Top 7 Reasons Why Every Californian Should Have an Estate Plan
Estate planning is something that many people put off until it's too late. But did you know that having a comprehensive estate plan in place can provide peace of mind and protect your loved ones in the event of your passing? In this blog post, we'll discuss the top 7 reasons why every Californian should have an estate plan, as well as some of the important pieces that make up a comprehensive plan.
Key Takeaways
An estate plan will avoid probate and save on taxes
Other reasons to have an estate plan include maintaining privacy, protecting assets and avoiding family disputes
TWO MOST IMPORTANT REASONS TO HAVE AN ESTATE PLAN: AVOID PROBATE AND SAVE ON TAXES
(1) Avoid Probate
Probate is the legal process that takes place after someone passes away and involves the distribution of their assets to their heirs. Unfortunately, the probate process can be both time-consuming and costly. In California, probate can take anywhere from six months to two years, and the costs can range from 4% to 8% of the total value of the estate. By creating a trust, however, you can avoid probate altogether and ensure that your assets are distributed to your loved ones quickly and efficiently.
One of the main benefits of avoiding probate is the speed at which assets can be distributed. When assets are tied up in probate, it can take months or even years for them to be released to the beneficiaries. This can be especially frustrating for those who are counting on the assets to cover expenses or pay off debts. With a trust, however, assets can be distributed almost immediately after your passing, providing much-needed financial support for your loved ones.
Another advantage of avoiding probate is that it can save your loved ones from incurring unnecessary costs. Probate can be an expensive process, with fees often amounting to a significant percentage of the total value of the estate. This can be a financial burden for beneficiaries who are already dealing with the loss of a loved one. A trust can help avoid these costs, allowing your loved ones to keep more of the assets you've worked so hard to accumulate.
Additionally, avoiding probate can also provide more privacy for your loved ones. The probate process is a matter of public record, which means that anyone can access the details of your estate. This can be especially troubling for those who want to keep their financial information private. An estate plan, however, can keep your assets and financial information private and out of the public eye.
It is important to note that not all assets are subject to probate, like assets held in joint tenancy, payable on death accounts, or assets with a named beneficiary. But having a trust in place can help ensure that all of your assets are distributed according to your wishes regardless if they are subject to probate or not.
In summary, avoiding probate is one of the most important reasons to have an estate plan in place. A trust can help ensure that your assets are distributed quickly and efficiently, without incurring unnecessary costs and maintaining privacy for your loved ones.
(2) Save on Taxes
An estate plan can also help save on taxes. For example, if you create a trust, you can take advantage of the federal estate tax exclusion, which currently allows you to pass on up to $11.7 million to your heirs without incurring any federal estate taxes. Additionally, a trust can also help avoid or minimize state taxes.
It is important to note that California does not have a state inheritance tax. However, if you own out of state property, your estate may be subject to inheritance taxes in those states. An estate plan can help mitigate this risk by properly structuring your assets and taking advantage of state tax laws.
In addition to estate and inheritance taxes, an estate plan can also help protect against income taxes. The "step-up in basis" rule allows the beneficiaries of an estate to inherit assets at their current fair market value, rather than at the original cost basis. This can significantly reduce the taxes owed on the appreciation of the assets.
An estate plan can also help protect against property taxes. Proposition 19 allows homeowners 55 and over and disabled homeowners to transfer their primary residence's base year value to a replacement residence anywhere in California, as long as the replacement residence is of equal or lesser value. Trusts can be used to bequeath real property to those excluded from property tax reassessment, ensuring that they can take advantage of Proposition 19.
In summary, an estate plan can help save on taxes in various ways. While California does not have a state inheritance tax, an estate plan can still help protect against taxes on out of state properties, income taxes and property taxes. An experienced estate planning attorney can help you navigate these tax laws and develop an estate plan that maximizes savings for your beneficiaries.
MORE REASONS TO HAVE AN ESTATE PLAN
(3) Protect Your Assets
An estate plan not only ensures that your assets are distributed according to your wishes, but it also protects them from creditors and lawsuits. A trust, for example, can provide protection for your assets even if you become incapacitated. Additionally, if you have minor children, a trust can ensure that their inheritance is managed and protected until they reach the age of majority.
(4) Maintain Privacy
Probate is a public process, which means that anyone can access the details of your estate. This can be especially troubling for those who want to keep their financial information private. An estate plan, however, can keep your assets and financial information private and out of the public eye.
(5) Provide for Loved Ones with Special Needs
If you have a loved one with special needs, an estate plan can ensure that they are taken care of after you're gone. A special needs trust, for example, can provide for their care and financial needs without disqualifying them from government benefits.
(6) Make Healthcare Decisions Easier
An estate plan should also include an advance healthcare directive, which allows you to make your healthcare wishes known in the event that you become incapacitated. This document can also appoint a trusted person to make healthcare decisions on your behalf if you are unable to do so.
(7) Avoid Family Disputes
Unfortunately, family disputes are not uncommon when it comes to inheritance. An estate plan can help avoid these disputes by clearly outlining your wishes and providing a roadmap for the distribution of your assets. This can not only save your loved ones from the stress of a legal battle but also ensure that your assets are distributed according to your wishes.
In summary, an estate plan can provide peace of mind and protect your loved ones in the event of your passing. It can avoid probate, protect your assets, maintain privacy, save on taxes, provide for loved ones with special needs, make health care decisions, and avoid family disputes.
Creating an estate plan can seem like a daunting task, but with the help of an experienced estate planning attorney, the process can be made simple and straightforward. If you're a Californian looking to create an estate plan, it's important to find an attorney who understands the specific laws and regulations in the state. In Laguna
For more information on trusts, you can explore our estate planning practice and Resources.
CONCLUSION
Estate planning in California is a great way to avoid probate and save on taxes. An estate plan can also help your protect your assets, maintain privacy, provide for loved ones with special needs and more. With so many reasons to have an estate, every Californian should have one. Check our Resources for further discussion in this regard or schedule a strategy session today. Keep planning smarter.
Matthew Schlau is a co-founding principal of Schlau|Rogers and an estate and business planning lawyer practicing in Orange, San Diego, Los Angeles and Riverside counties. He is a husband, father, blogger, crossfitter, and really good at helping people achieve their goals.
At Schlau|Rogers, we do more than just estate and business planning, probate and trust administration. Our objective is to provide individually-tailored plans that allow you the opportunity to reach your goals, all while minimizing headaches and risk, and maximizing peace of mind.
On our blog, you'll find useful information about estate and business planning, probate and trust administration, as well as some tidbits on personal finance, taxes, and anything else we think will help minimize headaches, worry and risk, all while maximizing peace of mind.
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