The Basics of Estate Planning
Updated: Jan 5, 2022
Estate planning is a term that most people have heard, but not many people understand exactly what an estate plan is or the advantages of using this planning technique. In this article I will discuss the basics of modern estate planning and why it is important to work with a qualified estate planning attorney to create your estate plan.
What is Estate Planning?
Everyone has an estate which includes everything they own: a vehicle, a home, other real estate, stocks, bonds, and other investments, business interests, life insurance, bank accounts, etc. Some people may have large estates and others may have smaller estates, but everyone can benefit from having an estate plan in place for when the unexpected–and expected–happens.
Estate planning is developing a strategy to manage the financial security of individuals during their lifetime and to ensure the desired transfer of property and assets at their death. However, estate planning encompasses more than just determining who will inherit certain assets, and should include a will or living trust, healthcare powers of attorney, and financial powers of attorney.
A properly drafted estate plan can ensure asset protection for beneficiaries, defer or avoid taxation of the estate, avoid lengthy and expensive court involvement (including avoiding probate and guardianship proceedings), and provide instructions for the seamless management of your estate during your lifetime, while you are incapacitated, and/or after your passing.
Simply put, your estate plan is a packet of detailed instructions for your trusted successors to follow when you are unable to carry on your own affairs (either through incapacitation or death). It is a gift to those who survive you during a time of immeasurable grief.
Do I Need An Estate Plan?
Ask yourself the following questions:
Do I have young (minor) children?
Do I own real estate?
Do I own a business?
Do I want non-relatives (i.e., friends, significant other, charities, etc.) to inherit part of my estate?
Do I want to provide specific instructions regarding how my assets should be distributed and when?
Do I want my friends and family to avoid a lengthy, expensive court process to inherit my estate?
If you answered “yes” to any of the above, then you need an estate plan! If you answered “no” to all of the above, then you may not need an estate plan now, but if at any time one or more of the above applies to you, then you should consult with an experienced California estate planning attorney.
Will My Estate Plan Avoid Probate?
Probate is the court-supervised collection and distribution of a decedent’s estate. In California, the current time to complete probate can be up to two years and includes attorney fees which are based on a percentage of the gross value of the decedent’s estate. For example, an estate worth $1,000,000 can expect to pay attorney fees of at least $23,000 during probate.
There are two primary types of estate plans available in California: will-based estate plans and trust-based estate plans. Individuals with no estate plan or with a will-based estate plan will be subject to probate. Only trust-based estate plans will avoid probate in California.
Do I Need to Update My Estate Plan?
Yes! Establishing your estate plan is a great first step, but your estate planning documents need to be updated as your financial or familial circumstances (or relevant laws) change. You should review and consider updating your estate plan after marriage or divorce, after the addition of a new family member, after the acquisition of a new home or investment property, after starting a new business, or after a sudden increase in your net worth.
Estate planning is a tool that should be in everyone’s pocket. It is important to work with a qualified estate planning attorney who you trust to guide you through the estate planning process. Although self-drafted estate plans can provide up-front savings, they often result in undesired consequences, which a qualified estate planning attorney would have avoided. This further results in time costs and attorney and court fees which will easily exceed the fee you would have paid for a qualified estate planning attorney to properly establish your estate plan.
To learn more about estate planning, contact Brennan Law Office at (949) 329-2989 or e-mail Irvine estate planning attorney Kayla M. Brennan directly at kayla@brennan-lawoffice.com.