Did you know that only 34% of Americans have an estate plan?
There are many reasons why people put off or altogether disregard estate planning.
Some are deterred by the discomfort that could result from thinking about the end of their life.
Some lack motivation because they are healthy and don’t foresee the end of their life being anytime soon.
Some fall victim to the misconception that they don’t have enough assets to make estate planning worthwhile.
If you are one of 34% of Americans who don’t have an estate plan, know that it’s never too late to create one. Regardless of your age or what your finances look like, it is important to make estate planning a priority.
Few people expect to contract a life-threatening illness or have an untimely death, but life is unpredictable. A comprehensive estate plan can help you be in control no matter what curveballs life throws your way.
Why Is Estate Planning Important?
What is an estate plan?
When most people think of estate planning, they think of wills and trusts, but these estate planning tools are just the tip of the iceberg.
While it’s true that estate planning allows you to leave behind instructions for who should inherit your assets after you die, it can also involve arranging for your potential incapacitation and end-of-life care, and possibly even your children’s care should anything unfortunate happen to you while they are still minors, resulting in their needing a guardian.
5 Benefits of Estate Planning
From ensuring your loved ones are financially provided for upon your death to minimizing tax obligations, estate planning has countless benefits. While creating a comprehensive estate plan may require you to invest your money and time, it is an investment that will more than pay off in the long run.
Learn about the chief benefits of estate planning from the following sections.
Estate Planning Puts You in Control
Suppose you have a stroke in the future that leaves you mentally incapacitated. If this happens, the court may need to appoint a conservator to preside over personal and financial affairs. However, if you had signed a durable power of attorney or Advance Health Care Directive as part of your estate plan, a person of your choosing would be stepping up to the plate instead, and the resulting arrangement typically wouldn’t be as restrictive as a conservatorship.
In the same vein, if someone were to die without a will, their assets would pass to their closest living heirs (which generally would be their surviving spouse and children) in a process called intestate succession, which uses a formula to determine the amount of each heir’s inheritance.
Perhaps you want your assets to pass to your heirs, but by planning out your estate, you can make specific gifts. Do you have a cause you’d like to contribute to? If so, an estate plan would allow you to leave donations to charity.
When you properly plan your estate, you maintain a degree of control, even after your potential incapacitation and death.
Estate Planning Allows Your Loved Ones to Gain Access to Your Assets More Quickly
After you die, it’s unlikely your loved ones will have immediate access to your assets since your estate generally will need to pass through the probate process, which can last anywhere from six months to a year or longer, before any distributions can be made to them. If your loved ones had been financially dependent on you in any way, this delay could cause them major hardships.
Creating estate planning documents, including a trust, can ensure that your loved ones will have more prompt access to your assets upon your death. In fact, there are some estate planning solutions, such as beneficiary designations and transfer-on-death deeds, that enable you to pass ownership of your assets to your loved ones immediately upon death. An estate planning attorney can provide you with estate planning tips to ensure your loved ones are financially provided for after your death.
Estate Planning Will Help You Plan for Your Possible Incapacitation
It’s impossible to say what the future holds. You could be perfectly healthy and competent today, but tomorrow, you could get into a car accident that leaves you incapacitated. A comprehensive estate plan takes into account such unforeseeable events.
Suppose you own a business. If you were to suddenly become incapacitated, who would run it? Who would consent to urgent medical procedures on your behalf if you were to end up unconscious? A skilled estate planning attorney will leave no stone unturned when it comes to planning for your future.
Estate Planning Won’t Leave Difficult Decisions Solely in Your Family’s Hands
There are many difficult decisions your family could have to make on your behalf at some point in the future. For example, if you were to be in a coma, how should your family handle your medical care? After you die, how should your body be disposed of?
In extreme situations like these, your loved ones will likely already be experiencing a fair amount of distress. Being forced to make a difficult decision would only add to it.
Fortunately, certain estate planning solutions, such as Advance Health Care Directives, allow you to provide instructions surrounding everything from whether to withdraw treatment if you’re in a vegetative state to whether to donate your organs after your death, so these decisions are not solely left up to your loved ones.
Estate Planning Could Help Minimize Tax Obligations
Are estate distributions taxable? Are trust distributions taxable?
If you are worried about your loved ones inheriting tax burdens, know that proper estate planning can help reduce or eliminate estate taxes after you die, as well as prevent your estate and loved ones from inheriting your tax burdens.
Suppose you were to place your assets in an irrevocable trust. This would shrink your taxable estate and allow more of your assets to end up in the hands of the people you care about most.
Taxation is a complex subject, particularly when it comes to estates. Seeking estate planning tips from a financial adviser or estate planning lawyer firm can help you keep your post-death tax obligations minimal.
What Estate Planning Documents Do I Need?
It’s understandable why so many people put off estate planning. The sheer number of documents you need to create a comprehensive estate plan can feel overwhelming, especially if you don’t know anything about them. But we’re here to change that.
In the following sections, we go over the top five California estate planning documents you need to create a comprehensive estate plan.
Will
A last will and testament is the most commonly used estate planning tool. It is a straightforward way to pass down your assets to the beneficiaries of your choosing after your death and nominate an executor of the estate, who will be in charge of making estate-related decisions and distributing estate assets to beneficiaries, among other things. Unlike some of the other estate planning documents on this list, a will won’t take effect until after you die.
Whether a person dies with or without a will, their estate will need to pass through a court-supervised process known as probate. Probate involves everything from the executor creating an inventory of your assets to the executor paying your creditors.
Needless to say, the probate process can take time, causing estate beneficiaries to sometimes have to wait a year or longer to receive their inheritances. This is one of the many reasons it’s a good idea to also include a trust in your estate plan.
Trust
While a trust often serves the same function as a will, it operates very differently. A trust is a fiduciary arrangement in which a third party, known as a trustee, holds assets for the benefit of trust beneficiaries. In other words, if you create a trust, you would need to fund it by transferring your assets into it. After that point, you would no longer be considered the owner of those assets. You, however, would be able to instruct to whom the assets in your trust should pass.
Unlike wills, trusts generally take effect upon signing. It’s also common for trust creators (called trustors, settlors or grantors) to name themselves as the settlor, trustee and primary beneficiary when they sign their trust, appointing someone known as a successor trustee to take over upon their incapacitation or death.
Because trusts generally are not subject to probate, they can allow beneficiaries to receive their inheritances faster. They also allow settlors more freedom in deciding how their assets will be distributed.
While estate assets usually are distributed to beneficiaries as a lump sum, a trust can provide for distributions to be made over time. For example, if a settlor is concerned about beneficiaries squandering their inheritances, they could provide for them to receive 25% of their inheritance on the anniversary of their death over a four-year period.
There are additional benefits of trusts. Trusts typically can generate income. For example, the trustee could safely invest trust assets in stocks and bonds, allowing for beneficiaries to potentially receive a steady stream of income from the trust. Trusts also may reduce tax liabilities.
There are numerous types of trusts to choose from, including revocable living trusts, irrevocable trusts and discretionary trusts. Find the best type of trust for your situation by working with a knowledgeable estate planning attorney.
Financial Power of Attorney
A financial power of attorney is a legal document you sign to grant another person (an attorney-in-fact or agent) the authority to act on your behalf in financial and legal matters. While all powers of attorney expire once the signer of the document (the principal) dies, when they take effect can vary based on the language of the document.
Most people opt for a durable power of attorney, which takes effect upon signing and remains in effect until their death. This is the most efficient power of attorney to use if you are planning for your potential incapacitation, as your agent will be authorized to act without taking any additional steps.
A springing power of attorney takes effect upon your incapacitation, but before your agent can act, they will need to seek a determination of incapacity from your treating physician.
A nondurable power of attorney takes effect upon signing and remains in effect for a specified time period or until you become incapacitated.
Suppose you have a stock portfolio that requires consistent management or you’re involved in a prolonged legal matter. If you have a springing or durable financial power of attorney, your agent can step in and handle these issues for you in the event you become temporarily or permanently incapacitated.
Having a financial power of attorney can eliminate the need for more extreme measures to be taken to protect your finances, such as having a conservator of the estate appointed should you ever become incapacitated. But keep in mind that to enact a power of attorney, you must have capacity. Once you lose capacity, a power of attorney will not be an option.
Advance Health Care Directive
An Advance Health Care Directive (also known as a living will) is a document that can be used to appoint a health care agent to make decisions on your behalf in the event you are unable to do so yourself, and inform your loved ones and medical providers of your preferences in regard to your health care. care agent to make decisions on your behalf in the event you are unable to do so yourself, and inform your loved ones and medical providers of your preferences in regard to your health care.
Some of the specific things an Advance Health Care Directive can do include:
- Nominate a health care agent (i.e., a health care power of attorney) and alternates
- Nominate a conservator
- Detail preferences around organ donation and disposition of remains
- Detail preferences around prolonging life
- Detail preferences around pain management
As we mentioned earlier, having detailed instructions surrounding your end-of-life care and what happens after you die can prevent your loved ones from having to make these difficult decisions on your behalf at a time when they likely will already be struggling emotionally.
Health Care Power of Attorney
A health care power of attorney is signed to authorize an agent to act on your behalf in medical matters. If you plan to sign an Advance Heath Care Directive, a health care power of attorney can be appointed using the same form.
Suppose you end up in the hospital with a traumatic brain injury. Your physicians need to perform a life-saving medical procedure on you, but because you are incapacitated, you cannot consent to it. If you’d had a health care power of attorney, your agent could have consented on your behalf.
It generally is a good idea to make your health care power of attorney durable so your agent is empowered to take immediate action in emergency medical situations like the one we mentioned above. If you opt for a springing power of attorney, your medical care could be put on hold until your agent is able to seek a determination of incapacity from your treating physician.
What Does the Estate Planning Process Entail?
If the estate planning process seems overwhelming, that’s because it can be. But working with a reputable estate planning law firm can streamline the process and help ensure there are no holes in your estate plan.
While there are countless document preparation services available that utilize estate planning questionnaires to draft your estate plan, these services rarely are able to draft a comprehensive estate plan that accounts for all of you and your loved one’s needs. While small estates may be able to get away with using this approach, most estates need to be planned out by a professional to stand the test of time.
Get the estate planning process started by using our estate planning checklist below.
Estate Planning Checklist
- Build an inventory of your assets: Take time to create a spreadsheet of your assets and their value. Assets can include money, real properties, bank accounts, retirement accounts, annuities, life insurance policies, vehicles, artwork, jewelry and more. This will help you and your estate planning attorney decide how to best structure your estate plan.
- Consider the needs of your loved ones: Do you have family members who are financially dependent on you? Do you have minor children who would need a guardian if you were to pass away? Do you have a partner or spouse who is unable to work? If your incapacitation or death would cause undue hardships for any of your loved ones, consider whether there’s anything you can do when planning your estate to reduce their burdens.
- Create your directives: Having both a financial power of attorney and Advance Healthcare Directive will help ensure your affairs are handled no matter what happens in your life. Be sure to carefully consider who you want to be your agents, as power of attorney abuse can occur, even at the hands of individuals whom you’d always found to be trustworthy.
- Select your beneficiaries: If you decide to create a will and/or trust, you will need to name beneficiaries to inherit your assets. You will also need to consider beneficiaries for payable-on-death and transfer-on-death assets, such as bank accounts and life insurance policies. Gather the contact information of your beneficiaries and be sure to know their full names, as this information will keep your estate plan free of ambiguous language.
- Seek the help of an estate planning attorney: There are many estate planning solutions available out there that allow you to create an estate plan for a fraction of the cost of working with an attorney, but there is nothing that beats the estate planning advice of a professional estate planner. If you want a rock solid estate plan that cannot be contested, minimizes tax liabilities and leaves no stone unturned, working with an estate planning firm is your best option.
- Periodically revisit your estate plan: Life is always changing. Maybe you suffered a significant financial loss. Maybe one of your beneficiaries won the lottery. Maybe you got remarried. Whatever it is, estate plans are not something you should create, lock in a safe and never look at again. Inspect your estate plan every now and then to ensure it is up to date and continues to reflect your true final intentions.
What’s the Difference Between an Estate Planning Attorney and a Probate Attorney?
Keystone Law Group exclusively focuses on probate litigation and administration, which is different from estate planning. While the two fields are closely related, probate specifically deals with the issues that can arise after your potential incapacitation or death.
For example, at Keystone, some of our most litigated cases are disputes over trusts and wills. However, we also litigate conservatorship and guardianship cases, power of attorney abuse, elder financial abuse, property disputes and fiduciary misconduct. Additionally, we assist trustees and estate representatives with trust and estate administration.
Call us for estate planning referrals.
Since Keystone exclusively specializes in probate, we will not be able to assist with your estate planning needs, but we can refer you to trusted estate planners in Southern California. On the other hand, if you have a probate issue, we likely will be able to help with that. Call us today to request a free consultation.
Elder Financial Abuse Stopped in Its Tracks
The swift action taken by Keystone’s attorneys to invalidate the QPRT and suspend the client’s son as trustee helped the client to retain her source of income during retirement. Without our attorneys’ efficient handling of this case, our client could have struggled to retire and to exercise any control over her finances, given that most of her assets were tied up in the QPRT. Our work also stopped the son from perpetrating more financial abuse against our client. While the client resided overseas, we worked hand-in-hand with the successor trustee to administer the trust and close it out.
My son, who I’d put through medical school was about to spend my entire life savings and sell my house. I had given him the legal authority to do so. He was challenging my ability to think for myself and retain legal counsel. He was playing dirty. I was lucky to have Verlan on my side. She really fought for me and eventually got the judge to void the document. Believe me when I say there is not a case Verlan can’t win
