Estate Planning

What Is Estate Planning?
Why Do You Need An Estate Plan?
When Should You Have A Plan?
What Is In The Plan?
Additional Documents
What Are The Most Important Issues For An Estate Plan?
Do’s and Don’t’s Of An Estate Plan
Take Action Today


What is estate planning?

Estate planning involves the transfer of wealth from one generation to the next or from an individual to another individual.  It is a formal legal process that often involves the court because such wealth transfer entails the changing of the ownership of assets, such as titles, from one owner to a new owner.  Such wealth transfer is also subject to tax law because estate tax is essentially a transfer tax imposed on the event of the transfer, much like a sales tax being imposed at the point of a sales transaction.

Why do you need an estate plan?

  • If you do not have an estate plan in place at death, your properties will be distributed by the court through the probate process according to state law, which is known as the law of intestacy.  Your properties may go to people against your wishes.
  • Probate is a long and costly process.  For example, in California, if you have a $1 million estate at death, probate law allows your attorney and your executor to claim $23,000 each in fees.  If you have a house worth $2 million and another $1 million worth of property, the fees alone will be $66,000.  Then there are court costs, and many other costs involved in the process.  Some probates can take years to close.
  • If you only have a will, your estate will definitely end up in probate.  However, if you have a will and a living trust, your estate can pass to your beneficiaries through the trust without going through probate, which can save a lot in cost and time.
  • Note that probate costs have nothing to do with estate tax.  Many people think that they do not need an estate plan because they have a small estate or very little in property.  But the reality is that even a small amount of money in a bank account may need court authorization before the bank will allow access to the account.
  • If you own real properties in many states, dying without a trust to hold your properties will result in your doing probate in all the states where your properties are located.  It is known as ancillary probate.
  • Given that the federal estate tax now has a high exemption amount, which is $11.4 million per person in 2019, indexed to inflation, the tax will only apply to a small number of Americans.  However, 18 states currently have either an estate tax or an inheritance tax that range from 12% to 20% with much lower exemption amount.  An estate plan in these states can serve to minimize such taxes and to preserve the wealth for the beneficiaries.
  • In short, an estate plan serves to carry out your wishes about your properties with the least cost and in the shortest time possible.

When should you have a plan?

  • Given the definition of estate planning above, there is a misconception that estate planning concerns only death, it is in effect in the broadest sense the management of one’s properties while one is alive as well as in death.  This is why an estate plan includes a variety of documents which deal with the disposition of one’s properties both before and after death.
  • Did you have to fill out an ownership and beneficiary form for your bank accounts, 401(k) accounts, IRA accounts, brokerage accounts, life insurance policies, etc.?  Such everyday form is part of your estate plan because it serves to identify the ownership and the beneficiary of these particular assets.
  • The goal of an estate plan is often to protect one’s family financially, particularly in the beginning of a young family with small children.  Accordingly, one should have a plan as soon as one starts a family.  Instead of preserving wealth, which may be limited for a young family, the focus at this stage of life is to have enough resources for the family to survive financially in the event of an untimely death.  Thus an early estate plan must include life insurance that would be sufficient to cover living expenses, to eliminate debt,  to replace income loss, and to provide for educational expenses for the children.
  • For those who own businesses, their estate plan would need to include business succession planning, so that the business would remain viable and profitable for a variety of financial purposes.
  • There are certain estate plan documents that should be put in place regardless of age.  The power of attorney for healthcare is a document that should be executed when one reaches legal age because it specifies who can make health care decisions for oneself.  The power of attorney for finance is a document that should be in place in the event one becomes incapacitated and is unable to handle one’s financial affairs.
  • Instead of waiting to do an estate plan at the later stage of one’s life, it is clear that one should consider doing an estate plan as soon as practicable in order to be proactive.  Note that an estate plan is not cast in stone.  It is subject to change according to the changes in one’s life. 

What is in the plan?

The Core Plan

In general, each plan has the following core documents.

  • A pour-over will.   It is the last will and testament of a decedent used in conjunction with the living trust.  The provisions in the will are identical to the provisions in the living trust.
  • A living trust.  It is used in most plans to avoid probate.  Probate is an open court, public proceeding, whereas a trust is treated as a private matter not subject to public disclosure.
  • Certification of trust. It contains the summary of the trust used by the trustee to carry out the instructions in the trust.
  • Assignment of property to living trust. It is a document to ensure that all properties of a trustor/decedent are transferred to the trust for disposition according to the instructions in the living trust.
  • Transmutation of property agreement for couples.  It is a document that specifies the nature of properties shared between a couple, which include community and separate properties.
  • Durable power of attorney for finance.  This document appoints an agent to take over all financial matters in the event of one’s incapacity.
  • Durable power of attorney for health care, which is also known as advance healthcare directive.  This document authorizes an agent to make medical decisions for an incapacitated person, even in life and death situations.
  • HIPPA release and authorization form.  This is a form that authorizes access of medical professionals to your health information needed for medical contingencies.
  • Transfer deed for real estate holding.  This is a deed that transfers a real estate title to new owners.  In the context of estate planning, the new deed transfers the ownership of the real estate from the owners as individuals to the same owners as trustees of the living trust.
  • Guardianship designation for small children, if applicable.
  • A complete inventory of all assets and liabilities.
  • A letter of intent for your agents and beneficiaries that explains and clarifies what you would like to accomplish with your estate plan.

Additional documents.

For a more complex estate plan, the following documents may be included:

  • A special need trust for family members who are disabled, and who may need supplemental support.
  • An irrevocable life insurance trust (ILIT) to hold life insurance outside of a person’s estate to reduce the size of the estate or to provide for liquidity to pay for estate tax and other purposes.
  • Charitable trusts and gifts.
  • Various grantor’s trusts to reduce the size of an estate and to reduce estate tax liability.
  • Asset protection trusts to protect assets from potential creditors.
  • Various business entities set up to protect against creditors and to preserve wealth, which include business trusts, limited liability companies, and family limited partnerships.  These entities are part of the estate plan because one of the primary objectives of an estate plan is to preserve wealth, including operational businesses, for transfer to the next generations.

What are the most important issues for an estate plan?

  1. You need to have a complete inventory of your assets and liabilities.
  2. You need to identify who can serve as your trustees, executors, health care and financial agents as they will be responsible for administering your estate.  These people have to be people you can trust to act on your behalf. 
  3. For small children, you need to identify who can serve as their guardians until they reach majority.
  4. You need to have a comprehensive approach to the plan and to have contingency provisions for the management of your estate.
  5. You need to fund your estate plan by transferring all relevant accounts to the trustee of your trust.
  6. For assets that do not need to pass through a trust, such as retirement accounts and life insurance, you need to clearly designate the beneficiaries of these assets and make sure that they are reviewed and updated periodically.

Do’s and Don’t’s of an estate plan


  1. Choose fiduciaries wisely as guardians, trustees, executors, agents of power of attorney. 
  2. Update, update, update.  No vintage estate plans.
  3. Fund the trust; otherwise will lead to probate.
  4. Designate beneficiaries clearly, both primary and contingent.  Itemize specific bequests.
  5. Plan for incapacity with Powers of Attorney for Healthcare and Finances.
  6. Organize assets.  Different assets may be treated differently.  List all assets and liabilities, especially assets located out of state.
  7. Charitable planning.   Charities may sue estate to enforce pledges.
  8. Communicate plan to family, and fiduciaries.   Write letter of final instructions.  
  9. Store and make copies of financial and personal documents.
  10. No surprises.
  11. Plan now.  Do a complete, not a piecemeal plan.
  12. Use an estate planning lawyer.  
  13. Write a letter to loved ones or a letter of instructions that outlines your last wishes.  For young families, state how you would like your children raised.


  1. Procrastinate.
  2. Fail to implement the plan by funding the trust, resulting in probate.
  3. Direct gifts to minors.   Should give to a minor’s trust or a guardian.
  4. Choose the wrong fiduciaries.
  5.  Fail to plan for contingencies to avoid probate.
  6. Forget about family pets.
  7. Inadequate life insurance for family, especially with young children.
  8. Fail to communicate and store estate documents properly.  The court will deem a missing will destroyed by the testator.
  9. Disorganized financial records. 
  10. Inconsistent provisions in different documents - a cause for probate.
  11. Do it yourself with short cuts. 
  12. Unreasonable and surprising terms, which may lead straight to court.
  13. Name estate as beneficiary in retirement accounts.
  14. Verbal promises.
  15. Forget about the plan after it’s been done.
  16. Testamentary trust in will.

Take action today.

As we do not know what may happen tomorrow, it is advisable to take care of your estate as soon as possible, please contact Plenaris Advisory® for a consultation of your estate planning needs.