What is
Estate Planning?
4695 CHABOT DRIVE, SUITE 200
PLEASANTON, CA 94588
TEL: (925) 558-2710
FAX: (925) 558-2701
LUNGU@LUNGULAW.COM
WWW.LUNGULAW.COM
Goals for Today
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Find out which documents are included in an
estate plan
Learn how all the documents work together
Learn how to use trusts to avoid probate
Learn how to use trusts to keep the court out of
your family
What is Estate Planning?

Estate planning is the planning process of
determining the distribution of your assets upon
your death.
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Planning also covers management of personal
affairs in the event of incapacity.
What Estate Planning Does
Avoids Probate
Maintain
Control Over
Your Person &
Affairs
Protects Against
Administrative
Expense &
Delay
Avoids Estate
Taxes
Protects Your
Children
Protects Assets
from Lawsuits,
Creditors, &
Divorces
Incapacity
Planning
General Documents
In Estate Plan
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Pour Over Will
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Revocable (Living) Trust
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Advance Health Care Directive
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Durable Power of Attorney for Property

Guardianship Documents for Minor Children
Pour Over Will
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States you are over 18 – age of capacity
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States your understanding of what you have and
who you want to give it to
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Names beneficiaries and Executor
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Specifies gifts

Has Pour Over Provision to Trust
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Must go through Probate
Trust
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Agreement between you as Trustee and
Beneficiary during your lifetime, for your
benefit now, and the benefit of beneficiaries
later
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Provides for distribution of funded assets

Avoids Probate Court
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Can be used to avoid or minimize Estate Taxes
Advance Health Care Directive

Gives an agent ability to make health care
decisions for you if you cannot because of
incapacity or illness

Can ensure burial and other end of life decisions
are carried out
Durable Power of Attorney

Gives an agent the ability to ensure your
financial concerns are taken care of in the event
of your incapacity

Avoids conservatorship
Other Estate Planning
Documents and Their Use

Guardianship Nominations – document that
names your designated guardian to care for
minor children

Affidavit of Intent to Return Home – conforms
to rules for Medi-Cal and reimbursement
requirements
Your Planning Options

Will

Revocable Living Trust

Or Both?
Definition of a Will or Trust
Revocable
Living Trust
Will

Set of instructions that
take effect upon your
death - amendable

Set of instructions to
care for you and your
family during your
lifetime, in the event of
incapacity, and at death
- amendable
Similarities of Wills and Trusts
Revocable
Living Trust
Will

Provides for
distributing property
at your death

Provides for
distributing property
at your death
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Has no adverse
lifetime income tax
consequences

Has no adverse
lifetime income tax
consequences
Differences of Wills and Trusts
Revocable
Living Trust
Will
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Are only effective at death
Must go through probate
• Expensive
• Long process for heirs
Probates are public
Are good only in state of
residence
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Are effective immediately
Avoids probate
Trusts are private
Are good in every state portable
Will
Revocable
Living Trust
My Property
Property in My
Living Trust
No
Probate
Probate
Heirs
Heirs
Why Use Both?
Funding of Assets
Will Estate
Trust Estate
Why Use Both?
What if…
Trust Estate
Will Estate
Refinance
your house
And you
forget to
put the
house back
in trust
And you die
Why Use Both?
What if…
Will Estate
Transferred to
Will Estate
Judge grants an order
to return back to trust
Trust Estate
Why Use Both?
What if…
Will Estate
Judge grants an order
to return back to trust
Trust Estate
What is Probate?
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Probate is the first step in the legal process of
administering the estate of a deceased person,
resolving all claims and distributing the deceased
person's property under a will.
Court decides the legal validity of a deceased
person’s will and appoints the executor.
Probate Court then distributes assets.
If there is no will, it is called an intestacy
probate.
What is the Cost of Probate?
Gross Asset Value of
Entire Estate
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$400,000
$500,000
$750,000
$1,000,000
$2,000,000
$3,000,000
$4,000,000
Minimum Statutory
Probate Fees
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$22,000*
$26,000*
$36,000*
$46,000*
$66,000*
$86,000*
$106,000*
*Fee is 0 if asset is in trust
Why People Avoid Getting an
Estate Plan?

Cost

Think their estate is too small to support the
expense of planning

Want to initiate probate proceedings at death

Superstitious
What if You Do Nothing?

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At Incapacity:
• Guardianship/Conservatorship
• Court controls assets
• Brain dead on life support
At Death:
• Court proceeding to determine who will be guardian for
minor children
• Assets distributed according to state law through probate intestacy
Failure to do advanced planning for larger estates:
• Family money goes to taxes instead of heirs – estate tax risk
• Kids blow inheritance
• Control issues and fighting among family members left
behind
Who Needs a Trust?
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“Everybody!”
Any individual with real property (home, land)–
regardless of state
Any individual with assets valued at over
$150,000 - gross
Those individuals that wish to spare their
beneficiaries the burden and cost of probate
Those individuals who have specific distribution
desires post death
Individuals with large estate tax risk
What is Estate Tax?
Two Fundamental Rules
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Unlimited Marital Deduction
•
•
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ANY amounts passing to a spouse (or a qualifying trust
for spouse) avoid estate taxes on the first death.
The tax, if any, is assessed upon the death of the
surviving spouse.
Applicable Exclusion (Coupon) Amount
•
The dollar value of assets that one can leave to non
spouse beneficiaries without incurring any estate taxes.
PRESENTED BY:
UNCLE SAM
Estate Tax Coupon
For
$5,340,000
This coupon allows you to leave assets and wealth,
up to the face amount of the coupon, to someone
besides your spouse, free of estate taxes. This
coupon is non-transferable and must be redeemed
at the time of your death.
How to Preserve over a $10,000,000
Estate Tax Free for your Heirs?
Use a Family Trust!
Let’s use our IRS “Coupon” -
The Applicable Exclusion Amount
How to Waste Your Estate Tax
“Coupon”? No Trust
Husband
Wife
Total
Assets:
$5,340,000
$5,340,000 = $10,680,000
Husband dies, leaves all to wife.
HUSBAND
WIFE
$5,340,000
Less One Coupon
$5,340,000
+ $5,340,000
$10,680,000
$5,340,000
Tax Cost: $2,136,000 (40% tax rate)
How NOT to Waste Your
Estate Tax “Coupon” Using a Trust
HUSBAND
Husband dies &
$5,340,000 of Assets
go to Family Trust
WIFE
Income and other
benefits to wife for her
lifetime
WIFE
Assets in estate
$5,340,000
Less Wife’s coupon - 5,340,000
To Children at
Wife’s Death
Tax = 0
What is the ESTATE TAX
“Coupon” Rate NOW?
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2010 - $5,000,000 Coupon Amount
2012 - $5,125,000 Coupon Amount
2013 - $5,250,000 Coupon Amount
2014 - $5,340,000 Coupon Amount
Remember that the top tax rate is 40% so your
heirs potentially can lose almost half of every
dollar that you do not specifically protect
through trust planning
Does this Apply to Me?
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Assets Included in Definition of “Estate”
• Real Property in any state
• Life Insurance Policies
• Checking, Savings, Annuity or other Liquid
Accounts
• Business Interests – Sole
Proprietor/Corp/LLC/Partnership
• Retirement and Pension Plans
• All Personal Property
Real Life Examples
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Amy Winehouse – 27 year old singer with $5mm estate
with no will – everything went to her parents – left out
siblings (which was her expressed desire)
Terry Schiavo – no planning led to her being on life
support for over 13 years
Leona Helmsley – put only $12 mm in trust for dog
“Trouble,” rest of her billions had to be probated
J.S. – died in the middle of divorce with kids, estate left
to husband
K.P. – no will so estate left to wife and two kids,
although kids were already provided for before death
Busses can be dangerous
Questions?
4695 CHABOT DRIVE, SUITE 200
PLEASANTON, CA 94588
TEL: (925) 558-2710
FAX: (925) 558-2701
LUNGU@LUNGULAW.COM
WWW.LUNGULAW.COM