5 Reasons Why You Need an Estate Plan

by | Feb 19, 2024 | Uncategorized

5 Reasons Why You Need an Estate Plan

If the 5 reasons below resonate with you, contact us to schedule a free consultation to help you create an estate plan or to revise a current plan.

1.) Choose who gets (or does not get) your assets after your death.

If you do not take the time to make your wishes known, California law will determine how your assets are divided and distributed. Making this determination ahead of time can also prevent family disputes after you pass.

2.) Set up a mechanism so that a loved one can care for you and manage your assets in the event of incapacity without court involvement.

A thorough estate plan will put a mechanism in place to shift control of your assets to a carefully selected individual in the event that you become incompetent or incapacitated. If you have not made this determination ahead of time, it will be up to a court to appoint your conservator – an expensive and public process.

3.) Avoid the time and expense of probate.

Probate is the legal process that occurs after your death when a court distributes your assets according to your last will and testament. Probate is a public process and the fees an attorney can charge are written into state law (Probate Code § 10810). Shockingly, these fees are based on the gross value of your estate without taking into account mortgages or other encumbrances. Plus, if you executor hires an attorney, they each can take the full statutory fee. With proper estate planning, a full probate can be avoided, saving time and expense. While it is usually advisable to avoid probate, note that there are situations where probate is appropriate, for example if you have creditor problems or a very complicated estate.

The current statutory fees on gross probate assets are:

  • 4% on the first $100,000 = $4,000
  • 3% on the next $100,000 = $3,000
  • 2% on the next $800,000 = $16,000
  • 1% on the next $9,000,000 = $90,000
  • 0.5% on the next $15,000,000 = $75,000

4.) Taxes.

Simply put, the federal government wants to tax every transaction or gift that occurs. Fortunately, current tax law provides a transfer tax exemption for up to $11,400,000 per person, making death tax inapplicable to most ordinary Americans. Capital gains tax, however, still plays a very important role in a thorough estate plan. A poorly planned estate may neglect to achieve favorable capital gains treatment at death, or it may improperly allocate assets that will appreciate into a trust that will not receive a basis adjustment at death. Additionally, a poorly planned estate may fail to consider the ability of Californians to preserve their property tax basis for the next generation.

5.) Nominate guardians for your children.

In either your Will or a stand-alone nomination of guardian, you nominate a person or persons to be the guardian of your minor children should something happen to you and your spouse before they reach the age of majority. If your assets are put into trust, your children’s trustee will distribute trust assets to the guardian so they can be used to benefit your children, and the terms of the trust would control how the funds are to be spent and at what age or ages they are finally distributed outright, if ever.

To learn more about estate planning click here.

This article is intended for general informational purposes only. It does not constitute legal or tax advice, and no attorney client relationship is implied or formed by this article. You should always consult with a tax professional or attorney before taking any action. The information on this website is considered LEGAL ADVERTISING under applicable California law and may be considered advertising under your state’s laws and ethical rules. The responsible member for this advertising is D. Andrew Brown of Essayli & Brown LLP.