Overview of Estate Planning

What Your Estate Plan Should Do

1. Direct the Disposition of Your Estate
At the very least, your estate plan should direct the distribution of your property to whomever you would like to receive your assets at you death. If you die without a will, you are considered to have died intestate. In California, if you die without a will, the state has a statutory scheme called intestate succession directing who will receive your property at your death. Intestacy laws are rigid and objective. It is conceivable the intestacy laws will not reflect your actual wishes and your property will be distributed to someone you would not have chosen as a beneficiary had you done some minimal planning.

You can designate to whom you want your property to be distributed at your death by drafting a will. However, you cannot direct disposition of your interest in certain assets such as joint tenancy property and beneficiary designated assets (ie: life insurance, retirement plans, employee death benefits, etc.) unless your estate is the designated beneficiary (see Alternatives to Planning).

You must be 18 years of age and of "sound mind" to create a valid will. Other than a holographic will, your signature must be acknowledged by at least two competent witnesses. In addition to dictating the manner you would like your estate to be distributed, you may also name an executor and nominate guardians for your minor children in your will.

2. Avoid Probate
The second benefit of your estate plan is probate avoidance. Whether you die with a will or you die without a will, your property will be subject to a probate proceeding to legally transfer your assets to your beneficiaries. Probate is an expensive, time consuming and public court supervised process to transfer assets. The probate threshold in California is only $150,000. If the aggregate value of your probatable assets is greater than $150,000, a probate will be necessary. The fair market value of your property, regardless of the liabilities, is used in determining if your estate will be subject to probate. For example, if the only asset in your estate is a home worth $600,000 and you owe $550,000 on that home, your estate would still be subject to the probate process. Your plan should provide for probate avoidance (see Revocable Trusts).

3. Minimize Taxes and Provide Asset Protection on Transfers of Wealth
A properly designed plan can reduce and sometimes eliminate income and transfer taxes. In addition to minimizing taxes your plan can be drafted to protect your assets for future generations. (The Marital Deduction and Utilizing the Unified Credit, Lifetime Gifts Using the Annual Exclusion, Irrevocable Trusts, Planning Using Family Limited Partnerships & Limited Liability Companies).

Your taxable estate may be larger than you think. For example, life insurance that you own is part of your estate. Consider that even with a modest estate, the assets you transfer to your beneficiaries could be greatly reduced by transfer taxes if you own a life insurance policy with a substantial benefit.

4. Providing for Incapacity
A comprehensive plan will include a Trust with incapacity provisions that coincide with the provisions set forth in a Durable Power of Attorney.   An Advance Health Care Directive should also be included.  A properly designed plan will confer upon your Trustee(s) and Agent(s) the authority and powers necessary to handle you financial affairs and your personal care in the event of your incapacity.   All without the necessity of a court supervised conservatorship or guardianship.

Choosing an Estate Planning Professional

Your estate planning attorney should not only be knowledgeable about the law and transfer taxes, but knowledgeable about you, your family, your estate and your goals. Your plan should be specifically tailored to meet your desires and needs. Your plan should be custom designed and not a cookie-cutter, one-size-fits all plan. To that end, your estate planning professional should not merely be a document preparer. You should find an attorney with knowledge, wisdom and experience who will counsel you through the process and educate you on all aspects of your plan.

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