Estate Planning

Do I need a will or a trust, and what is the difference?

Most California residents with significant assets benefit from both, and the question is not really either/or. A will specifies how your assets should be distributed at death but goes through probate, a court-supervised process that is public record in California and can take one to two years. A revocable living trust accomplishes the same goal without probate: assets pass directly to beneficiaries at death with more privacy, faster distribution, and typically lower cost. A trust also handles incapacity: if you become unable to manage your own affairs, a named successor trustee steps in without court involvement.

 Even with a trust in place, a pour-over will is typically still needed to capture any assets not yet titled in the trust at the time of death. For most California residents with a home, significant retirement accounts, or a taxable investment portfolio, a revocable living trust is generally the more effective structure. Your estate planning attorney will typically prepare the trust and the pour-over will together as part of the same engagement. We work alongside estate planning attorneys and can help you understand which approach fits your situation before you sit down with legal counsel.

 What documents does every retiree need and what happens without them?

Every adult with significant assets should have four documents in place: a will or revocable living trust specifying how assets are distributed at death; a durable power of attorney naming someone to manage financial affairs if you become incapacitated; a healthcare directive specifying medical treatment preferences and naming a healthcare agent; and a HIPAA authorization allowing named individuals access to your medical information. Without these documents, your estate passes according to California's intestacy laws, which may not reflect your intentions, and your family may face a court conservatorship to manage your affairs if you cannot do so yourself. We work alongside estate planning attorneys and encourage every client without a current plan to consult one.

 What is the difference between a will and a revocable living trust, and do I need both?

A will specifies how your assets should be distributed at death and goes through probate, a court-supervised process that is public record in California and can take one to two years. A revocable living trust holds your assets during your lifetime and distributes them to beneficiaries at death without probate: more privacy, faster distribution, and typically lower cost. A trust also handles incapacity: if you become unable to manage your own affairs, a successor trustee steps in without court involvement. Most California residents with significant assets benefit from a revocable living trust rather than relying on a will alone. Even with a trust, a pour-over will is typically still needed to capture assets not yet titled in the trust's name. We provide context and education on these instruments but do not draft legal documents.

 Why do beneficiary designations override my will, and why does that matter?

IRAs, 401(k)s, life insurance policies, and annuities pass directly to named beneficiaries at death through non-probate transfer, bypassing the estate entirely regardless of what your will or trust says. If your IRA names a former spouse as beneficiary and your will names your children, your former spouse receives the IRA. If no beneficiary is named, the account goes through probate and may be distributed according to default rules. Beneficiary designations should be reviewed after every major life event: marriage, divorce, birth or adoption of a child, death of a named beneficiary, or any significant change in your financial situation. We review beneficiary designations as a standard part of our planning process.

 What is a step-up in basis and how does it affect what my heirs receive?

When appreciated assets held in a taxable investment account pass to your heirs at death, the cost basis is stepped up to the fair market value on the date of death. Your heirs can sell those assets immediately without paying capital gains tax on the appreciation that occurred during your lifetime. For example, if you paid $50,000 for stock worth $350,000 at your death, your heir's basis becomes $350,000 and a sale at that price produces no taxable gain. Assets inside a traditional IRA do not receive a step-up in basis: those distributions are fully taxable to the beneficiary as ordinary income. This difference affects decisions about which assets to hold until death, which to sell or convert during your lifetime, and which to leave to different beneficiaries.

 How does the federal estate tax exemption work and does my estate need to worry about it?

The federal estate tax applies to the value of your taxable estate above the current exemption, $15 million per individual (indexed for inflation) under current law. Married couples can effectively double this through portability, sheltering approximately $30 million combined. California does not impose a separate state estate tax. The One Big Beautiful Bill Act, signed into law in July 2025, made the elevated exemption permanent. For clients with estates approaching or exceeding the $15 million threshold, strategies such as annual gifting, irrevocable trusts, and charitable transfers remain effective tools for reducing a taxable estate over time.

 What changed with the SECURE Act and how does it affect what my children inherit from my IRA?

The SECURE Act of 2019 significantly changed the rules for most non-spouse beneficiaries who inherit an IRA. Before 2020, beneficiaries could stretch distributions over their own life expectancy, sometimes spanning decades. Under current law, most adult non-spouse beneficiaries must withdraw the entire inherited IRA balance within 10 years of the account owner's death. For a large IRA left to a child in their peak earning years, this compressed timeline can create substantial taxable income in a concentrated period. This change affects which assets to leave to which beneficiaries, whether Roth conversions during your lifetime could reduce the tax burden on your heirs, and how beneficiary designations should be structured. Estate plans built around the old stretch rules should be reviewed.

What does per stirpes mean on a beneficiary designation form and why should I pay attention to it?

Per stirpes is a Latin term meaning 'by the branch.' It is a beneficiary designation method that specifies how assets pass if a named beneficiary predeceases you. Understanding the difference between per stirpes and per capita (the other common option) can significantly affect whether your estate ends up where you actually intend it to go.

 An example makes this clearest. Robert and Carol name their 2 adult children, James and Diana, as equal beneficiaries on their IRA, each receiving 50%. James has 2 children of his own, Ella and Marcus. Diana also has 2 children, Sophie and Nathan, giving the couple 4 grandchildren in total.

 Under a per stirpes designation: if James predeceases Robert and Carol, James's 50% share passes down through his branch of the family to his children, Ella and Marcus, equally. Each receives 25%. Diana still receives her 50%. The inheritance flows through James's branch as if he had been there to receive and then pass it on.

 Under a per capita designation: if James predeceases Robert and Carol, his share is redistributed equally among the surviving named beneficiaries. Since only Diana remains, she receives 100%. Ella and Marcus, James's own children and the couple's grandchildren, receive nothing.

 For most people, per stirpes reflects actual intent: if a child predeceases them, they want that child's branch of the family to still receive their share. Despite this, many beneficiary designation forms default to per capita, and many people sign them without reading the fine print. Confirming that per stirpes is elected on every retirement account and life insurance policy where that is your intention is a standard part of the beneficiary designation review we do with every client.