| Wills
A will is a legal document, drafted and executed in accordance with state law,
which becomes irrevocable at your death. In your will, you can name:
Beneficiaries -
These are family members, friends, or charitable organizations
who will receive your assets as you direct. You may
provide for specific gifts of such items as jewelry
or a specific sum of money to named beneficiaries.
You should also provide for the distribution of the "residue" of
your estate -- that is, your remaining assets (which
do not need to be specified) which are not specifically
given to individuals or organizations in your will.
A Guardian for Minor Children - You may nominate a person who will have
the responsibility to care for a child of yours if you and your spouse die
before the child attains 18 years of age. You may also name a guardian -- who
may or may not be the same person -- to be responsible for management of assets
given to a minor child, until the child attains 18 years of age.
An Executor - This person or institution of your choice, named in your
will and appointed by the probate court, collects and manages your assets,
pays your debts and expenses and any taxes that might be due, and then, in
a manner approved by the court, distributes your assets to your beneficiaries
in accordance with the provisions of your will. Your executor plays a very
important role with significant responsibilities. It can be a time-consuming
job. You should choose your executor carefully. A will is a part of your "estate
plan." To provide you with more information, the State Bar has published a
I pamphlet entitled "Do I Need Estate Planning?" You may obtain a free copy
of the pamphlet by sending a stamped, self-addressed envelope with your request
to the address listed below.
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What Does a Will Cover
Generally speaking, your will affects only those assets which are in your name alone at your death. Some assets which are not affected by your will include:
Life
Insurance - The cash proceeds from an insurance
policy on your life are paid to whomever you have
designated as beneficiary of the policy in a form
filed with the insurance company -- no matter who
the beneficiaries under your will may be.
Retirement Plans - Assets held in retirement
plans, such as a 401 (k) or an IRA, are transferred
to whomever you have named as beneficiary in the
plan documents.
Assets Owned as Joint Tenants - Assets such
as real estate, automobiles, bank accounts and other
property held in joint tenancy will pass to the surviving
joint tenant upon your death, not in accordance with
any directions in your will.
"Transfer on Death" or "Pay on Death" - Some
bank accounts and security accounts may be held with
a beneficiary designation such as "transfer on death" ("TOD").
Other assets, such as U.S. savings bonds, may be
held in a form directing those assets to be "paid
on death" ("POD") to a named beneficiary. These assets
will pass pursuant to those directions, and not pursuant
to your will.
Living Trusts - Assets held in a revocable living trust at your death
are distributed pursuant to the provisions of that trust document. A living
trust allows for the management of your assets during your lifetime and the
transfer of those assets pursuant to the terms of the trust without a court-supervised
probate proceeding. The State Bar has published a pamphlet entitled "Do I
Need a Living Trust?" which provides more detailed information about living
trusts. You may obtain a free copy of the pamphlet by sending a stamped,
self-addressed envelope with your request to the address listed below.
Spouse's Half of Community Property - In California, any assets acquired
by you and your spouse from earnings during your marriage are community property.
You and your spouse own equal shares of those assets. Your will, therefore,
affects only your half of the community property, not your spouse's. Assets
that either spouse owned at the date of the marriage, together with gifts
and inheritances given to just one spouse during the marriage, are that spouse's
separate property. Your will affects all of your separate property held in
your name alone.
Even if your entire estate consists of property held in
joint tenancy, a life insurance policy and a retirement
plan, you should still consider making a will. If the other
joint tenant dies before you do, then the property held
in joint tenancy will be in your name alone and subject
to your will. If named beneficiaries die before you do,
the assets subject to a beneficiary designation may be
payable to your estate. You may unexpectedly be entitled
to a bonus, a prize, a refund, or may receive an unexpected
inheritance which would then be subject to your will as
well. If you have minor children, the nomination of a guardian
of their person and estate is a very important reason for
making a will.
What
Happens Without a Will
If you die without a will (that is, "intestate"), California law will determine
the beneficiaries of your estate. Contrary to popular myth, if you die without
a will, everything does not automatically go to the state. If you are married,
your spouse receives all of your community property. Your spouse will receive
part of your separate property, and the rest of your separate property will be
distributed to your children or grandchildren, parents, sisters, brothers, nieces,
nephews or other close relatives.
If you are not married, your assets will be distributed to your children or grandchildren,
if you have any -- or to your parents, sisters, brothers, nieces, nephews or
other close relatives. Friends or a favorite charity will receive nothing if
you have no relatives and die without a will. In that case, the State of California
is the beneficiary of your estate.
Types of Wills
A will can be written in one of three ways:
A Handwritten
or Holographic Will - This will must be completely in your own handwriting.
You must date and sign the will. Your handwriting has to be legible, and
the will must clearly state what you are leaving and to whom. A handwritten
will does not have to be notarized or witnessed. Even so, having the will
signed by two witnesses is a good idea. It is also a good idea to retain
a qualified lawyer to check the will to be sure that it conforms with California
law and is clear with respect to your intentions and directions.
A Statutory Will - California law provides for a "fill-in-the-blanks" will
form. The will form is designed for single, married and divorced people
with relatively small estates. If there is anything you do not understand
or if you are making any provisions which are complicated or unusual, you
should ask a qualified lawyer to advise you.
A Will Prepared by a Lawyer - A qualified estate planning lawyer
can provide you with the assurance that your will is prepared in accordance
with California law. The lawyer can also offer suggestions and help you
understand the many ways that property can be transferred to or for the
benefit of your beneficiaries. A lawyer can also help you develop a complete
estate plan and offer alternative plans which may save taxes. This kind
of planning can be extremely helpful and economical in the long run for
you and your beneficiaries. Your lawyer will either personally supervise
the signing of your will or will provide you with detailed instructions
concerning the rules for its execution by you and two witnesses who are
not beneficiaries of your estate.
If Assets Pass to a Living
Trust
You may make provision in your will for a trust to be created after your death
and funded with assets held in your estate. When trusts are created under a will,
they are known as "testamentary trusts." With an appropriate beneficiary designation,
testamentary trusts can even be beneficiaries of life insurance policies.
If you have a living trust, then your will is often referred to as a "pour over" will.
That will provides that any assets held in your name at your death and not in
your living trust will be added to the trust, to be held, administered and distributed
in accordance with its terms.
For beneficiaries who are minors, you may also consider providing for transfers
from your estate to a custodian under the California Uniform Transfers to Minors
Act.
Changing a Will
You should review your will periodically because, if it is not up to date when
you die, your estate may not be distributed as you wish.
Your will can be changed through a "codicil," which is a legal document which
must be drafted and executed in accordance with the same state laws which apply
to wills. A "codicil" is simply an amendment to your will. Your will must not
be changed by crossing out words or sentences or making any notes or written
corrections on it. You should seek the advice of a lawyer and make a new will
when you marry or divorce. You should also review your will )when there are any
major changes in your family (such as births and deaths), when the value of your
J assets significantly increases or decreases, and when it is no longer appropriate
for the persons named as guardian or executor or testamentary trustee to act
in that capacity.
If you have moved to California from another state and have a will which is valid
under the laws of that state. California will honor its validity. It is important
for you to review your will with a qualified California lawyer, however, since
California law will govern the probate of your will if you reside here at your
death. If you move to another state, your California will should be reviewed
by a lawyer there.
Carrying Out the Provisions
of a Will
The process by which the provisions in your will are carried out following your
death is known as "probate."
Probate is the court-supervised process developed under California law which
has as its goal the transfer of your assets at your death to the beneficiaries
set forth in your will, and in the manner prescribed by your will. It also provides
for the relatively quick determination of the validity of any claims by creditors
against your assets at your death. At the beginning of a probate administration,
a petition is filed with the court, usually by the person or institution named
in your will as executor. After notice is given, and a hearing is held, your
will is admitted to probate and an executor is appointed.
If your will provides that assets shall pass to your surviving spouse at your
death, then those assets can be transferred to your surviving spouse through
the filing in the probate court of a "spousal property petition," which is a
simpler and less expensive procedure than a formal probate administration. If
the assets in your name alone at your death do not include an interest in real
estate and have a total value of less than $100,000, then generally the beneficiaries
under your will may follow a statutory procedure to effect the transfer of those
assets pursuant to your will, subject to your debts and expenses, without involving
the probate court.
A probate has advantages and disadvantages. The probate court is accustomed to
resolving disputes about the distribution of your assets in a relatively expeditious
fashion and in accordance with defined rules. In addition, you are assured that
the actions and accountings of your executor will be reviewed and approved by
the probate court.
Disadvantages of a probate include its public nature; the provisions of your
will and the value of your assets become a public record. Also, because lawyer's
fees and executor's commissions are based upon a statutory fee schedule, the
expenses may be greater than the expenses incurred by a comparable estate managed
and distributed under a living trust. Time can also be a factor; often distributions
to beneficiaries can be made pursuant to a living trust more quickly than in
a probate proceeding.
Who Should Know About a
Will
Other than the lawyer who writes a will for you, no one needs to know what your
will says. But the location of your original will should be known by your executor
and other close friends or relatives. Your will should be kept in a safe place
such as your safe deposit box, your lawyer's safe, or a locked, fireproof box
at your residence.
The Tax Consequences for
Beneficiaries
Assets that are transferred to either your spouse (if he or she is a U.S. citizen)
or to charitable organizations are not subject to estate taxes. Assets passing
to other individuals will be taxed if the net value of those assets -- in 1999
-- is $650,000 or more. Under current law, that amount will increase, in uneven
increments, to $1,000,000 in 2006. For estates which approach or exceed this
value, significant estate taxes can be saved by proper estate planning. That
planning must usually be accomplished before death and, in the case of married
couples, before the death of the first spouse. While estate planning generally
focuses upon estate taxes, planning must , it also take into consideration income,
gift, property and generation-skipping taxes as well. Qualified advice about
taxes should be obtained during the estate planning process.
Preparation of Other Documents
Additional documents can also facilitate the process, including:
A List of
Assets and Debts - Making a list of your assets and keeping it in a
place known to your executor or other family members is of great help to
them when you are not able to share that information with them. List your
bank accounts, safe deposit boxes, stocks and bonds, real estate, and other
assets. Also list the names and addresses of anyone to whom you owe money.
A Durable Power of Attorney for Property Management - In this document,
you appoint another individual (the "attorney-in-fact") to make property
management decisions on your behalf if you are incapacitated. The attorney-in-fact
manages your assets and must do so in a prudent manner accountable to you
and solely in your best interests.
A Durable Power of Attorney for Health Care - This document allows
the person named as attorney-in-fact to make health care decisions for
you when you can no longer make them for yourself. It may also contain
statements of wishes concerning such matters as life sustaining treatment
and other health care issues, and instructions concerning organ donation,
disposition of remains and your funeral.
Shoreline's Competitive
Edge
Whatever your estate planning need, Shoreline Wealth and Investment Management
can assist you in obtaining the best estate and legal advice available.
For more information:
If you'd like more information about how diversified investment advisors can help you achieve your financial objectives through personalized wealth or retirement and risk management strategies, please contact us. We welcome the opportunity to discuss your unique needs and how we may best meet them.
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Charles M. Bloom, Registered Principal offers securities
and advisory services through Centaurus Financial, Inc. - 214 Calle Palo Colorado, CA, 93105 (mailing address: 3905 State Street Suite 7173, Santa Barbara, CA, 93105) - Member FINRA and SIPC.
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