Advanced planning is an important part of our lives. A check list, such as the one below, will give you a good starting point when you find yourself in a position of taking care of final arrangements for a loved one. Planning should include knowing where documents are kept, who has a copy of the documents and any important passwords. When you have Trust and Will documents in your possession, check for the following information:

  • Make certain that the document is a Living Trust, not a Testamentary Trust.  A Testamentary Trust is one created by will and does not avoid probate. Of the two, only the Living Trust avoids probate.

  • Be sure you know whether the trust is Revocable or Irrevocable.  One is changeable, one is not. Neither one is right or wrong, the question is “which is appropriate for your situation?” Most people start with a Revocable Trust and then if the size of the estate, or the type of assets justify, an Irrevocable Trust might be appropriate, in addition to the Revocable Trust.

  • Make sure that the trust document or some companion document indicates that the assets are to be treated as though they are community property.  Assets treated as community property will receive an adjustment in the basis when one spouse passes away, alleviating any capital gains on appreciation up to the death of the first spouse. And don’t make the mistake of assuming that all assets in the state of California are community property. They are not and the I.R.S. treats non-community property assets different than separate property assets for adjustment and basis purposes.

  • Be sure that the trust contains the assets it should – not all assets should be owned by the trust.  Traditional assets that trigger probate, such as: real property, stocks, bonds, securities and bank accounts typically should be placed in the name of the trust.

  • Is life insurance payable to the trust?  Remember, life insurance proceeds are estate tax includable. This means that careful planning needs to be done with regard to the life insurance, depending on the size of the estate and the face amount of the life insurance policy. In most cases, life insurance should not be payable to a spouse, but rather payable to a trust and/or owned by an Irrevocable Trust, depending on the size of the estate.

  • Make sure that the purpose of the Revocable Living Trust is not asset protection.  Because the trust is revocable and you have access to all assets, creditors likewise can access the assets also. If the goal is to put the assets out of the reach of creditors, then other methods of protection should be considered, such as a Qualified Personal Residence Trust (this will also reduce the estate tax consequence at the death of the Trustor), a Family Limited Partnership (this is a very popular method of not only protecting the estate from law suits, but reducing the estate tax consequences while maintaining control for the creator or General Partner), and/or some type of a corporation (“S” Corporation, Limited Liability Corporation, or a “C” Corporation).

  • Be certain that you have not only a power of attorney, but the correct power of attorney.  There are basically two types of powers of attorney. One is for health care and one is for financial care. The Financial Power of Attorney can be general or durable and either one of those c [pic] an either be current or springing. Basically the durable is preferable because is endures beyond the incompetence of the principal, (the one who gave the power to the agent). The springing power of attorney becomes effective when the principal becomes incompetent. The immediate power of attorney is effective immediately upon signature of the principal. Which is appropriate for you depends on your circumstances. However, because of its tremendous potential impact, the type of power of attorney and choice of agents should be closely monitored.

  • Make sure that the Health Care Powers of Attorney was not signed prior to 1992.  The second kind of Power of Attorney is the Health Care Power of Attorney. This is an important part of the estate planning documents, but be sure the one you have is not dated before 1992. Prior to that date all powers of attorney had an expiration of seven years or less. Obviously, they have all expired now and need to be reissued. The new Health Care Powers of Attorney do not need to have an expiration provision in them. A common companion to the Health Care Power of Attorney is a document called a Directive to Physician, commonly called a Living Will. These documents, if signed prior to 1992, also had an expiration clause of five years in them. Again, the new version does not have an expiration clause. Consequently, if updated and properly signed, will last your lifetime.

  • Make sure that the individuals appointed to serve in various capacities in the documents are still willing, able, and the choice of your loved one.  The person chosen to be in charge in a trust is called a Trustee. Often times, people will choose Trustees who made sense at the time, but some years later, those Trustees may have moved away, the relationship with them may have deteriorated and/or it might be more appropriate simply to choose somebody else as the Trustee. When choosing the new Trustee, make certain that the companion Will to the document, wherein you name Executors, is consistent with the Trustees. If there are young children, Guardians for these minors should also be nominated in the Will and these need to be reviewed possibly more often than other representatives as these are the people who will be raising the children. As we all know, children’s needs change and so does the willingness of people to serve as Guardians. In addition, the agents under the Health Care Power of Attorney and Financial Power of Attorney should be reviewed and analyzed. Make sure that the person making life and death decisions at the hospital is on good terms.

  • Analyze the distribution schedule to see if it’s still appropriate with the circumstances.  Sometimes it makes sense to distribute the assets outright free of further trust and sometimes it doesn’t. If there are younger children, it wouldn’t be appropriate to deliver the assets to these minors or to young inexperienced children. Assets can be held in a trust for a number of years until the desired age is attained with discretionary distribution for emergency needs such as health or education. Sometimes the purpose for placing the assets in the trust for the benefit of children is to avoid their creditors. This can be done so that the children have access to the funds but nobody else does, (i.e. lawsuits, divorce situations, creditors, I.R.S., etc.).

Excerpted from THE FINAL JOURNEY – What to do When Your Loved One Passes Away

by Ravi Sahay, The Final Journey Seminars

What to do When a Loved One Passes Away

Woodland Hills Long Beach Orange County

San Mateo  

Living Trust or Testamentary Trust

Revocable or Irrevocable

Trust and Companion Documentation

Asset Protection


Power of Attorney

Health Care Powers

Review Appointed Individuals

Analyze Distribution Schedule