Although many people use the phrase "estate planning" to refer to creating a trust or will, the process actually involves much more. A comprehensive estate plan addresses:

• Management of your assets, if you become unable to do so for yourself
• A method for making medical and personal care decisions for yourself and your minor children, if you lose the ability to make such decisions yourself
• The distribution of your assets to your beneficiaries after your death
• Minimization of the administrative and tax costs of transferring your assets to your beneficiaries

A living trust or a will is often the cornerstone of an estate plan, but addressing all estate planning goals usually requires several additional documents.

A will is perhaps the most common estate planning document, and the one with which most people are familiar. A will, sometimes called a "Last will & Testament," is a legal document that directs distribution of your assets to your beneficiaries. In addition, your will also identifies the Executor you have selected. The Executor manages and distributes your estate after your death. In California, the Superior Court usually supervises the Executor through a probate proceeding. Your will may also name a person to care for your children, if any of your children are still minors at the time of your death. That person is called a guardian.

A will becomes irrevocable upon your death. That means that you may change your will as often as you like during your lifetime, but that upon your death, the terms of your will cannot be changed.

For a will to be valid, it must be drafted and executed in compliance with the laws of the State where the person making the will, called the Testator, is living.

Generally, your will only controls distribution of assets that you own that are titled in your name alone at the time of your death. Common assets that are usually not controlled by your will include retirement plans, joint tenancy assets, "payable-on-death" assets, and life insurance. Each of these is discussed below.

Investments you hold in an IRA, a 401(k), a 403(b), or in other qualified retirement plans are distributed to the person(s) you have named as beneficiary in the plan documents, regardless of what your will might otherwise direct. Your will controls distribution of retirement benefits only if you have not named any beneficiaries in the plan documents, or if the beneficiaries you have named in the plan documents die before you die, or if you name your estate as your beneficiary in the plan documents. The last scenario—naming your estate as your beneficiary—may create negative tax consequences for you. Accordingly, you should only name your estate as beneficiary of your qualified retirement plans after consulting with a qualified professional to advise you on the tax consequences.

Assets you own with another person as a joint tenant, such as real estate, bank accounts, automobiles, and securities, will pass to the surviving joint tenant upon your death. The provisions of your will control distribution of joint tenancy assets only if you are the last of the joint tenants to die. However, if you jointly own property with another person as tenants in common, rather than as joint tenants, your will controls distribution of your interest in the property (but not the interest of the other owner(s)) regardless of whether you die before or after the other joint owner(s) die.

Some bank account, securities accounts, and U.S. Savings Bonds may be held with a beneficiary designation such as "payable on death" (i.e. "POD"). Bank and securities accounts may also carry the designation "In Totten trust For" (i.e., "ITT For") or "Transfer on Death to" (i.e., "TOD"). These assets will pass pursuant to those designations, and not according to the terms of your will, unless the designated beneficiary dies before you die. If the designated beneficiary predeceases you, your will controls distribution of such assets.

Insurance proceeds on your life are paid to whomever you have designated as beneficiary of the policy in the form you file with the insurance company. If all of the persons named as you beneficiary die before you die, the proceeds will be paid to the person(s) as set forth in the boilerplate language of the insurance contract. Most insurance contracts direct for payments to your estate when all of your beneficiaries die before. In such case, your will controls distribution of the proceeds.

The requirements to create a valid will vary from state to state. In California, you may create a valid handwritten will, called a holographic will, provided that you comply with all legal requirements. To be valid in California, a holographic will must:

• Be in your own handwriting (i.e., you cannot dictate your will to another person or have someone copy it for you)
• State that you intend for the document to be your will
• Clearly state what you are leaving and to whom
• Be legible
• Be signed by you

You do not need to have your holographic will notarized. You may want to have your will signed by two witnesses; however, this is not a legal requirement. You should also date your will, but this is not a legal requirement either.

A living trust, also called an inter vivos trust, is a legal entity that you create during your lifetime to hold your assets for your benefit while you are alive. Following your death, your living trust directs distribution of your assets to your beneficiaries.

Living trusts afford several benefits, including:

• Management of Assets During Incapacity without a Conservator
  A living trust provides for the management of your assets during your lifetime if you lose capacity to manage for yourself. If you become incapacitated, the person you have named as successor trustee can usually assume responsibility for your assets and manage them for your benefit without the appointment of a conservator by the court.
• Avoidance of Probate
  After your death, your successor trustee pays your debts, claims, and taxes, and then distributes your assets to the persons you have named as your beneficiaries in your living trust. The successor trustee is able to settle your affairs usually without court supervision and without the need for appointment of an Executor by the court.
• Privacy
  Because creation and proper funding of a living trust generally precludes the need for court intervention during your incapacity and after your death, your finances and estate plan never become public.

If you have established a living trust prior to becoming incapacitated, you can generally avoid the necessity of a court-supervised conservatorship. If you are acting as your own trustee and become incapacitated, the person you have named as your successor trustee will assume responsibility for managing your assets for your benefit. Because the trustee is authorized to manage your assets held in trust for you, there is no need for the Superior Court to appoint a conservator.

When you die, assets titled in your individual name are generally subject to the jurisdiction of the probate court. In California, the probate court usually supervises the payment of creditors, inventory of assets, sale of real property, and distribution to beneficiaries. Because of the significant court involvement, probate administration costs are significant. In California, the fees for the personal representative of the estate and for the personal representative's attorney are fixed by law as a percentage of the value of the estate. The total of these fees plus other administrative costs typically exceeds six (6) percent of the gross value of the estate.

By contrast, a living trust avoids some of the expenses and delay associated with probate administration. Assets held in your individual name at the time of your death are subject to the jurisdiction of the probate court. Assets held in your living trust are not. Therefore, if you transfer title to virtually all of your assets into your living trust while you are alive, the probate court will not have jurisdiction over your estate when you die. In other words, when you die, you leave nothing to probate because your assets are "owned" by your living trust.

Because assets held in a living trust are not subject to probate administration, the person administering your estate after your death does not need to file a petition with the court and wait for appointment at the court hearing several weeks later before acting to settle the estate. Instead, the person administering your estate, called the successor trustee, can assume control of your trust immediately upon your death. The successor trustee can begin payment of debts and taxes at once. Further, the successor trustee often can make distribution to your beneficiaries more readily than a court-supervised executor can.

Living trust are generally more expensive to create than a will because creating a living trust involves more steps than creating a will. Both involve creating and signing estate planning documents. However, trust documents tend to be more voluminous than wills and sometimes more expensive to prepare. In addition, once your trust is signed, it must then be funded. "Funding" refers to transferring assets out of your name and into the name of your trustee. You must sign and record deeds to transfer real estate. You must also transfer accounts at banks, savings & loan associations, stock and bond brokerages, and securities held in your own name to your trust.

Occasionally, dealing with third parties can be complicated when your assets are held in a living trust. Lenders, for example, may require you to remove your home from your living trust in order to refinance your mortgage.

Because living trusts are not court-supervised, an unscrupulous trustee may have a greater opportunity to take advantage of you and your beneficiaries than a court-supervised executor would.

No. Creating a living trust does not, in and of itself, save estate taxes. A living trust may contain provisions that postpone, reduce, or even eliminate estate taxes at your death. However, these same provisions can be included in a will.

No. Creating a living trust has no effect on your income tax liability during your lifetime. Further, transfers of California real estate into your living trust are exempt from reassessment under Proposition 13.