Your estate is comprised of everything you own — your car, home, other real estate, checking and savings accounts, investments, life insurance, furniture, personal possessions. No matter how large or how modest, everyone has an estate and something in common — you can’t take it with you when you die.
When that happens — and it is a “when” and not an “if” — you probably want to control how those things are given to the people or organizations you care most about. To ensure your wishes are carried out, you need to provide instructions stating whom you want to receive something of yours, what you want them to receive, and when they are to receive it. You will, of course, want this to happen with the least amount paid in taxes, legal fees, and court costs. That is estate planning.
- Include instructions for passing your values (education, hard work, beliefs, etc.).
- Include instructions for your care if you become disabled.
- Name a guardian and trustee for minor children.
- Provide for family members who may need future protection from creditors or divorce.
- Provide for loved ones who may need future protection from creditors or divorce.
- Include life insurance to provide for your family.
- Provide for the transfer or wrap up of your business.
- Minimize taxes, court costs, and legal fees.
Estate planning is for everyone.
It is not just for “retired” people, although people do tend to think about it more as they get older. Unfortunately, we can’t successfully predict how long we will live, and illness and accidents happen to people of all ages. Estate planning is not just for “the wealthy”, either, although people who have built some wealth do often think more about how to preserve it. Good estate planning often means more to families with modest assets, because they can afford to lose the least.
If you don’t have a plan, the state has one for you, but you may not like it.
If you die without an estate plan, your assets will be distributed according to state probate law. If you have minor children, the court will control their inheritance. If both parents die, the court will appoint a guardian without knowing whom you would have chosen.
Given the choice — and you do have the choice — wouldn’t you prefer these matters be handled privately by your family, not by the courts? Wouldn’t you prefer to keep control of who receives what and when? And, if you have young children, wouldn’t you prefer to have a say in who will raise them if you can’t?
An estate plan begins with a will or living trust.
A will provides your instructions, but it does not avoid probate. Any assets titled in your name or directed by your will must go through your state’s probate process before they can be distributed to your heirs. (If you own property in other states, your family will probably face multiple probates, each one according to the laws in that state.) The probate process is very expensive and time-consuming in California. Court files are open to the public and the court, not your family, controls the process.
A revocable living trust avoids probate at death (and multiple probates if you own property in other states) and brings all of your assets together into one plan. A living trust typically saves thousands (if not tens of thousands) of dollars in probate fees, is valid in every state, and can be changed by you at any time. Assets can stay in trust until your beneficiaries reach the age you want them to inherit. A trust can reflect your love and values to your family and future generations.
Estate planning helps you organize your records, correct property titles, and make the proper beneficiary designations.
Would your family know where to find your financial records, titles, and insurance policies if something happened to you? Planning your estate now will help you organize your records, locate titles and beneficiary designations, and find and correct errors. Most people don’t give much thought to the wording they put on titles and beneficiary designations. You may have good intentions, but an innocent error can create all kinds of problems for your family at your disability and/or death. Naming the wrong beneficiary on your tax-deferred plan can lead to devastating tax consequences.
Estate planning does not have to be expensive.
If you don’t think you can afford a complex estate plan now, start with what you can afford. Then, let your planning develop and expand as your needs and financial situation change. Don’t try to do it by yourself to save money. An estate planning attorney can provide critical guidance and peace of mind that your documents are prepared properly.
The best time to plan your estate is now.
None of us really likes to think about our own mortality or the possibility of being unable to make decisions for ourselves. This is exactly why so many families are caught off-guard and unprepared when incapacity or death does happen. Don’t wait. You can put something in place now and update it later…which is exactly the way estate planning should be done.
The best benefit is peace of mind.
Knowing you have a properly prepared plan in place – one that contains your instructions and will protect your family — will give you and your family peace of mind. This is one of the most thoughtful and considerate things you can do for yourself and for those you love.
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