The modern centerpiece of a California estate plan is a Revocable Living Trust (RLT). In it, we appoint fiduciaries. Also called successor trustees, they handle trust assets during our lifetime. For example, if we become incapacitated or resign to act as trustee. A successor trustees also makes distributions of the trust assets to the trust beneficiaries when we die. All of this is accomplished without involvement by the probate court. A trust-based estate plan is also known as a Pour-Over Will.
RLTs & a Pour-Over Will
So whether we represent a married couple, domestic partners or an individual, we almost always include an RLT in the estate plan. Think of the RLT as a basket. Title to your home and other real property transfer to your basket. Non-qualified assets (such as savings and investment accounts) also transfer to the basket. When you die, the successor trustee empties the basket. And they distribute the trust assets to the beneficiaries. We do not transfer qualified assets such as IRAs and 401ks to an RLT. This is because of adverse IRS tax treatment. Instead, we name qualified assets as pay-on-death beneficiaries.
We also include a will as part of a trust-based estate plan. The vernacular for this will is a “Pour-Over Will.” However, we never mention that term in the will. For a couple, each spouse or domestic partner has their own will. So you may ask, “Why do I need a Will if I have an RLT?” The answer? The will serves two functions:
- A court function
- A non-court function
Your beneficiaries may find either function useful when you die.
The Court Function
With a trust-based estate plan, you probably will not use a will. Nevertheless, consider what would happen if you die. Your loved ones search for all of your assets. As a result, they could come across an asset (such as a bank savings account or an investment account not included in the RLT.) The account may not designate a “pay on death” beneficiary. In this case, the bank or financial institution would not know where to send a check. If the account is over $166,250, we file the will with the court. What’s more, we initiate a formal probate proceeding.
The probate court process could take almost a year finalize. But the goal is to obtain a court order. It is called a Pour-Over Will since you would “pour” the asset over into the RLT. The court would distribute the asset would from the trust to the beneficiaries. If the amount of the asset is less than $166,250, we could prepare a “California Small Estate Affidavit.” You would present the affidavit to the bank or financial institution. It authorizes the bank or financial institution to distribute the asset to the person making the affidavit.
Non-Court Function 
The non-court function: The non-court function of the pour over will have to do with distribution of the decedent’s personal property items, without going to court. Personal property consists of household furnishings, jewelry, stamp collections, etc. Instead of transferring personal property items to the revocable living trust, you can direct the executor of the will to make distributions of certain personal property items to certain individuals upon your death. We can do this without going to probate court. You can also attach an instruction to the will, describing who should receive which item of personal property upon your death. The nice thing about this is that you can periodically update and change the attached instruction yourself without going back to the attorney each time you want to make a change. I found over the years that family members may squabble over who gets which personal property items with such an instruction.