What is Estate Planning?
Believe it or not, you have an estate. In fact, nearly everyone does. Your estate is comprised of everything you own— your car, home, other real estate, checking and savings accounts, investments, life insurance, furniture, personal possessions. No matter how large or how modest, everyone has an estate and something in common—you can’t take it with you when you die.
Estate planning is for everyone. It is not just for “retired” people, although people do tend to think about it more as they get older. Unfortunately, we can’t successfully predict how long we will live, and illness and accidents happen to people of all ages.
Estate planning is not just for “the wealthy,” either, although people who have built some wealth do often think more about how to preserve it. Good estate planning often means more to families with modest assets, because they can afford to lose the least.
Estate planning does not have to be expensive. If you don’t think you can afford a complex estate plan now, start with what you can afford. For a young family or single adult, that may mean a will, term life insurance, and powers of attorney for your assets and health care decisions. Then, let your planning develop and expand as your needs change and your financial situation improves. Don’t try to do this yourself to save money. An experienced attorney will be able to provide critical guidance and peace of mind that your documents are prepared properly.
The best time to plan your estate is now.
None of us really likes to think about our own mortality or the possibility of being unable to make decisions for ourselves. This is exactly why so many families are caught off-guard and unprepared when incapacity or death does strike. Don’t wait. You can put something in place now and change it later… which is exactly the way estate planning should be done.
The best benefit is peace of mind.
Knowing you have a properly prepared plan in place - one that contains your instructions and will protect your family - will give you and your family peace of mind. This is one of the most thoughtful and considerate things you can do for yourself and for those you love.
Why do you need an estate plan?
Too many people don’t plan. Individuals put off estate planning because they think they don’t own enough, they’re not old enough, they’re busy, think they have plenty of time, they’re confused and don’t know who can help them, or they just don’t want to think about it. Then, when something happens to them, their families have to pick up the pieces.
If you don’t have a plan, your state has one for you, but you probably won’t like it.
At disability: If your name is on the title of your assets and you can’t conduct business due to mental or physical incapacity, only a court appointee can sign for you. The court, not your family, will control how your assets are used to care for you through a conservatorship or guardianship (depending on the term used in your state). It can become expensive and time consuming, it is open to the public, and it can be difficult to end even if you recover.
At your death: If you die without an intentional estate plan, your assets will be distributed according to the probate laws in your state. In many states, if you are married and have children, your spouse and children will each receive a share. That means your spouse could receive only a fraction of your estate, which may not be enough to live on. If you have minor children, the court will control their inheritance. If both parents die (i.e., in a car accident), the court will appoint a guardian without knowing whom you would have chosen.
Given the choice—and you do have the choice—wouldn’t you prefer these matters be handled privately by your family, not by the courts? Wouldn’t you prefer to keep control of who receives what and when? And, if you have young children, wouldn’t you prefer to have a say in who will raise them if you can’t?
That is estate planning—making a plan in advance and naming whom you want to receive the things you own after you die. However, good estate planning is much more than that.
It should also:
- Include instructions for passing your values (religion, education, hard work, etc.) in addition to your valuables.
- Include instructions for your care if you become disabled before you die.
- Name a guardian and an inheritance manager for minor children.
- Provide for family members with special needs without disrupting government benefits.
- Provide for loved ones who might be irresponsible with money or who may need future protection from creditors or divorce.
- Include life insurance to provide for your family at your death, disability income insurance to replace your income if you cannot work due to illness or injury, and long-term care insurance to help pay for your care in case of an extended illness or injury.
- Provide for the transfer of your business at your retirement, disability, or death.
- Minimize taxes, court costs, and unnecessary legal fees.
- Be an ongoing process, not a one-time event. Your plan should be reviewed and updated as your family and financial situations (and laws) change over your lifetime.
Why use C.E. Harris?
Why should you hire Charles E. Harris? He has been part of the Sonoma Valley and helping families like yours with their Estate Planning since 1980. To ensure your wishes are carried out, you need to provide instructions stating whom you want to receive something of yours, what you want them to receive, and when they are to receive it. You will, of course, want this to happen with the least amount of distress and concern. Mr. Harris takes his clients needs personally and is very conscientious about the welfare of the family that his client's leave behind. Mr. Harris provides you with practical solutions to your estate planning concerns. He provides experienced estate planning services to people throughout California. Each client and each client's affairs receive close and personal attention. He helps clients with many different estate planning options.
What types of estate plans are there?
Although estate plans vary among individuals, many of the estate planning documents and concepts used are similar. List below is an explanation of some of the more common ones:
Last Will and Testament
This is the most common form of estate planning document. A will is a document whereby you express, in writing, how you want your estate disposed of at the time of your death; who you want to have manage your estate for you; as well as various other instructions. Although many people include funeral instructions in their will, it should be noted that a will is generally not admitted to probate until weeks and even months after death.
A living trust is a document whereby you convey property from your individual name to a trust of which you (or you and your spouse) are the trustee. The trustees are the only people who can manage or control the property within the trust. It is also necessary that a trust have beneficiaries. Initially, you (or you and your spouse)will be the beneficiary of the trust.
In that manner, you will owe no duty to any other beneficiaries (such as children) to account for what is in the trust. You can essentially do what you please with the trust property.
Upon your death, the trust can name the successor trustees and can provide for the division and distribution of your estate after your death. Finally, a trust can provide for the management of your property in the event you become disabled. In this manner, a trust can avoid the need for a guardianship of the estate of a given beneficiary.
Durable Power of Attorney
A power of attorney is a document by which you appoint someone (a friend, spouse, relative, etc.) to act in your place. It can be for a limited purpose, such as signing checks on your bank account, or signing a deed or mortgage for you in case of your absence, or it can be for a general purpose which essentially gives your attorney-in-fact the power to do anything that you could have done. A power of attorney is valid until it is revoked, or until the creator dies or becomes incompetent. Further, if the power of attorney is a durable power of attorney, it will be valid even after the incapacity of the creator.
Advance Directive for Health Care
This is the so-called "living will", which is not really a will at all. It is a document in which you state your intention and desire not to be connected to artificial life support in case your death is imminent or in the event you are in a terminal condition or a persistently unconscious condition. The document also allows you to designate a person, known as a health care proxy, to make health care decisions for you in the event you are unable to do so.
Generally this is used only for probate avoidance purposes. It involves conveying your real estate to someone, such as a child, and reserving to yourself the right to live there for the rest of your life. Upon your death, your interest terminates and the person or persons owning the rest of the property (the remainder) will own it all. Unfortunately, as a life tenant, you cannot usually sell or mortgage the property (other than the sale or mortgage of your life estate which has little value). Upon your death, the remainder owners usually need to file an Affidavit to legally determine your death in order to terminate your ownership interest in real estate, and may have to file a court proceeding to terminate other ownership rights you held. A life estate has become a useful way to contribute property to a charity. You can retain use and control of the property during your life, and then have the property pass to a charity after your death.
This trust, which is formed similar to a living trust, has a more limited use. You generally do not want an irrevocable trust to own most of your property because you cannot change the terms of such a trust. This form of trust is useful, however, to own life insurance since the proceeds of life insurance are of no personal benefit to you and can be taxable in your estate for estate tax purposes if you own the policy. This form of trust is also useful for charitable planning which can substantially reduce estate taxes, eliminate capital gains taxes and generate income taxes savings. Some forms of irrevocable trust can only be used to protect your assets from consideration as resources in qualifying for Medicaid. However, such a trust generally cannot be created by you and allow you to be a beneficiary since, by law, any beneficial interest you retain in the trust is fully reachable by your creditors, including nursing homes.
Pay on death designation
Many people use this option, usually provided by banks and investment companies, to allow for passage of certain property after death to designated beneficiaries. Common types of property for which this designation is used are certificates of deposit and savings bonds. Also, most IRA accounts provide for a pay on death designation.
It is the Probate Court's responsibility to ensure the probate assets are collected, maintained, and distributed among the decedent's heirs, beneficiaries, and/or creditors according to the direction of the decedent as expressed through a will and if there is no will, through the laws of the state.
For more information, contact Chuck Harris at (707) 938-3654 or firstname.lastname@example.org