If there is one aspect of the law each and every person will one day have to interact with, whether you like it or not, it is estate planning. The legal field covers all manner of preparations for your death or incapacitation, and even if you choose to neglect it at every turn, your family and loved ones will no doubt pay the price.
This article aims to make estate planning more accessible and less off putting by answering the ten most frequently asked questions about estate planning in California. Some of the answers may surprise you, including:
Even if you have never heard the term estate planning before in your life, chances are you already know what it is. Have you heard of a will? Have you seen any show where family members fight over an inheritance? Then, you are already somewhat aware of what estate planning is and does.
The term estate covers everything you own, from property like houses and cars to assets in bank accounts and companies. Planning is required because when you die, something needs to happen to all of those things. Most people generally want a say in what exactly does occur rather than leaving it in the hands of the government to decide.
Thus, estate planning is, at its most basic, the process of determining how your wealth will be distributed after your death. But taken one step further, it is also planning to avoid heartbreak and conflict for your family and loved ones.
You might be thinking, “I already have a will; that is enough…right?” but when it comes to estate planning, a will is the bare minimum, and it is often not enough to protect your family and legacy from the burden of California Probate.
Generally, the last thing you want to be remembered for is your family tearing itself up over the inheritance you worked hard to accumulate for them. Unfortunately, the California probate court system seems designed to encourage and foster just such a conflict. This is the government process in which people can question your will, contest the distribution of assets, and keep things held up for years.
Even in the best circumstances, probate in California takes months and will cost your family substantially. Depending on the total value of your estate, they could easily be looking at thirty to forty thousand dollars in fees. That's 5 digits down the drain.
Fortunately, estate planning can avoid this entirely with tools like irrevocable living trusts and pour-over wills.
If you have not spent some time preparing your estate, then you will have no say at all in what happens to your assets and property after your death.
In the best-case scenario, in which you have virtually no property at all, or the only thing you own is already set to be transferred to your spouse (and they are still alive), your family might be able to avoid probate.
This will not be true for almost anyone living in the Bay Area, however. Here, even the most humble estates are too large and will inevitably end up in Probate Court. Without a will, California law decides who your assets go to, and sometimes the answer to that is “your ex-spouse” or an estranged child you wouldn’t dream of supporting.
Unless you have been living as an Ascetic monk for the better part of your life, chances are you have accumulated enough property, wealth, and belongings to merit careful estate planning.
In terms of avoiding probate, the current threshold for estates that require probate is $184,500. This is about one-tenth of the price of the average house in the East Bay Area, which means chances are, your legacy is going to have to go through the probate grind unless you put some time and thought into your estate plan.
If, by some (very unfortunate) miracle, you happen to own a total combined amount of property and assets less than that, you might be able to escape the rigors of probate.
Do you have children? Are you planning on having children at some point? If the answer to either is yes, or if you have any reasonable amount of wealth or assets accumulated, then you should already be planning your estate.
It is never too early to start estate planning with an experienced attorney. It is easy to change things later on if your life situation or family situation changes, but it is impossible to do so once something happens to you. It can all too quickly become too late, so why delay?
Not to be confused with the concept of trust, a trust in estate planning is a tool, a document, or a contract that can be used to govern the ownership of your property or assets. Unlike a will, a trust does so while you are still alive by transferring your assets and property into the ownership of the trust.
Each trust will require a trustee to look after it and manage the assets within it (often, this will be you!) and will include extremely specific instructions for what will happen to them after your death. And there are dozens of different kinds of trusts you can use.
Some will let you set aside money for a child or relative with special needs; others allow you to shield your assets from anything from liability claims to taxes and more. Each has its own strengths and weaknesses. But the most commonly used in estate planning is probably the Revocable Living Trust.
Among all the kinds of trusts used for estate planning purposes, perhaps the most frequently called on is the revocable living trust, which is easy to set up and modify. It is called revocable because you can easily change it during your lifetime, pulling assets out or putting more in.
The “living” part of the name implies that when you do pass away, the nature of the trust changes, and whatever rules and designations you have laid out for its contents kick in. A revocable living trust makes a great tool for identifying beneficiaries and the distribution of assets, as you can go in and change those as well when changes occur in life.
When properly set up, a trust can help your family and estate avoid probate entirely. As ownership of the assets has already been passed on to the trust, they are no longer in your name and, thus, do not require going through probate to be distributed to your beneficiaries.
As the name suggests, an irrevocable trust means you cannot make any changes to it after it has been created. The assets placed in it will stay there until the conditions you wrote into it apply, such as your death. This is often done to help avoid taxes, but there are several estate planning reasons for creating an irrevocable trust.
For example, they can lower your net worth and wealth so that you can qualify for certain government benefits like long-term health-care coverage under Medicaid. Or perhaps you have dementia or Alzheimer's in your family, and you want to protect your wealth so that no one can take advantage of your potential future mental fragility to change your trust or amend your trust.
Wills and trusts will go a long way towards securing your legacy after you die, but estate planning also covers other eventualities, such as becoming incapacitated. Therefore, you will generally work on a few other key documents with your attorney during estate planning.
These might include powers of attorney to indicate who should make medical or financial decisions for you and your estate if you are incapacitated. Similarly, advanced healthcare directives can tell doctors what you would prefer in terms of reanimation and life support/sustaining care. Finally, a complete estate plan may also include personal property memorandum forms or certificates of trust.
Which documents you will want and need will depend on your preferences and objectives. Estate planning, after all, is a means for you to impose your wishes on your life and legacy while you still can, with the help of an experienced lawyer. To get started on Estate Planning In The State Of California, contact an experienced California estate planning attorney.