Estate planning can be done at any stage in life. The main purpose for planning your estate is to ensure your family is provided for after you are gone.
Keeping a current estate plan is not difficult or too time consuming with the help of Portola Law. People don't plan to fail; but many fail to plan. Let Portola Law guide you to deliver peace of mind.
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Estate Planning Tools
Basic Estate Planning Tools
The following table summarizes the benefits provided by some of the more common estate planning techniques. (Note: For definitions of the estate planning tools compared in this table, scroll to the bottom of this page)
Benefit of Planning Tool |
No Will |
Basic Will |
Pour- over Will |
Living Trust |
AB Trust |
ABC "QTIP" Trust |
| Selectivity | ||||||
| Permits you to select the beneficiaries of your estate | No, State of CA selects |
Yes | Yes | Yes | Yes | Yes |
| Permits you to select the executor of your will | No | Yes | Yes | Yes | Yes | Yes |
| Permits you to select the trustees of your trust | No | No | Yes | Yes | Yes | Yes |
| Permits you to select the guardians for your children | No | Yes | Yes | Yes | Yes | Yes |
| Probate | ||||||
| Avoids the time-consuming and expensive probate process | No | No | No | Yes | Yes | Yes |
| Timing of Distributions | ||||||
| Permits distribution of assets to children other than simply upon reaching the age of majority (Ex. 1/3 at age 30, 1/3 at age 35, 1/3 at age 40) | No | No | Yes | Yes | Yes | Yes |
| Protection | ||||||
| Prevents conservatorship of estate owner | No | No | No | Yes | Yes | Yes |
| Protects assets from creditors | No | No | No | Yes | Yes | Yes |
| Estate Taxes | ||||||
| Assists married couples in reducing estate taxes | No | No | Possibly, if properly designed to save estate taxes | No | Yes | Yes |
Allows the first spouse to die to name the ultimate beneficiaries of his/her estate while still permitting the surviving spouse to utilize the assets and while still deferring estate taxes |
No |
No |
Yes |
No |
No |
Yes |
No Will means you have no will, and your estate passes to your heirs based on the laws of descent and distribution of the State of California.
Basic Will means you have a will that distributes everything to your spouse, if living, otherwise to your children when they reach the age of majority (18 in CA).
Pour-over Will means you have a will that distributes everything to a trust.
Living Trust means a trust designed to avoid probate and provide asset management. A basic living trust does not effectively use the current $5,250,000 estate tax exemption of both spouses. Remember, each person is entitled to have the first $5,250,000 of his or her estate pass to his or her heirs without estate taxes. Because of this deficiency of a basic living trust, an AB Trust is often recommended instead to married couples with substantial assets.
AB Trust means a trust designed to make sure the $5,250,000 estate tax exemption of each spouse is used to the full extent possible, while allowing the surviving spouse to have the use of the assets of the deceased spouse during the remainder of the surviving spouse's lifetime.
ABC "QTIP" Trust means a trust designed to permit a spouse to transfer assets to his/her trust ("C" or "QTIP") while still maintaining control over the ultimate disposition of those assets at the spouse's death. QTIP Trusts are particularly popular in situations where a person is married for a second time but has children from a first marriage for whom he/she wants to reserve assets.
Additional Estate Planning Tools:
Durable Power of Attorney for Property: A written document in which an individual designates another person to make his or her property and property-related decisions in the event that the individual becomes incapacitated and is unable to do so.
Durable Power of Attorney for HealthCare (In CA, this is part of a document called Advance Health Care Directive Kit): A written document in which an individual may 1)appoint another person to be his/her health care "agent" who will have legal authority to make decisions about your medical care if you become unable to do so, and/or 2)write down his/her health care wishes to be followed by your agent and doctor, and 3)express his/her wishes about organ and tissue donation.
Charitable Remainder Trust: A trust in which individuals are named as beneficiaries to receive income for a period of time (or the lifetimes of the beneficiaries) after which the principal passes to charity. Often used to facilitate diversification and reduce the capital gain tax impact of single low-basis stock holdings, and to maximize charitable deductions and gifts, while providing income payments to the donor.
Annual Exclusion: Each individual can give away up to $14,000 (in 2013) per recipient per year without gift taxes. Not all gifts qualify for the annual exclusion; only outright gifts or gifts to certain types of trusts qualify.
Lifetime Gift Tax Exemption: Each individual can shield up to $5,250,000 (in 2013) of gifts (in excess of the annual exclusion amount) during their lifetime. If not used during life, the exemption will be available at death as part of the Estate Tax Exemption.
Estate Tax Exemption or "basic exclusion amount": The amount of property owned by a person at death that may be shielded from federal estate taxes ($5,250,000 in 2013). Note: CA does not currently impose an estate tax on property transferred from a person at death.
Generation Skipping Transfer (GST) Tax Exemption: The amount of property that a person can shield from federal GST tax either during life or at death. The GST tax exemption amount for 2013 is $5,250,000. The GST tax is imposed on transfers of property from a donor to a person more than one generation removed(e.g., grandchild).
Irrevocable Life Insurance Trust: An irrevocable(cannot be changed)trust which is generally established for the purpose of excluding life insurance proceeds from the estate of the insured and the spouse of the insured for death tax purposes and thereby transferring that wealth to beneficiaries estate tax free. Also may serve the purpose of providing liquidity to pay estate taxes.
IRA and Qualified Plan Trusts: Utilized if you desire to protect your IRA or Qualified Plan assets from being unnecessarily reduced by estate taxes. Your surviving spouse will be able to allocate the assets from your IRA or Qualified Plan following your death to a marital trust and/or to a credit shelter trust. Flexible allocation and subsequent tax savings on these assets would not be possible without such a trust.
Qualified Personal Residence Trust [QPRT]: An Irrevocable Trust established to hold title to one's residence. The owner transfers ownership of the house to the trust, retaining the right to reside in the home for a period of years. A QPRT may serve a useful purpose when the owner(s) wishes to transfer his or her personal residence to family members (usually children) at some time in the future, and to reduce the overall transfer tax cost--that is, estate and gift tax cost-- of the transfer.
Family Limited Partnership [FLP]: A limited partnership controlled by members of a family. Generally, senior family members contribute assets in exchange for a small general partner interest and a large limited partner interest. They can then give all or a portion of the limited partner interest to the children/grandchildren. Transferring limited partnership interests to family members reduces the taxable estate of senior family members while still maintaining control over the partnership assets. FLP's can utilize valuation discounts to reduce taxable gifts and FLP's protect assets from creditors and spouses of failed marriages.
Special Needs Trust: A Special Needs Trust is a specialized legal document designed to benefit an individual who has a disability. A Special Needs Trust enables a person under a physical or mental disability, or an individual with a chronic or acquired illness, to have, held in Trust for his or her benefit, an unlimited amount of assets. In a properly-drafted Special Needs Trust, those assets are not considered countable assets for purposes of qualification for certain governmental benefits.