Understanding Estate Planning Documents

There are frequently asked questions that people have about revocable living trusts, wills, supported decision making agreements (new), powers of attorney and advance health care directives. Basically it is what do these documents accomplish and how do they work?

California’s new Supported Decision Making (“SDM”) law allows adults with disabilities to authorize trusted persons (e.g., family and friends) to assist them in understanding, making, communicating, and implementing their own informed choices, and to have supporters present at important meetings. A disabled person’s capacity to engage in a wide range of activities is to be determined with such decision making supports in place. A SDM agreement can authorize supporters to assist a disabled person in estate planning and much more.

A decedent’s will nominates an executor to administer the decedent’s estate, including the distribution of specific gifts and other assets. A person can execute a simple handwritten will, a statutory will, or have a professional draft a will. Any will, other than a handwritten will, must be witnessed by two disinterested witnesses (i.e., who have no interest under the will). At death, a will only applies to assets that are not otherwise transferred under a trust, a designation of death beneficiary form or a joint tenancy title.

A trust controls and manages trust assets during a person’s life and at death. Assets held in a living trust avoid conservatorships (during the settlor’s disability) and probate (at the settlor’s death).

Assets transferred into a living trust must belong to the settlor(s) who established the trust. A married couple may together establish a joint (two settlor) trust to receive their community property assets. Each spouse may choose to transfer his or her own separate property assets into a joint trust or else keep their separate property assets in a separate property trust.

Trust assets are titled – for ownership and control — to the trustee(s). Trustee(s) are fiduciaries, i.e., the legal representative of the trust, who administer the provisions in the trust as written, unless unenforceable (i.e., contrary to law or to strong public policy). When a trust is silent on an issue the trustee follows the California Probate Code.

Successor trustees nominated in the trust take office when the last initial trustee(s) resigns, is incapacitated or dies. When and how the transfer occurs is stated in the trust. Some trusts also include a method to fill a trustee vacancy if no nominated successor trustees accepts.

Living trusts can be amended by the settlor(s) as stated in the trust instrument or in the Probate Code. The incapacity or the death of the settlor make the trust irrevocable. A joint trust, however, sometimes allows either settlor acting alone to amend the living trust, in some or all particulars.

Next, a Power of Attorney (“PoA”) allows a person (i.e., the principal) to authorize another person (i.e., the agent) to act as a fiduciary (representative) over some or all of the principal’s own legal, property and financial affairs; but not the assets held in a trust. A PoA can either be effective upon signing or upon incapacity of the principal. If used to transfer title to real property, a power of attorney must be recorded with the county recorder.

Lastly, Advanced Health Care Directive (“AHCD”), like a PoA, delegates authority to an Agent to act in a fiduciary capacity, but with respect to the principal’s health care only. An AHCD is needed when the principal is unable to make health care decisions, most notably at end of life.

The foregoing discussion is not legal advice. Consult an attorney for legal advice. Dennis A. Fordham, attorney, is a State Bar-Certified Specialist in estate planning, probate and trust law. His office is at 870 S. Main St., Lakeport, Calif. He can be reached at Dennis@DennisFordhamLaw.com and 707-263-3235.