1. What is Estate Planning?
Estate planning is a comprehensive process that involves individuals—your family, other relevant parties, and, in many cases, charitable organizations of your choice. This planning encompasses your assets and the various forms of ownership and titles those assets may have.
As you prepare your estate, you will consider:
- How your assets will be managed for your benefit if you are unable to do so.
- When specific assets will be transferred to others, whether during your lifetime, at your death, or at a designated time thereafter.
- To whom those assets will be bequeathed.
Estate planning also addresses your healthcare needs, anticipating your personal care and medical decisions should you become unable to manage them yourself. This planning may include financial, tax, medical, and business considerations. A will is one component of this process, but other documents may be necessary to effectively meet your estate planning requirements.
It’s important to note that estate planning is a dynamic process. As individuals, laws, and assets change, it may be necessary to update your estate plan periodically to reflect those changes.
2. What is Involved in Estate Planning?
When beginning to formulate your estate plan, I advise my clients to complete a brief questionnaire to address some critical questions during our initial meeting. These questions include:
- What are my assets, and what is their approximate value?
- Who do I want to inherit my assets, and when?
- Who should manage these assets if I am unable to do so, either during my lifetime or after my death?
- Who should be responsible for the care of my minor children should I become incapacitated or pass away?
- If I cannot care for myself, who should make decisions regarding my welfare and medical care?
3. Who Needs Estate Planning?
Regardless of the size of your estate, it is essential to designate someone to manage your assets and care in the event of your incapacity. This person should also have the authority to make healthcare decisions on your behalf.
For smaller estates, you may focus primarily on identifying who will inherit your assets after your death and designate someone to oversee their management and distribution.
For larger estates, discussions will encompass not only who will inherit your assets but also ways to protect them for your beneficiaries and minimize estate taxes due upon your death.
California law stipulates that, without proper planning, the court will appoint individuals to manage your personal care and assets. Additionally, if you pass away without a will, state laws governing “intestate succession” will dictate how your assets are distributed.
4. What is Included in My Estate?
Your estate encompasses all property or interests in property that you own. This includes assets such as savings accounts, real estate, stocks and bonds, furniture, and jewelry.
You may also hold property in various forms of title beyond your name alone. For example, joint tenancy often bypasses probate or a living trust. Beneficiary designations on accounts must also be carefully evaluated.
Assets with beneficiary designations—such as life insurance policies, IRAs, qualified retirement plans, and certain annuities—constitute critical components of your estate and require alignment with your overall estate planning strategy.
The value of your estate is determined by the “fair market value” of each asset, minus any debts, including mortgages or car loans. The total value of your estate is a key factor in determining any estate tax liability upon your passing.
5. What is a Will?
A will is a formal legal document that takes effect upon your death to:
- Designate individuals (or charitable organizations) to receive your assets, either outright or in trust.
- Appoint an executor, who is appointed and supervised by the probate court, to manage your estate, settle debts and expenses, pay taxes, and distribute your estate in accordance with your will.
- Name guardians for your minor children to ensure their care and support.
Assets solely in your name at your time of death will be governed by your will and subject to the probate process in the county where you reside.
6. What is a Revocable Living Trust?
A revocable living trust, also known as a revocable inter vivos trust, grantor trust, or simply living trust, allows the individual who establishes it (known as the “trustor,” “grantor,” or “settlor”) to modify or revoke the trust at any time during their lifetime, provided they have the requisite mental capacity.
Estate planning not only addresses your financial and asset considerations, but also encompasses your personal care and medical needs should you become unable to care for yourself. While a will is one aspect of estate planning, it is essential to recognize that comprehensive estate planning involves multiple documents and strategies to adequately fulfill your estate planning objectives.
Please take advantage of a free informational live webinar or a 1 on 1 private consultation (via Zoom call) that I have arranged for my readers with our preferred Estate Planning professionals. Click here to learn more about how you can avoid probate and register for the zoom call (information only). Use referral code Kevin Byrd Stockton Mobile Notary.(I may receive a commission for any purchase you make with Premier Estate Planning).