Where There Is A Will, There Is A Way (And A Way Not) To Plan Your Estate

The Perils And Problems Of Drafting Your Last Will And Testament

Wills, also known as Last Will and Testaments, are often perceived as the be-all, and end-all, of estate planning. So much so that many individuals simply jot one down, with the preconception that it will be adequate and sufficient, when in reality, this may not at all be the case, especially in California. In this article, we will discuss: Some of the difficulties in drafting your own estate planning documents, such as wills or trusts.

• Some of the difficulties in drafting your own estate planning documents, such as wills or trusts.
• What assets cannot, or should not, be left in a will in California.
• The best of four ways that assets not included in your will can be passed on after your death.

Can I Draft My Own Will In California?

Technically, in California, as in any other state, you can do any legal work you want on your own. You are never obligated to retain an attorney. You can litigate your own lawsuits, plaintiff or defense side, and even defend yourself without an attorney in a criminal action. And, of course, you could certainly draft your own will.

But in law school, one of the first things they tell you is that a client that represents themself has a fool for a client. Because the minutiae of navigating the law, even for wills, is difficult, and it is all too easy to make a mistake that could cost you your case, claim, or for wills, your legacy.

In California, the California probate code (6240) actually provides for a will. It is a sort of template which you could easily use or do by yourself. You could also write up what is called a holographic will. That is to say, a handwritten will, for which some of the formalities of executing a will are not required, such as the witnesses.

In fact, California statutes make it easy to write your own and even try to help you to avoid mistakes. But there are nevertheless plenty of them you can make, and the consequences for doing so can be dire.

What Are The Dangers Of Trying To Write My Own Will In California?

The most significant risk of trying to write your own will is the very real possibility that it will not be followed. If you used the statutory will and failed to execute it correctly, your will could be invalidated, and you could end up being considered intestate. Or worse, a prior will may take precedence, leaving everything to a hated ex!

If you die without a will, or intestate, California State law determines where your assets go. Which could end up being drastically different than what you wanted. And it is quite easy to make mistakes in actually executing the will, meaning having it signed. If you fail to get two independent and disinterested witnesses or if you put in a provision that is invalid, some or all of the will could be thrown out.

Worse, family members battling it out over the will and assets may end up costing the estate, not to mention the family, precious time and money. Even setting aside the emotional cost and stress of the situation.

Obviously, everyone should be free to write their own will and determine their own level of sophistication. And if you look at the statutory will and use self-help programs, you might be able to manage it without error. However, the potential risks of doing so are significant, which is why most Californians will turn to an attorney to help make sure everything is done perfectly and will not end up being challenged later.

Are There Some Assets That Cannot Or Should Not Be Put In A Will?

It is a common misconception (which further reveals the dangers of trying to write your own will) that assets can be “placed” in a will. You do not put assets into a will. A will is merely instructions to a probate court on how to distribute your estate, assuming they are over California’s probate limit of $184,500 (as of 2022).

A will is limited to simple instructions. It says what percentages to distribute to whom or where specific items should go. A will can distribute any asset that is probatable, which means that it is not distributed by some other method.

If you have life insurance and you have a beneficiary on it, that is not a probatable asset because the beneficiary is already determined. You don’t need a probate court order for the life insurance company to pay out. Same with a retirement account or real property if you own it in joint tenancy with another person, and so forth.

Are There Any Assets Which Cannot Or Should Not Be Placed In Trusts?

Now trusts, on the other hand, are where you can put any asset you want, and unlike a will, the assets are actually placed in the trust. In other words, the trust is given ownership over the assets. However, as a result, there are some assets you might not want to re-title to a trust, such as a retirement account. Doing so would be a change of ownership and therefore be a taxable event.

Obviously, however, there can be legal complications and details. For example, if you had a business that was owned by a trust and it was an S corp, there is some language that would be necessary and possibly some adverse tax consequences.

But overall, you can put assets into a trust, retitling them. The legal owner becomes the trust and not an individual. That is what we call funding the trust, and it can be very helpful for avoiding some of the consequences of probate, such as taxation or family conflict.

What Should You Do With Assets That Cannot Be Put In A Will Or A Trust?

There are four ways that assets are distributed when a person passes away, putting aside the possibility of fraud or theft…

1. Probate Is The Default For Handling Assets After Death

The first way is probate, which will go down in one of two ways. If you die with a will, the court will follow the instructions you left (unless it is challenged or deemed invalid). If you die without a valid will, you are considered intestate, and the court follows state law.

This means neither you nor any of your beneficiaries will have a say in how your assets are then distributed.

2. How Can Beneficiary Designations Help Me Avoid Problems In Probate?

The second way, as briefly mentioned earlier, is beneficiary designations. These are when you attach a beneficiary directly to the asset. Life insurance is the main example, but you could also do it with bank accounts. Retirement account beneficiary designations are also common.

By listing the beneficiary on the account or asset directly, what happens when you die is a matter of law. When you die, the beneficiary automatically inherits it. But this also means you have to be careful as if you forget to update beneficiaries, key assets could end up going to someone you no longer wish to benefit.

3. How Are Joint Tenancy Properties Handled After Death?

The third method by which assets are transferred after death is via a concept called joint tenancy. This is probably most prevalent with real estate deeds but can also be done with financial accounts. You could own a bank account in joint tenancy with another person, and there are several different types of joint tenancy.

There’s joint tenancy, there’s tenancy by the entirety, community property, and rights of survivorship. For such transfers, you do not need a court order; it is a simple, straightforward legal operation, like a contract. If you and your brother buy a house and you are joint tenants, when one joint tenant dies, the surviving joint tenant inherits the whole.

4. Why Are Trusts The Ultimate Tool For Estate Planning?

The fourth way, and the only other way assets can be passed on after your death, is through a trust. Trust law covers several different types, such as living trusts, which can be revocable or irrevocable depending on your estate planning purposes. Most people, to avoid probate, are going to use a revocable living trust.

Overall, those are the four ways that assets are going to transfer hands. You can look at every one of your assets, determine which one of those four ways can distribute that particular asset. From there, you can make a decision about the most efficient and affordable way to handle them, depending on how much control you want to have.

Obviously, that is a lot to handle, though, and complex enough that even most attorneys will need a specialized estate planning attorney to advise them, not to mention help fill out the forms, paperwork, and other legal actions required. Thus, while it is technically possible to do everything by yourself, it is very much not recommended to do so. For more information on Wills & Trusts In A California Estate Plan, an initial consultation is your next best step.