Estate planning basics:
5 important things everyone needs to know
By Barbara Craig, Attorney at Law
Estate planning can be a difficult subject to think about. Nobody really enjoys talking about what happens after they die. However, taking steps to make sure your estate is handled properly after you are gone can be an incredible gift to loved ones and ensure that your wishes are honored. Before you decide whether or not you need an estate plan, here are five things you should know.
1. Estate plans aren’t only for those with mansions and inherited wealth
While you may not think of your belongings and home as an “estate”, pretty much everyone has an estate when they die. If you have any real estate or vehicles, they are part of your estate. So are bank accounts, investments, savings bonds, retirement accounts, and life insurance policies. Even jewelry, paintings, and other objects with monetary value are all part of your estate.
2. Estate plans can help your loved ones avoid probate
If you die owning real estate worth more than $50,000 or other assets that total $150,000 or more, probate is mandated by California law — unless your estate is held in trust, as in a well-designed estate plan. The probate court process can take 9 to 18 months, and many probate cases can drag on for even longer. Probate court records are also open to the public, so your heirs will have no expectation of privacy about the gifts they receive from your estate. This information is often used to target beneficiaries for financial and investment offers, insurance policies, real estate opportunities, and other solicitations which are not always in their best interest.
3. Estate plans can save your heirs the cost of probate
The expense of the probate process can be eliminated with an estate plan which has been properly prepared by a qualified attorney. The attorney’s and executor’s fees come out of the estate as well as probate court costs, all of which are set by state law based on the value of the estate, and can be quite substantial. Having an attorney draw up an estate plan costs significantly less than these fees. In fact, for someone with a $750,000 estate – which is about average for homeowners here in the South Bay – the savings could be $30,000 or more vs. the fees and costs associated with probate court. This is a tremendous benefit to those inheriting the estate, and makes sure more of the wealth you worked hard to build goes to your loved ones.
4. Estate plans can provide for minor children
Estate plans are much more comprehensive than a simple will. If you have minor children and are concerned about their well-being in the event of your passing, an estate plan can be prepared to make sure they are taken care of. Funds can be designated so that their living expenses, education costs, and maintenance expenses are paid for, and guardianship documents are prepared so specific people are appointed to have charge of them, rather than leaving it up to state agencies to make these decisions.
5. Estate plans can go into effect before death if you are incapacitated
While a regular will and testament is only executed upon someone’s death, an estate plan can be set up to avoid court-appointed conservatorship if you become incapable of making medical or financial decisions. You can designate someone you trust to manage your affairs and make end of life decisions, disburse funds, and perform other important tasks you are unable to do for yourself.
If you decide that an estate plan is the best way to protect your interests and those of your heirs, you should find the right attorney to prepare the necessary documents for you. Online forms are one-size-fits-all and should be avoided. While a family friend who is an attorney is permitted to prepare estate plans, they may have no real experience in putting together a plan. Instead, look for an attorney who has specific expertise in estate planning and related areas of law.