Estate planning is crucial for your parents and you, and time may be running out.
California estate planning attorneys talk a lot about the importance of getting a living trust. And there are good reasons to get a living trust:
to prevent an expensive probate
to ensure someone is authorized to manage your finances and to make health care decisions for you if you can’t
to name guardians for your young children, and
to provide for the smooth and efficient transfer of your assets according to your wishes.
This is all true and important, but what is not often said is that it may be a bigger priority, in terms of estate planning triage, to make sure your parents have done their estate planning and that their living trust is up to date and that their probate assets have been transferred to their trust. If not, you and your siblings will be left holding the bag, and you may be stuck filing a conservatorship with the court to help your parents while they are alive and then filing an expensive probate in the court when they pass away.
Depending on your relationship with your parents, it may be easy or difficult to talk to them about their estate plan. A while back, one of my clients told me he could not talk to his 80-year-old widowed father about his estate plan because his father told him that when it came to estate planning, he considered his children the enemy. Oh!
Many parents, especially as they get older, will be open to the discussion - unless, of course, they consider you a greedy, spoiled brat who wants to strip them of all their assets and leave them homeless.
Most parents want the best for their children and want to leave a positive legacy.
If you can have the talk, your role should be more as a teacher. I’ve been a California estate planning attorney for over 25 years, and I can tell you that most people don’t know much about estate planning other than what they’ve seen on Netflix or read in a John Grisham novel.
Here is what you and your parents need to know about California estate planning:
The essential documents in a California estate plan are a living trust, a pour-over will, a durable power of attorney, an advance health care directive, and a HIPAA. The living trust can prevent probate, a durable power of attorney can prevent a conservatorship, and the health care directive and HIPAA can prevent delays in your medical treatment.
When your die, your estate may be subject to probate. In California, probate is expensive and can tie up your estate in court for a year or more. But you can avoid probate with a fully funded living trust.
A fully funded living trust means that you have transferred ownership of your probate assets to your living trust.
What are probate assets in California?
Real properties - your home and any other real properties.
Bank and investment accounts whose total value exceeds $184,500. This does not include retirement plans like IRAs and 401ks.
Assets with beneficiaries, like retirement plans and life insurance, will not go through probate if you named beneficiaries.
Your living trust names successor trustees. Successor trustees are the people you trust to administer your trust if you become incapacitated or when you pass away.
The people you named as your successor trustees need to be alive. I say this somewhat in jest, but we have administered trusts where the decedent created their estate plan decades ago and never updated them. They named their parents and brother as successor trustees, but along the way, their parents and brother died, and they never updated their documents. Now, their 50-year-old son must petition the probate court to ask the judge to appoint him as trustee.
The most pressing matter with older living trusts is that the probate assets are not in the trust. You need to transfer ownership of your assets to your living trust. This is called “funding” your trust. If you’ve never transferred ownership of your brokerage account to your trust or your current home is not titled in your trust, your estate may be subject to probate, in which case your estate plan is broken.
KEY CONCEPT. An outdated estate plan is as effective as no estate plan.
To avoid probate, your home and any other real properties must be in your living trust. For example, the current deed should say something like: John Smith and Susan Smith, husband and wife, as joint tenants, hereby transfer and convey to John Smith and Susan Smith, Trustees of the. John and Susan Smith Family Trust.
If you refinanced in the past, the title may have been transferred out of your trust and into your name. You should get a current copy of your deed from the county recorder to confirm the title. Your property tax bill will also indicate how the title is held.
Don’t ignore this. A good estate planning attorney will transfer the title of your home to your living trust when you set up your estate plan. But if you’ve refinanced once or twice over the years, your home may no longer be titled in your living trust.
The California probate threshold is $184,500. Probate only kicks in if you have bank and investment accounts that, in total, are worth more than that. To avoid probate, you need to transfer large-value bank accounts, such as your savings or money market accounts, to your living trust.
Investment accounts are what financial advisors call taxable or brokerage accounts, distinct from retirement plans like IRAs or 401ks. Investment accounts should be owned by your living trust.
Stocks owned directly in your name with a stock certificate or through a stock transfer company like Computershare are difficult to transfer after you pass away. You should move these stocks to an account with your financial advisor. Your financial advisor will be able to transfer them to your account.
By the way, in the context of estate planning, a good financial advisor is very important. He or she can ensure your assets are titled correctly and aligned with your estate plan. And when you pass away, your financial advisor will be a valuable ally in assisting your successor trustee and attorney with the trust administration.
Retirement plans, such as IRAs and 401ks, are separate from a living trust. Retirement plans have beneficiaries: a primary beneficiary, which, if you are married, will be your spouse, and contingent beneficiaries, which are usually your children. If you have named beneficiaries of your retirement plans, they will not go through probate.
The key here is to make sure you have named beneficiaries - primary and contingent on your retirement plan designated beneficiary form.
And make sure you update your beneficiaries if one of them passes away (or if you decide you no longer like your beneficiary). If you die without beneficiaries, your retirement plan may have to go through probate.
Your life insurance death benefit will be paid out to the named beneficiaries and will not be subject to probate. Most married people name their spouse as the primary beneficiary and their living trust or children as the contingent beneficiary.
Sometimes, an older person whose spouse has died doesn’t have a beneficiary. He named his spouse as the primary beneficiary when he bought the policy back in the day and didn’t name a contingent beneficiary. When his wife died, he didn’t name a new beneficiary. As a result, if he dies without a beneficiary, the insurance company may refuse to pay out the death benefit to his children without probate.
You need a durable power of attorney. If you become incapacitated and need help with your finances, a durable power of attorney will authorize your chosen to pay your bills. Without a durable power of attorney, you may need a conservatorship. Some attorneys refer to a conservatorship as a living probate (or a living hell). It’s a court process where a court evaluates whether you have lost your marbles and whether the judge trusts your son or daughter to take care of you.
You also need an advance health care directive and HIPAA. These documents authorize a agent of your choosing to make medical decisions for you if you can’t.
The agents named in your durable power of attorney and health care directive and HIPAA need to be current - not your brother or best friend who have passed away.
HOT TIP: If the agents named in your documents are dead, they can’t help you.
Under current law, most people won’t be subject to the estate tax. Believe it or not, California does not have a state estate tax. Shocking, I know. But there is a federal estate tax. However, most people won’t be subject to the federal estate tax, even if it changes in 2026.
The IRS just announced that in 2025, the lifetime estate and gift tax exemption will increase from $13,610,000 to $13,990,000. Depending on who wins the November 5 election, it could drop to $7,000,000 in 2026. I wrote about how the election could affect the federal gift and estate tax here.
Unless you have a large estate, the estate tax will not be an issue.
Now is the time to have the talk. If your parents have never done their estate planning, they need to. And if they signed their estate planning documents before iphones were invented, their estate plan is most likely out-of-date and broken.
You are on the clock. Once it’s too late, it’s too late.
If your parents do not have a living trust, you will suffer the consequences. If you can, you need to encourage them to do their estate planning.
Your parents need an updated living trust estate plan to avoid conservatorship and probate.
Protect yourself when helping your parent.