Hello, everyone. This is Robert Mansour. Today I want to make a brief video about the fundamentals of estate planning. I have my handy dandy whiteboard here. I'm going to give you like a "macro view," a "flyover" view of estate planning and what the basic components are all about.
In most estate plans, there are legal tools that we can create that can help you and your family in case something goes wrong. I call this the "legal toolbox." Inside this legal toolbox are a whole bunch of tools that people can reach for in case this happens, or this happens, or you pass away, or you have dementia or Alzheimer's disease, or you're in a car accident, etc. Sometimes we need to have legal tools to help ourselves, and to help others help us. A lot of people don't have a legal toolbox. If you don't have a legal toolbox, you might find yourself in court, seeking an order from a judge. If you have all these things set up in advance, you don't need to involve the court. You already have the legal tools that you need.
There are four major tools in most estate plans. The first one is this - The living trust. The living trust is the first major tool. A lot of people think the living trust is the estate plan. No, it's not. People call me all the time and they say, "We need you to do our living trust," and I say, "Do you mean an estate plan?" They're like, "Oh no, no. Just, just the living trust." I tell clients, "That's like buying the engine of the car and nothing else. No steering wheel, no wheels, no seats, no nothing." This is just a part - It's a big part - but it is a part of the estate plan.
The living trust has three major players in it. The first major player is someone called the "settlor." If there's two of them, they're called the "settlors." The settlors are the people who create the trust. You will always be the settlor of your own trust. The next cast member, if you will, are the "trustees." The trustees are the people who are in charge of the trust. In the very beginning, you are going to be your own trustee, or a married couple would be their own trustees.
After you pass away, or you can no longer handle your own affairs, you name people called "successor trustees" to manage your trust. The person who is the trustee, they get to manage every thing inside the circle. When I say "inside the circle," I mean that title to the asset actually says, "Smith family trust" or "Johnson family trust." The title on the asset has to be changed in order for something to be "in" your living trust.
The final cast members of the living trust are the people called the "beneficiaries." The beneficiaries are the people who benefit from the living trust. In the very beginning, that's going to be you, whoever sets up this trust. You're the settlor, the trustee, and you are also the beneficiary.
Before I get to the next one, I want to talk about three main reasons people set up a living trust. The first reason is this: Everything in the name of your trust avoids the court system. The reason it avoids the court system is because you've taken care of things in advance. Number 2: Your successor trustees (the people that you name) in the order that you name them are allowed to manage everything in your trust - Not anybody who wants the job, only the people that you've named. Finally, number 3: There are rules of your trust. At the end of the day, this is a legally enforceable document. What it says has to be followed. You get to set out the rules as to who gets what, and how they get it, and when perhaps they don't get it. The living trust can be a very powerful tool.
The next tool in our toolbox is something called the will. The will that goes with the trust is not any kind of will. Most people have a will that says, "Johnny gets this, Sally gets that, Vinny gets this, my brother Skippy gets that." Your will is going to do one thing only. It's going to direct everything back to your living trust. In fact, we call this type of will a pour-over will because everything "pours over" back into the trust.
People say, "Why would I even need this thing?" Here's why: Remember, I told you that assets in the trust avoid the court system. However, sometimes you might find an asset that was not in the trust. For some reason or another - a clerical error, you forgot, you didn't get around to moving that asset into the trust. The will catches that and directs it back into the trust. The person in charge of your will, by the way, is called your "executor." The person in charge of the trust is the "trustee." The person in charge of the will is the executor.
The next major tool is something called the power of attorney. The power of attorney is the next major tool. This person is called your "agent." Power of attorney simply means the following: You appoint someone, usually your spouse or a friend or a family member, as your agent. They get to act on your behalf in many different circumstances. Sometimes people tell me they say, "Wait a minute. That sounds like the trustee. Isn't the trustee acting on my behalf?" The answer is yes, they are. However, there are many things in our lives that have nothing to do with our trust. For example, let's say my wife needs to speak to my former law firm, my former employer, and she needs to get information. That's not part of the Mansour family trust. That's just some kind of HR file. She needs to act on my behalf. She can do so with a power of attorney. Or she needs to speak to a credit card company, or you need to help somebody with X, Y, or Z. You may need to use this tool to do that.
The final tool in the toolbox is called the Advance Health Care Directive. As the name implies, this person is also called your agent, this person makes health care decisions for you if you cannot. The thing that most people think about when I talk about this is they say, "Oh, this is the 'pull-the-plug' person." I'm like, "Well, kind of...I would say it's about 20% 'pull-the-plug' and 80% 'advocate'." There are going to be times when you are sick, when you need people to advocate for you. You need people who are going to get answers, talk to doctors, talk to hospital staff, make difficult decisions. These people that you've chosen, in the order that you choose them, get to serve in that capacity. Sometimes this is a very tough job.
There you have it. This is a macro view of the basic components. There are others, but these are the big four tools that go into most estate plans. I hope you found this helpful. If you'd like, you can call my office at (661) 414-7100 and set up an appointment to set up your own estate plan. Thank you very much.