“Everyone at my funeral gets a stun gun. The last person standing gets all my stuff.”
—  Author Unknown

Go ahead and laugh, but that’s about the same thing that happens if you don’t have a will.

I know … you’re going to get to it next month. Or maybe sometime next year.

I’ve heard it all over 40-plus years of serving as a financial adviser. And like the Nike ad, my response was always the same: JUST DO IT.

Crucial Components

Please understand, I am not a lawyer, I am not being paid by the State Bar of California and my comments should not be taken as legal advice.

I just always believed my clients should have a current estate plan that reflected their wishes in case something happened to them.

This is an act of selflessness. You do it for your family, not yourself.

Note that a complete estate plan deals not only with death, but also in case an accident or illness leaves you incapacitated.

A complete California estate plan is a highly customized set of documents that generally includes a Revocable Living Trust, Pour-Over Will, Durable Power of Attorney for Property, Advance Health Care Directive, HIPAA Waiver of Authorization, deeds to your real properties, assignments of your LLCs and other business entities, beneficiary designations for life insurance policies and retirement accounts, and even letters of instructions/wishes to your family.

But what If you don’t want to spend the time, effort and money to get a carefully considered estate plan?

What Happens Without a Will?

Well, if not, the State of California has a plan for you. If someone dies without a will, California’s intestate succession laws (Probate Code 6400-6455) outline how assets are to be distributed.

And without a durable power of attorney or advance health care directive, no one can perform actions on your behalf unless a court appoints a conservator of the person or estate in the event you become incapacitated.

If you arrive at a hospital or medical center incapacitated, and don’t have an advance directive or power of attorney, providers must make a good-faith effort to find a person authorized to make medical decisions.

If all this sounds unsettling, it should give you good reasons to make an appointment with a qualified trusts and estates attorney right away. You never know what can happen. 

Let’s assume you’re now motivated to get an estate plan — or even review potentially outdated plans.

My career was in Seattle, where I told hundreds of clients that estate planning was an important part of comprehensive financial planning.

And for any clients with property in other states, trusts were usually recommended to avoid an auxiliary probate, and to avoid very high probate costs if the property was in California.

High Cost of Probate

Here’s why: California has established statutory fee schedules that outline the compensation for executors, personal representatives and attorneys engaged in the probate process.

Probate fees are set forth as a percentage of the gross value of the estate:

• 4% of the first $100,000
• 3% of the next $100,000
• 2% of the next $800,000
• 1% of then next $9 million
• 0.5% of the next $15 million

Amounts above $25 million are determined by the court.

Someone in Santa Barbara with a median-priced home, a nice retirement account and some personal property might well have a $4 million-plus estate — and thus would be subject to a probate fee of more than $50,000!

Your Shield Against Probate

But there’s a way to avoid this, by holding your assets in a revocable living trust.

A thoughtfully drafted revocable living trust can provide a plan for the management of assets during your lifetime and when you’re gone.

This planning approach avoids the costs, delays and lack of privacy involved with probate.

The plan can be customized to meet your goals by an experienced lawyer. You can be your own trustee and name a backup for when you are unable to manage things. You can add property to it, take property out of it, change it or terminate it.

It can make sure your assets pass according to your wishes. Provisions can be made to support young children, help with college costs and distribute funds when they are adults. It can protect “spendthrift heirs” against overspending their inheritance.

QTIP trusts can provide for the lifetime financial security of a spouse while assuring assets ultimately pass to your children — an important option in second marriages. (I once had a seasoned laywer describe QTIPs to a married couple as “hunk and bimbo trusts” —protecting against assets unintentionally going to a future spouse.)

In addition, the revocable living trust can contain provisions addressing the various federal and state taxes. The pour-over will simply adds anything not already held by the trust into it at death.

Tidy up beneficiary arrangements for life insurance policies and retirement accounts, complete an advance health care directive and a durable power of attorney, and you have a solid estate plan.

Beyond the Trust

It can be smart to draft a handwritten letter to accompany the estate plans that provide insights and additional details, especially about how personal effects and family heirlooms should be distributed.

And it can be very important to provide digital passwords to your family, trustee or executor.

I’ve also recommended that family members be provided with information about who to contact in the event of emergency: your lawyer, accountant, financial adviser, etc. 

Once done, you can forget about all of this, at least for a while — until something changes. And no need to stock up on stun guns!