Estate planning is preparing legal documents that express your wishes regarding your assets and family. It can help minimize taxes your heirs would otherwise pay and protect your family against costly disputes.
A good estate plan can also include healthcare directives and long-term healthcare wishes so your loved ones know what you want if you become incapacitated.
Peace of Mind
Estate planning in California, can be a morbid, boring task nobody likes to think about. However, if you do not put together a plan, your loved ones will be forced to make difficult decisions at an emotional time, possibly with a misunderstanding of your intentions.
Your plan allows you to designate guardians for children, appoint decision-makers with power of attorney or health care directives, and save your family from paying estate taxes that can reduce what they get to keep. The peace of mind that comes with knowing your estate will be handled properly offers relief that should not be ignored.
Another benefit of having an estate plan is that you can avoid the loss of privacy when your assets are a matter of public record through probate. This is especially important if you have family members who may be in financial trouble or be subject to lawsuits. This is accomplished by establishing trusts and creating documents that allow you to transfer assets without the need for public records.
A solid estate plan is designed to ensure that assets are transferred to loved ones in the manner you desire while minimizing taxes and avoiding costly challenges such as probate. It can also reduce family disputes over what is left and how it is inherited. For example, if you have blended family members, an estate plan can ensure that the biological children are cared for and that stepchildren do not receive too much. Additionally, for those with disabilities, an estate plan can set up structured trusts to allow the beneficiaries to remain eligible for public benefits, like Social Security disability insurance.
A basic estate plan includes a will, an enduring power of attorney, and a list of everything you own that has monetary value, including bank account deposits, property ownership, and life insurance policy beneficiaries. Additionally, you may consider adding transfer-on-death designations to your financial accounts to avoid paying probate fees upon your death or incapacity. Additionally, a trust structure can offer potential benefits that a will cannot, such as keeping your financial information out of the probate process and protecting privacy.
Like the Olympics track and field relay race, an estate plan requires teamwork. Just as the Olympic athletes must seamlessly hand off the baton to their teammates to win, family members must work together with each other and their attorneys when executing an estate plan.
The first step is to compile a list of all assets, including bank account deposits, home ownership and property ownership, jewelry, cars, collectibles, and even possessions of primarily sentimental value such as pictures. This list will help family members understand what is included and who receives what.
It is also important to be open about your plans – within reason. Although some individuals may fear that their family will fight over an inheritance, it is generally better to have productive conversations about your expectations and concerns for your beneficiaries before your death. It will help ensure that the proper individuals – whether they be family members or professional advisors – take over when you become incapacitated or pass away.
Like a relay team, estate planners use a series of tools to fulfill your legacy wishes. These include a will and transfer on death designations for bank accounts, investment assets, and retirement accounts. Depending on your specific situation, you may also establish trusts, which can offer substantial tax savings and provide greater control of asset distributions.
Family fights are a major issue often arising when an individual dies without a thorough estate plan. While avoiding disagreements between siblings is impossible, you can help manage expectations and reduce the likelihood of future conflict by ensuring you document your wishes in legal documents.
For example, consider a case where you want to leave your entire estate to one sibling. You might document your intentions in a will, but discussing your plans with that sibling and explaining your reasoning is also prudent. A trusted professional can help you to avoid family disputes by establishing enforceable legal documents. Those same documents can also protect your assets from future creditors.
Wills & Trusts
A comprehensive estate plan includes documents that provide for the division of assets, appointing beneficiaries, and naming guardians. In addition, an estate plan can consist of arrangements for charitable purposes and other unique family circumstances.
One important goal is reducing potential estate taxes. It can be accomplished by avoiding probate, passing assets without being subject to hefty taxes, and utilizing trusts.
Whether to use a will or a trust should be determined by the nature of an individual’s assets, the age and capabilities of their heirs, and tax planning considerations. Some individuals may benefit from using both arrangements. Gifting annually while alive can also help reduce the size of a person’s taxable estate.
A good first step in estate planning is compiling a list of everything with financial value, such as equity in property, checking, savings and retirement accounts, life insurance policies, etc. This information should be saved, notarized, and safely stored in a secure location for easy access by loved ones. It should be updated periodically to reflect significant changes in one’s circumstances.