Clients often ask what exactly is estate planning and why do they need at least a will. Clients also wonder whether they need to think about estate planning not being rich or getting close to retirement.
The answer to all of those questions is yes. Contrary to a popular belief, all of us need to have at least a will to protect our assets and our families in case of unfortunate and unexpected events of death or disability.
Most common estate planning mistakes:
- “I will take care of this later.” Most people are inclined to postpone estate planning indefinitely. However, no one can predict when the disability or death will occur. With time health gets worse not better, and a person is a lot more likely to become disabled than to die early.
- “I have a will, so my estate plan is in order.” Having a will is better than not having anything. However, the will drafted 10 years ago may be too simple and fail to account for changes in perspectives, circumstances, people and the law. Also, the will would need to be filed with the clerk of court at death and the estate will have to go through probate proceedings before it is distributed to the beneficiaries.
- “My family will make financial and health decisions for me.” Family members may often disagree with regards to your needs and your wishes. The arguments can be expected even if all of them are doctors or lawyers.
- “I am leaving everything to my spouse. I don’t need a fancy will.” This strategy fails to take into consideration the possible remarriage of the surviving spouse, and/or loss of the estate to creditors and financial predators. As a result, this plan may fail to provide anything to the children and stepchildren.
- “I am leaving everything to my children.” Your children may still be underage when the death or disability occurs. If you die intestate, your children will be put under the care of a court appointed guardian, and there is a real danger that the support they need would be delayed while your estate goes through probate proceedings.
Can you address these issues in advance? Yes, you certainly can. All of these potential problems are resolved by having a comprehensive estate plan.
Estate planning is a process that allows you to control and protect your property while you are alive and well, and enables someone else to take care of you and your loved ones if and when you can’t. Estate planning also let’s you give what you want to whom you want, how you want and when you want, without delays or intrusion to your privacy at the lowest possible cost to you and your loved ones.
What are the questions that estate planning helps to answer? Estate planning takes the guesswork from your family regarding your wishes. It lets them know what and when to do, and how to pay for it in case of death or disability. In addition, estate planning takes care of the proper authorization for all such actions. Proper estate planning provides for your family and protect your estate and privacy from probate.
What is your estate? Your estate consists of
- Cash, Savings, and CD’s.
- Stocks, Bonds, and Mutual Funds.
- Life Insurance and Retirement Plans.
- Homes, Vehicles, Boats, and Planes.
- Investment and Rental Properties.
- Jewelry, Furniture, Tools, and Antiques.
- Essentially – All of your stuff!
Who is in your estate?
- Your spouse and children;
- Your extended family;
- Your church and other charitable organizations;
- Any other third parties you include.
What documents should you include in your estate plan? The complexity of your estate plan will depend on the size of your estate and your individual circumstances.
Common estate planning documents during a person’s lifetime regardless of age or estate include:
- A stand-alone will, or a will and a trust.
- Durable (financial) power of attorney.
- Healthcare power of attorney.
- Living will.
- HIPAA authorization.
- Designation of a stand by guardian.
- Medical consent for minor.
Advanced estate planning documents consist of:
- Credit Shelter/ Marital Deduction Trusts.
- Irrevocable Life Insurance Trusts.
- Dynasty Trusts.
- Asset Protection Trusts.
- Charitable Trusts.
- Custodial Accounts for Minors.
- Business Succession Planning.
- Family Limited Partnerships.
- Pet Trusts.
- Special Needs Trusts.
If you have questions regarding estate planning options best for you and your family, contact San Diego Tax Law Group today.