Planning for your death may seem a bit morbid. Yet proactive people protect their loved ones and their estates through well drafted and properly funded estate plans. A good estate planning attorney will create a comprehensive plan to address your goals and concerns. Here are the top five reasons you need to get started on your estate plan today
1. Probate avoidance.
Probate is an administrative court proceeding that may be triggered when a person passes away. This is often a lengthy and costly public process. An estate planning attorney can assist you with making sure that your assets are not subject to probate and advise you on how to properly link your current and future assets to your Trust. In California, a Trust’s primary function is to avoid probate.
2. Incapacity planning.
An estate plan should include nominations of trusted individuals to: (1) assess your needs; and (2) manage and distribute assets to you and your dependents in the event that you become incapacitated. Incapacity is typically defined as the inability to manage finances or one’s affairs. If incapacity planning is not part of your estate plan and you become incapacitated, there is a mandated court process called a conservatorship, where a judge nominates a person to make decisions on your behalf.
3. Control and shelter assets.
This allows you to have a say in how your children, loved ones, and other beneficiaries will inherit your assets when you are no longer around. In other words, you can allocate shares to be distributed to your chosen beneficiaries at different intervals or ages and you can set up incentives for certain beneficiaries. Assets are often held and managed by a nominated person or entity in the Trust you created, which means that those assets can be protected from the beneficiary’s creditors.
If you have minor children, you have likely considered and worried about what would happen if you become unable to care for them due to death or incapacity. We have already addressed money above, but where will they live, go to school, and who will look after them? We know these are unpleasant thoughts. However, if you haven’t considered that your short-tempered and self-absorbed brother won’t be the right person to take care of your kids, then you need to put together a short list of loved ones that are going to love and care for your kids. It’s a good idea to consider the prospective guardian’s geographic location and relationship to your child.
5. Tax planning.
A well-thought-out estate plan will address estate tax exposure (also known as death taxes). There is a federal estate tax and some states have their own separate estate tax. There are often income tax repercussions for beneficiaries of tax-deferred accounts like IRAs and 401Ks. Lastly, most estates have some property tax related ramifications. An estate planning attorney can assist you with making sure that your assets pass to your beneficiaries with the least amount of estate taxes, income taxes, and property taxes. Investing a few thousand dollars proactively into getting your estate plan in order will provide you with a peace of mind and substantial long-term savings. It will protect your assets and alleviate avoidable hardships for your loved ones during a difficult time.
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