Estate planning isn’t just for the wealthy. What Californians should know

When one of Ravi Kalyanaraman’s colleagues died unexpectedly in March 2022, the loss rattled his workplace.

The colleague was only in his late 40s. Kalyanaraman, who works in hardware design, had worked with him for years. The sudden death prompted conversations among colleagues about planning for their own deaths. Until then, Kalyanaraman, now 58, said he had given little thought to what would happen to his own assets after his death.

“It opened my eyes in the context of what happened to my colleague,” Kalyanaraman said.

By 2023, Kalyanaraman had put together his first estate plan. Single and without children, he had to account for his San Francisco condominium, bank accounts, stocks and other assets and decide where they should eventually go.

For adults who have put off making similar decisions, estate-planning experts say the first hurdle may simply be recognizing that planning for death and incapacity isn’t reserved for the very wealthy.

“Many people don’t want to face the fact that someday they’ll no longer be here,” said Lori Trawinski, senior director at AARP’s Public Policy Institute. “It’s a really difficult thing to sit down and plan for a time when you won’t be here.”

What happens if you don’t have an estate plan?

Without an estate plan, families may have to navigate court proceedings and California law to determine who can manage an estate and how property will be distributed. The consequences can begin even before death. Without documents authorizing someone to make financial or medical decisions, family members may have to go to court to obtain a conservatorship if a loved one becomes incapacitated. Estate planning can give people more control over who makes those decisions while reducing the burden on those left to handle their affairs.

“If you don’t plan, the state of California has a plan for all of us,” said Ben Sowards, an estate-planning attorney based in San Jose.

Trawinski said the consequences can extend to seemingly mundane responsibilities.

A home may still have a mortgage, insurance and other expenses that need to be handled after its owner dies. Without estate planning in place, she said, it can take months for someone to receive the legal authority necessary to deal with the property — including paying the mortgage for a home they may live in.

Trawinski has experienced some of those complications herself while handling another person’s estate. Even something as ordinary as a car can become an issue while an estate is being settled, she said.

“It creates a lot of extra work for survivors,” Trawinski said.

And estate planning isn’t necessarily irrelevant for someone who doesn’t own a home or have substantial savings. Trawinski pointed to household possessions, jewelry and sentimental belongings people may want particular relatives or friends to receive.

“You want to have a say in who gets your belongings,” she said.

For parents of minor children, planning can also address who should care for them if their parents die.

Who needs a trust?

One of the biggest misconceptions Sowards encounters is that trusts are exclusively a tool for the rich.

A trust is a legal arrangement that holds and manages assets for designated beneficiaries. With a revocable living trust, the person who creates it generally maintains control of the assets during their lifetime and establishes how those assets should be handled or distributed after death. Assets properly placed in the trust can also avoid the probate process that might otherwise apply.

For Californians, whether a trust makes sense can depend heavily on what they own.

Sowards said he generally recommends considering a trust when a person’s assets exceed California’s applicable probate threshold of $208,850 — a threshold California uses to determine whether certain estates may qualify for simplified procedures for transferring property after death, or when the person owns real estate in the state. Whether an estate must go through formal probate depends on factors including the type of property, how it is owned and whether beneficiaries have been designated.

But creating the document alone isn’t enough. Sowards said people sometimes establish a trust and fail to actually transfer their assets into it. His home and bank accounts, for example, are titled in his trust.

“It’s important for people to understand you have to put your assets into the trust,” Sowards said.

Sowards also cautioned against a common misunderstanding about asset protection. A typical revocable living trust does not provide its creator with asset protection simply because property has been transferred into it. But an estate plan — the collection of legal documents outlining how a person’s assets and affairs should be handled during incapacity and after death — can be structured to provide protections for beneficiaries after the person who created the trust dies.

Those provisions can be useful for people who don’t want beneficiaries to receive an entire inheritance immediately. Instead of a child gaining unrestricted access to inherited assets at 18, for instance, a trust can specify when and under what circumstances assets are distributed.

Trusts can become particularly useful in more complicated families, Sowards said. As people live longer, divorce and remarry, he increasingly encounters blended families in which spouses have children from previous relationships.

Those parents may want a surviving spouse to be able to benefit from their assets while ensuring what’s left eventually goes to their own children.

Trawinski cautioned that probate itself shouldn’t automatically be treated as something to fear. The process varies from state to state, she said, and although it can be slow, her own experience wasn’t as onerous as some people imagine.

Cost is another consideration. Having an attorney prepare a comprehensive estate plan can cost thousands of dollars, depending on its complexity. For people with relatively few assets, paying for a more elaborate estate plan may not make financial sense, though they may still benefit from documents such as a will, durable power of attorney or advance health care directive.

Estate planning isn’t just about death

Estate planning can also determine what happens if someone is alive but becomes unable to make financial or medical decisions independently.

Sowards said the estate plans his office prepares generally involve four core documents: a trust, a pour-over will, a durable power of attorney and an advance health care directive.

A pour-over will works alongside a trust, allowing assets left outside the trust to be directed into it after death. A durable power of attorney allows someone else to handle financial and legal decisions, while an advance health care directive addresses who can make medical decisions on a person’s behalf.

For someone who doesn’t own real estate and whose probate assets qualify for California’s simplified small-estate procedures, Sowards said a trust may not be necessary. But he still recommends considering a will, durable power of attorney and advance health care directive.

Trawinski said people should also consider their wishes about medical treatment if they become unable to communicate them themselves, including decisions about resuscitation, feeding tubes and other life-extending measures.

Without appropriate documents giving someone authority to act during incapacity, Sowards said families may have to seek a conservatorship through the courts.

For lower-income adults concerned about the expense of preparing documents, Trawinski said free legal assistance may be available. People with complicated estates should consider working with an attorney, she said, and anyone preparing documents themselves should make sure they have been completed correctly. In Santa Clara County, residents age 60 and older can seek free help from Senior Adults Legal Assistance, a nonprofit that assists with estate planning matters including advance health care directives, powers of attorney and certain wills

An estate plan shouldn’t be a one-time decision

Creating the documents isn’t the end of the process.

Sowards tells clients to contact his office after major changes in their families, including marriages, births and divorces. Changes in a beneficiary’s circumstances can matter, too. A parent, for example, might reconsider how an inheritance should be structured if an adult child develops an addiction or is facing a divorce, bankruptcy or lawsuit.

Sowards said changes in state or federal law can also warrant revisiting an estate plan.

For Kalyanaraman, though, the lesson from losing his colleague came before any of those finer details: to not assume estate planning is something that can always be dealt with later.

“Everybody has a very optimistic view of themselves,” he said. “They think mortality is far away, but nobody really knows.”