure that assets are correctly retitled in the name of your trust.

• Update Beneficiary Designations: Review and update the beneficiary designations on your life insurance policies, retirement accounts, and other accounts.

• Regularly Review Your Trust: Over time, you may acquire new assets or sell existing ones. It’s important to regularly review your trust to ensure that any new assets are properly transferred into the trust and that your estate plan remains up-to-date.

5. What Happens if You Miss an Asset?

If you fail to transfer certain assets into your trust during your lifetime, a "pour-over will" can serve as a backup. A pour-over will directs that any assets not already in the trust at the time of your death be transferred (or "poured over") into the trust. However, assets passing through a pour-over will must still go through probate, so it is best to fully fund your trust during your lifetime to avoid probate entirely.

A revocable living trust can provide significant benefits, from avoiding probate to protecting your privacy. But those benefits are only realized if you properly fund the trust. Failing to transfer assets into your trust can result in your estate going through probate, increased costs for your heirs, and potential conflict among beneficiaries. To ensure your trust works as intended, it’s essential to fund it correctly and review it regularly as part of your overall estate plan.

If you have questions about funding your revocable living trust or need assistance in ensuring your estate plan is fully in place, consult with an experienced estate planning attorney. Taking the time now to properly fund your trust can save your family time, money, and stress in the future.

Living Trusts Provide Efficiency, Privacy, and Control

A Living Trust offers a dynamic alternative to the conventional Will. Let's explore the unique features that make Living Trusts a more desirable choice for those seeking efficiency, privacy, and enhanced control over their legacy.

1. Bypassing the Probate Quagmire:

Picture a streamlined process where your assets seamlessly transfer to your heirs without the delays, costs, and public scrutiny of probate. A Living Trust makes this vision a reality, circumventing the probate quagmire and ensuring a swift and private distribution of your estate.

2. Unparalleled Privacy:

In a world where discretion is a prized virtue, a Living Trust shines as the epitome of privacy. Unlike Wills, which become public records, a Living Trust shields the details of your assets and beneficiaries from prying eyes, preserving the confidentiality of your financial affairs.

3. Immediate Incapacity Planning:

Life is unpredictable, and planning for potential incapacity is a mark of foresight. A Living Trust empowers you with immediate and flexible control over your assets if you become incapacitated, sidestepping the need for court intervention and conservatorship.

4. Reduced Costs in the Long Run:

While the upfront costs of establishing a Living Trust may seem higher than a simple will, envision it as an investment that pays dividends in the long run. The potential savings from avoiding probate expenses make a Living Trust a strategic and cost-effective choice. By example, the attorneys fees alone for a probate estate valued at $1 million (half of a house in this county) amounts to $23,000!

5. Effortless Asset Management:

As the architect of your Living Trust, you retain control during your lifetime. Managing and modifying the trust is a seamless process, providing a level of flexibility and control over your assets that surpasses the constraints of a Will.

Imagine the peace of mind knowing that your loved ones will inherit your assets swiftly and privately, without the intricacies of probate. A Living Trust transcends the conventional, offering a dynamic, proactive, and forward-thinking approach to estate planning.

Consult with an experienced estate planning attorney today toward a legacy of efficiency, privacy, and enduring impact.

Estate Planning Basics

Welcome to the world of estate planning! Whether you're just starting out or realizing it's time to get your affairs in order, understanding the basics is the first step toward securing your legacy. In this beginner's guide, we'll break down the fundamental concepts of estate planning to help you navigate this essential process with confidence.

Understanding the Basics: Estate planning involves selecting decision makers to handle your affairs when you’re unable and creating a roadmap for the distribution of your assets and the fulfillment of your wishes after you're gone. The key components include:

1. Living Trust:

   A living trust is a tool that allows you to manage assets during your lifetime, even if you become disabled, ensuring a smoother distribution process after your passing while avoiding probate.

2. Last Will and Testament:

   Your will is a legal document used as a “safety net” to catch assets you forgot to title in the name of your trust.

3. Power of Attorney:

   This legal document designates someone to make financial decisions on your behalf if you become unable to do so. It's a crucial aspect of planning for unforeseen circumstances.

4. Healthcare Directive (Living Will):

   Specify your healthcare preferences in advance with a living will, ensuring that your medical treatment aligns with your wishes, even if you can't communicate them yourself.

The Importance of Beneficiary Designations: In addition to your estate planning documents, above, many assets, such as life insurance policies and retirement accounts, allow you to designate beneficiaries directly. Keeping these designations up-to-date is crucial to ensuring your assets go to the intended recipients.

Considerations for Parents: If you have minor children, your estate plan should include provisions for their care. This involves appointing a guardian in your will and potentially setting up a trust to manage their inheritance until they reach a specified age.

Starting Your Estate Planning Journey: Now that you have a basic understanding, the next step is to consult with an experienced estate planning attorney. They can help tailor a plan to your unique situation, they can provide expert advice as it relates to taxes, and they can ensure that your wishes are legally sound and well-protected.

Estate planning might seem daunting, but with the right guidance, it becomes a proactive and empowering process. By taking the time to understand the basics and seeking professional assistance, you're not only securing your legacy but also providing peace of mind for yourself and your loved ones.

Are Trust Deposits FDIC Insured?

The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the U.S. government that provides insurance to depositors in case a bank or savings institution fails. The FDIC was established in 1933, after the Great Depression, to maintain stability and public confidence in the banking system.

FDIC insurance provides depositors with protection up to a certain amount per depositor, per insured bank. The current standard insurance limit is $250,000 per depositor, per insured bank. This means that if you have $250,000 or less in deposits in a single insured bank, your deposits are fully insured. If you have more than $250,000 in deposits in a single bank, the excess amount may not be covered by FDIC insurance.

When it comes to revocable trusts (aka living trusts), FDIC insurance covers deposits in accounts owned by the trust, as long as certain requirements are met. A revocable trust is a type of trust that can be changed or revoked by the owner (also known as the trustor, grantor or settlor) at any time. To qualify for FDIC insurance coverage, the revocable trust must meet the following requirements:

• The trust must be a valid trust under state law.

• The trust must be revocable.

• The beneficiaries of the trust must be individuals or charities.

• The account title must reflect that the account is held in the name of the revocable trust (e.g., "John Doe, trustee of the Jane Smith Revocable Trust").

If these requirements are met, the FDIC will insure the deposits in the trust up to the standard insurance limit of $250,000 per depositor, per insured bank. The insurance coverage on deposits is unchanged whether you hold it in trust or not. However, It's important to note that the $250,000 limit applies to each unique beneficiary of the trust, which is different than deposits in your individual name. So, if the trust has multiple beneficiaries, each beneficiary can be insured up to $250,000, up to a maximum of 5, for a total of up to $1,250,000 in coverage for a five-beneficiary trust.

Overall, FDIC insurance provides depositors with peace of mind that their deposits are protected in case their bank or savings institution fails. By naming your living trust as the account holder, you can extend FDIC protection to the beneficiaries of your trust.

Full Video of the January Living Trust Seminar

The seminar below was presented live on January 21, 2023, by Matt Shafae, at the reSolve Group offices in Palo Alto. We covered basic estate planning, how to review an existing estate plan, how to care for minor children, and a basic survey of the taxes involved in an estate plan.

The screen may be hard to view on the video. Click here for a copy of the slides to follow along.

Distribution Options for Your Beneficiaries

One of the main reasons cited for creating an estate plan is to care for loved ones. An estate plan allows you to expressly name beneficiaries to your estate, the methods by which the gifts will be distributed, how the distribution is administered, whether there are any conditions on the gifts, and so forth. Most people want to provide for family members, relatives, or close friends. This post will survey some common options for how you can make the gift.

Outright and free of trust

The most straightforward way to provide for someone is outright and free of trust. Upon your death (or your spouse’s death, or after the second of you to die, etc.), the gift is distributed to the intended beneficiary, and assuming they are above the age of 18, the gift is now owned by them. That’s it. For example, if you leave $40,000 to Person X, then upon your death, Person X receives $40,000 to do whatever they want. It works similarly for percentage or fractional gifts, like 25% of your estate, or 1/3 of your estate. The value is calculated, and when the distribution stage takes place, the beneficiary receives that gift as their own. The limitation to this method of giving is that you relinquish all control over the gift. If the beneficiary was going through some life challenges, like a divorce or a bankruptcy, your gift may end up never reaching the beneficiary at all. Or if they face significant debt, your life’s work may have ended up going straight into the hands of the beneficiary’s creditors.

Sometimes a little nuance is needed. Maybe dropping a large sum of money on someone isn’t the best idea under the circumstances.

In Trust

Leaving a gift in trust for someone can provide a lot of flexibility and oversight. This option creates a trust (a separate trust other than your living trust) naming your beneficiary as the beneficiary of this newly created trust. You also name the Trustee managing the assets held in trust. 

These trusts are created after your death. They are sometimes called “beneficiary trusts”,  “inheritance trusts”, “FBO trusts” (“for the benefit of”), “GST trusts” (generation skipping transfer), “dynasty trusts”, or “asset protection trusts”. For the most part, all of those terms can be interchangeable. They all describe an irrevocable trust set up for the benefit of someone other than yourself. “Irrevocable trust” means that the beneficiary is not able to change the terms of the trust (unlike your living trust, which is amendable during your life). The two main reasons someone may want to create irrevocable inheritance trusts is to 1) retain some control over the gift; and 2) protect the gift from the beneficiary’s creditors (think: the beneficiary’s ex-spouse in a divorce, a plaintiff in a judgment against the beneficiary, or from a bankruptcy). By keeping an inheritance in trust, the assets in trust will not “count” toward the assets of the individual beneficiary, and remain somewhat shielded from those creditors.

If you want to provide for a minor (a child under the age of 18), then a beneficiary trust is the way to go. You can name someone as Trustee of the trust to manage the gift for the benefit of the minor child, and that person does not need to be the child’s parent or guardian. You can specify when, if at all, the minor beneficiary is able to take over as Trustee of their inheritance.

Similarly, you can provide for someone who is financially immature or has addiction issues. A trust allows you to provide for someone even when they are not fully capable of providing for themselves.

Supplemental Needs Trust

Sometimes a beneficiary is receiving government assistance that is means-tested. For example, many MediCal and SSI/SSA benefits have eligibility requirements pertaining to a recipient’s income or net worth. If your beneficiary receives a lump sum inheritance, it could disrupt those benefits. The beneficiary would then need to use their inheritance for their care in place of the government benefits, and they would likely end up destitute, back on the government benefits. By leaving the inheritance in a supplemental needs trust, the trust can provide for the beneficiary without disrupting their means-tested assistance.

With trusts, you can place conditions on your gifts. For example, a common condition for parents is that their children be educated before receiving their inheritance. However, what may be clear in your head, may be ambiguous to someone carrying out your instructions. What does educated mean? Does the child need to earn a degree? Two year degree or four year degree? Does the institution need to be accredited? Does the institution need to be located in the United States? Can it be an online institution? You get the idea. You can place any condition on your gift that you like. However, an estate plan is only as effective as it is executable. There needs to be as little ambiguity in the trust terms as possible.

When you work with an estate planning professional, they will field all of the available options, discuss your goals, and assist you with matching your options and your goals. And after all that, an estate planning professional will make sure the documents are drafted correctly, with as little ambiguity as possible.

How Do You Select The Decision Makers in Your Estate Plan?

Determining what happens to your stuff after you die is only one aspect of an estate plan. And it’s not even the most critical part. The most critical component of any estate plan is the people involved. Who will act as your financial agent in a time of crisis? Who will make medical decisions for you? If you have minor children, who would you select to be their legal guardian? And then there’s your stuff. Where do your assets and possessions go after you die? And if you’re leaving any of it to young, immature, or unprepared individuals, who will you select to manage that inheritance for them?

Financial agents. “Financial agent” is a short hand to mean the successor trustee of your living trust, the executor of your will, and the attorney-in-fact under your power of attorney. The reason we have one umbrella term for these roles is because they all serve in making financial decisions for you when you are unable, and the three roles overlap so much that we recommend using a consistent list for all three.

So how do you choose your financial agents? It comes down to judgment. This is a decision making role. Choose someone who shares similar priorities, values, and decision making principles with you. Don’t worry about knowledge or expertise. With good judgment, one can always seek out the appropriate expert advice.

Guardians. Guardians are nominated to raise minor children–children under the age of 18 years. A good guardian is someone who shares your values. Are you religious? Do you like early bedtimes for your children? Is diet and nutrition important for your child? A good candidate for a guardian nomination would hold dear the same values that you do. Additionally, if your child is school-aged, it will be critical that the nominated guardian live local enough as to not uproot your now-orphaned child. Orphaned children have already gone through the trauma of losing their parents. They do not need the additional unease of living in unfamiliar surroundings, away from their friends and community.

Healthcare agents. The same goes for healthcare agents as was described previously about financial agents. You do not need to befriend a bunch of medical professionals to use as healthcare agents. You want someone who shares your judgment and values. They can speak to the medical professionals to get expert opinions and advice.

You can select the same person or persons for each or all of the roles above. But that is not required. It really comes down to your life situation and peace of mind. Would you want the person in charge of your child’s inheritance to also be the one who puts them to bed each night? Do you know someone who can make medical decisions for you and also handle your financial affairs? An experienced estate planning professional can help walk you through your life situation, priorities, and selections. And they can add their own experiences as additional guidance.

Estate Planning is Not for You

It’s for them—your loved ones, for those you care about.

When you are either deceased or incapacitated you obviously won’t be available to participate in the execution of your estate plan. Your estate plan is all that remains to assist in caring or providing for your loved ones or causes that you care about.

To that end, the most important aspect of an estate plan is the personal information and guidance that you provide to those who step in to execute your plan. Without that information and guidance, it could be a wild goose chase trying to piece together all the loose ends surrounding your life. The more loose ends, the more time and effort will be required to carry out your wishes.

Do your trusted agents have access to your passwords and credentials?

Our lives no longer consist solely of tangible assets. Sure, for most of us our homes are our most valuable assets. But more and more, our lives are becoming more digital and intangible–online financial accounts, cloud storage, digital photographs, social media accounts, cryptocurrency, etc. To access these digital assets, your trusted agents will need your passwords. Without them, federal privacy laws require a court order to access them. Your trusted agents require adequate time and evidence to obtain a court order. If it takes your agents too long to obtain the order, or if they lack the requisite evidence to persuade a judge to issue an order, the digital accounts may be terminated, blocked, and in some cases deleted. Even providing the PIN to your mobile device could save your agents time, expense, and a lot of expended energy.

Do your trusted agents have clear guidance on your wishes?

An estate plan allows you to document your wishes–how to handle your financial affairs, how to provide for your loved ones. But it’s only as good and thorough as the information you provide. Be sure to keep current documentation of your assets, your debts, and any specific instructions. A great place to keep this information is in your estate planning binder containing your legal documents.

Is your list of trusted agents current?

Our lives are ever changing. And so are the relationships we have with our loved ones. It’s critical that you revisit your estate planning documents to confirm that you have the most current list of trusted agents to step in when a crisis arises.

A current, detailed estate plan will allow your loved ones to step in and execute your wishes in that time of crisis. Chances are that you will be unavailable to provide any guidance or assistance when that time comes. Be sure the appropriate information is readily available for your trusted agents to minimize delays and confusion.

Funding Your Trust

Once you have created a trust, it’s important that you “fund” it. Funding the trust essentially means that you transfer ownership of your assets into the name of the trust. Instead of your name being on the account, it’s your name as trustee of the trust on the account. 

For example: the checking account of Joan Johnson becomes the checking account of Joan Johnson, trustee of the Johnson Living Trust, dated March 3, 2020. 

It is critical to fund your trust to avoid the time, expense, and public nature of probate. And to have a plan in place if an unexpected crisis arises. Having a trust unto itself doesn’t help you achieve that end; you have to get your assets into the name of the trust for the trust to be effective. Ideally, everything you own, besides your retirement accounts, is typically transferred into a living trust. If you don’t put your assets (like your house) into your trust, then your estate may still go through probate!

When we set up a trust for you, we provide you with complete funding instruction to address each type of asset and how to move it into the name of the trust. And if any questions arise, we welcome our clients to call us with any questions.

What is... a Trustee?

This is part of an on-going series of blog posts titled the "What Is..." series, where we attempt to explain, in simple terms, common estate planning terms and concepts. To read other posts in this series, click here.

A trustee is a person (or sometimes an institution, like a bank) who has the power to act on behalf of a trust. If you establish a living trust (as a trustor), then most of the time you will be the initial trustee. You act on behalf of the trust. 

As the trustor (also known as the person who established the trust), you also name successor trustees -- people who will act on behalf of the trust after you, either because you no longer want to, or you are not able to do so, or because you have passed away. 

As the trustee of your own living trust, nothing changes on a day-to-day basis. You even file taxes the same way. The living trust is more like a legal alias for you.

But what do your successor trustees do for your trust? Or, what do YOU do if you’re named as a successor trustee for someone else? 

In sum: the trustee’s job is to carry out the directions set forth in the trust document. 

There are some initial steps that a successor trustee must take after the death of the trustor. Please note that this is not an exhaustive list -- and this is exactly what we help with as attorneys. This is for informational purposes, to give you some idea of the responsibilities involved. 

First, the trustee must accept the position so that they can act on behalf of the trust. Then:

1. In general, the trustee must notify the beneficiaries and heirs that they are beneficiaries of the trust.

2. Certain government offices must be notified as well, depending on the trustor’s assets and benefits. For example, if the trustor owned real estate, then the assessor’s office must be notified. If the trustor was receiving social security benefits or Medi-Cal benefits, those agencies would need to be notified.

3. The trustee must then inventory and determine the value of assets as of the date of the trustor’s death (e.g. appraisals of property, etc.). This is required to determine the value of the assets for tax purposes, and to provide an accounting of the trust property to the beneficiaries.

4. In addition to handling an estate tax return, the trustee may be required to file the trustor’s final income tax return for the year that they died. The trustee may also have to file an income tax return if the trust estate earns money before it is all distributed to the beneficiaries. 

The trustee must then follow the instructions in the trust, within the boundaries of the law. This may include paying funeral expenses, outstanding credit card debts, etc. Some trusts have certain time periods during which the beneficiaries should receive a distribution, or they may have conditions that must be met before a beneficiary receives a distribution. Some trusts require waiting a certain period of time before the beneficiary receives a distribution, or the trust may contain outright restrictions on distribution. The trustee is tasked with interpreting and executing all of these instructions.

The trustee has a fiduciary duty to the trust. This means that just because they have the right to do something doesn’t mean that they should do it. For example, they may have the ability to sell trust assets like a home, but if they sell it for below the market value, or in a down market, they could have breached their fiduciary duty.

It’s important to know what the trust says to be able to execute its provisions and comply with the legal requirements. 

If you are a successor trustee for a loved one, please contact us for a free initial consultation. If you have a trust, and would like to ensure that it says what you want it to say for your trustee, please also contact us for an initial consultation.

Trustees and Fees

If I ask someone to be a trustee for me, I want to make sure that they get paid. Do I need to give them a specific amount in the trust? 

Most trusts (like most of the ones we draft) include a provision that permits the trustee to receive “reasonable” compensation. In most cases, this is determined based on the amount of time and complexity of an estate. And, in most cases, there is no dispute about the trustee receiving reasonable compensation. 

However, if you anticipate that someone might challenge the compensation, then you absolutely can specify how a trustee will be compensated. For example, you might select a percentage of your assets as payment or you might select an hourly rate that increases with inflation. 

(Note: If you have a professional fiduciary serve as a successor trustee, then they will provide their own rate of pay.)

How does someone determine what is a reasonable fee?  

The trustee must keep track of all the time that he or she spends in the role of trustee. The trustee should keep a log of the date, amount of time*, and each task that was performed. More complicated tasks are entitled to increased compensation. Keeping clear records is important. 

At the end of the year, the trustee can obtain the fee. By keeping clear records, the beneficiaries understand why the trustee is requesting the amounts and what they did during that time. Additionally, if administering the trust takes multiple years, the beneficiaries are less likely to raise issues or questions if the fees are spread over several years. 

*How does a trustee track time? 

We recommend tracking time by 15 minute increments or less. In other words, if something takes you 10 minutes, then it’s okay to put in .25 as your time; it is not okay to round up to an hour. 

Is the trustee’s fee considered a gift? 

No. The trustee’s fee is taxable income. It is earned. However, if the trustee spends money that is reimbursed (e.g. mileage for trips on behalf of the trust or tolls) than this is not income and therefore not subject to income tax. 

How does the trustee pay for things? 

The trust pays for trust expenses. Depending on the terms of the trust and the point at which a trustee begins managing the trust, the trustee should create a trust administration bank account, opened using a taxpayer ID that is specifically for the trust. 

What if my trustee doesn’t want to accept a fee? 

Even if the trustee chooses to waive a fee, he or she is still entitled to receive one and should take the approach we recommend above. A trustee may begin by saying that they don’t want a fee, but if the time and complexity becomes too much, they may decide otherwise. Having clear records is the key. 

Why wouldn’t a trustee accept a fee payment? 

Trustee fees are income, and therefore subject to income tax. If the trustee is also a beneficiary of the trust, they may decide to waive the fee as they would receive funds as a trust distribution anyway. 

If I become a trustee, what’s the first thing I should do? 

We strongly recommend speaking to an attorney (like us) as early as possible. We know that grieving can take a toll, but we also are here to help guide you through the trust administration process.

What is... a conservatorship?

This is part of an on-going series of blog posts titled the "What Is..." series, where we attempt to explain, in simple terms, common estate planning terms and concepts. To read other posts in this series, click here.    

When we started contemplating this blog post, the world was a vastly different place. Now, in the time of COVID-19, we have unfortunately seen this issue come up many times. This is how it happens: George is 42 years old. He had a high fever and difficulty breathing, and was rushed to the hospital. He was intubated and suddenly isn’t conscious anymore. He didn’t create an estate plan in advance, and did not execute any powers of attorney. 

Who can pay his bills? Who can make medical decisions for him? 

In the absence of powers of attorney, a loved one would need to petition the probate court to become George’s conservator. A conservatorship proceeding protects a person who cannot care for himself or his property. The person making the request is asking the court to appoint him or her as the conservator to make those decisions on behalf of George. The conservator may only make decisions on George’s behalf that are in George’s best interest. 

What does the conservator actually do? 

There are three types of conservatorships: 

1) of the person - in which the conservator manages one’s personal needs (physical, medical, food, clothing, shelter)

2) of the estate - in which the conservator manages one’s financial affairs 

3) of both the person and the estate - in which the conservator does both #1 and #2.

Can conservatorships end? 

Yes. If George gets better, and can manage his own finances and healthcare decisions, the conservatorship is no longer necessary and it terminates. If George passes away, then the obligations of the conservator terminate as well. 

Why do you want to avoid a conservatorship? 

1. It is a court proceeding. This means it takes place in a public forum and it can take a long time to complete. 

2. It is time that your loved one is away from you. You and your loved one want to be together, not in court. 

3. The person who is appointed the conservator may not be the person you want to be making those decisions. 

4. It can be expensive. A court maintains oversight over a conservatorship to ensure that the person is being cared for and that the conservator is meeting fiduciary obligations. Court oversight means paying an attorney an hourly rate, and paying an accountant every year to prepare “accountings” to demonstrate to the court that the conservator is appropriately using George’s funds on George.

Typically, conservatorships occur when someone loses capacity suddenly and is unable to make decisions for him or herself unexpectedly. (See our previous post on incapacity). For example, George was 42 years old and didn’t anticipate being hospitalized. He was generally healthy, and hadn’t yet executed powers of attorney. 

What can I do to avoid a conservatorship? 

It’s actually fairly straightforward. We strongly recommend creating financial and healthcare powers of attorney so that your loved ones can avoid a court proceeding and you can name who YOU want to make these decisions for you. And if it’s appropriate, a living trust can also help in times of incapacity. Contact us today for a free consultation.