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  • A Fresh Approach. Comprehensive Estate Planning.
  • A Fresh Approach. Comprehensive Estate Planning.
  • A Fresh Approach. Comprehensive Estate Planning.
  • A Fresh Approach. Comprehensive Estate Planning.

What is Estate Planning?

Put simply, estate planning is the process of creating and implementing a plan to make sure that both you and the people you love will be taken care of if you are ever unable to take care of yourself and your family. Estate planning involves two things: articulating and appointing. You will articulate specific wishes and will appoint specific people to carry out those wishes. The process of estate planning is summarized in this diagram:

First Step of Estate Planning: Articulate.

Second Step of Estate Planning: Appoint.

Many people mistakenly believe that estate planning is just for the wealthy, but that couldn't be further from the truth – in fact, every individual who has reached the age of eighteen years should have some type of estate plan in place, regardless of asset level. Estate planning is not merely about who gets what when you’re gone – rather, estate planning involves creating, implementing, and maintaining a plan to ensure that you are taken care of if you are ever alive but incapacitated and to make sure that your spouse and children are taken care of if you are deceased.

Many people mistakenly believe that estate planning is just for the wealthy, but that couldn't be further from the truth…

 

Dealing with Incapacity.

Estate planning involves putting legal documents in place to ensure that if you are ever incapacitated, a person of your choosing (your spouse, child, parent, friend, etc.) will be able to make financial, health care, and personal care decisions for you. Without proper estate planning, if you are ever incapacitated, your loved ones will be forced to go through a lengthy and expensive court process to get legal authority to manage your assets, pay your bills, pay for your family’s needs, consent to medical procedures for you, and make health care and personal care decisions on your behalf (for example, to terminate life support or choose an assisted living facility and health care providers for you).

What if there comes a time that you can’t take care of yourself? Without the proper documents, your family will have to go to court, spending time and money, for the right to take care of you.

 

Nominating a Guardian.

Estate planning also involves putting legal documents in place to ensure that if you are deceased, a person or persons of your choosing will raise your children. In the absence of formally nominating a guardian, your parents/in-laws/siblings/friends will be forced to petition a court (again, a time-consuming and expensive venture) for the right to care for your children. An effective estate plan can also provide guidance regarding how you would like your children to be raised and how the money available for your children’s care should be used. In addition, an estate plan can give authority for day-to-day care of your children to one individual while giving authority for financial decisions for your children to another trusted individual – thus providing checks and balances and ensuring that there is oversight regarding the money that should be used to raise your children.

How would you raise your children? An effective estate plan can provide guidance to your guardian.

 

Distributing Your Estate.

There are three options when it comes to estate planning:

1. Do Nothing.

2. Execute a Will.

3. Execute a Revocable Living Trust as the Basis of Your Estate Plan.

If you choose to DO NOTHING, this will happen on your death:

  • California law will kick in and will determine who inherits from you, how much they inherit, and when they inherit;
  • Your estate (if valued at more than $150,000) will have to go through a formal probate before it can be distributed, which will eat up your beneficiaries’ time and money;
  • Your beneficiaries may have to pay a hefty estate tax bill upon inheriting from you.

If you EXECUTE A WILL ONLY (and no revocable living trust), this will happen on your death:

  • Most likely, your minor beneficiaries will receive their entire inheritance, no strings attached, upon reaching the age of eighteen;
  • Your estate (if valued at more than $150,000) will have to go through a formal probate before it can be distributed, which will eat up your beneficiaries’ time and money;
  • Your beneficiaries may have to pay a hefty estate tax bill upon inheriting from you.

Executing a REVOCABLE LIVING TRUST allows you to avoid the pitfalls described above for people who either take the “do nothing” approach or who only execute a will. In addition to avoiding probate and minimizing estate taxes, a thoughtfully prepared revocable living trust empowers you to determine who inherits from you, how much they inherit, and when they inherit. This is particularly useful if you will have minor children or young adults as beneficiaries.

In the absence of an estate plan that says otherwise, a minor child beneficiary will inherit their full share upon turning eighteen years of age. As you can imagine, receiving a large inheritance at a young age could actually harm that child by perhaps railroading plans for continuing education, not to mention encouraging unwise spending practices.

This is also often the case for young adult beneficiaries. For many young adults, they are set up for success if they receive an inheritance spread out over a number of distributions, e.g., 1/3 upon earning a Bachelor’s degree or reaching the age of twenty-five years, 1/3 upon reaching the age of thirty years, and 1/3 upon reaching the age of thirty-five years. For many young adults, wisdom and maturity develop with each successive distribution, and lessons are learned, thereby inspiring confidence in handling money and a setting them on a path toward a lifetime of success with handling finances.

An inheritance should help, not hurt, your heirs. A thoughtfully prepared estate plan helps you to accomplish this.

 

A well-designed estate plan also allows your estate to AVOID PROBATE altogether. By creating a revocable living trust and funding that trust with your assets, you are empowering your trustee to manage or distribute all of your assets on your death with no court involvement whatsoever, thereby saving time and money for your beneficiaries.

Finally, a properly-drafted estate plan empowers you and your spouse to MINIMIZE or even ELIMINATE ESTATE TAXES altogether, which, depending on the size of your estate, could save your beneficiaries tens of thousands, hundreds of thousands, or perhaps even millions of dollars of your hard-earned money.

Proper estate planning empowers your heirs to minimize or even eliminate estate taxes.

 

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