What is an Estate Plan? Do I need one?

As an Estate Planning attorney, the question I hear most is, “what exactly is an Estate Plan?”  I am always happy to hear clients ask this question because it gives us an opportunity to really educate our clients and it tells me that the clients are eager to learn and be proactive in protecting their family and their assets.  An Estate Plan is a set of documents created for the benefit of an individual or a family, that allows them the ability and discretion to control their assets, healthcare and financial decisions while they are 1) alive and healthy, 2) upon incapacity, and 3) after they have passed away.  By setting aside a small amount of time, individuals and families can, through the proper estate plan, ensure that their money and possessions are passed down to whom they want, when they want, all while avoiding unnecessary attorneys fees, court costs, and taxes.

Generally, what is included in an Estate Plan?

For the average individual or family, an Estate Plan typically includes a Revocable Living Trust, Durable Powers of Attorney, Advanced Health Care Directives, Pour Over Will (with guardian provisions), Living Wills, and HIPPA Authorizations.  That being said, each individual or family should have an Estate Plan tailored to their own specific needs and wishes.

How will an Estate Plan benefit me and my family?

Each individual and family has unique issues and circumstances that makes it essential for them to speak with an experienced attorney to fully understand their options and take full advantage of the fully customizable Estate Plan documents. However, if you’re like me, you need an example to better visualize and understand how an Estate Plan can benefit you and your family.

Let us suppose that a hypothetical husband and wife (the Smiths) who live in California are considering talking to an Estate Planning attorney but are not sure why exactly they should or what benefits that would bring them.  Let us further assume that the Smiths have two children, ages 10 and 7, and own a home in San Diego worth $600,000.  Some common concerns that the Smiths might want to address are:

  1.  What will happen to the young children should the parents pass away unexpectedly or become incapacitated while the children are under 18 years of age?  Who will be their guardians?
  1.     Who would the Smiths like to receive their assets and property once they pass away?  (These are usually referred to as the beneficiaries).
  1.     Assuming they wish for their children to be the beneficiaries, at what age and what increments should they receive the funds of the estate?
  1.    Will their estate have to go through Probate? (A legal process where a court decides how your assets will be divided and who they will be given to. This is a costly, public, and time consuming process that reduces the total value of the estate. In California, a few of the ways an estate can avoid the full probate process are: by holding assets in a trust, or if the total value of the estate is under $150,000.00 (Cal. Prob. Code §§ 13050, 13100) or with real property valued under $50,000.00 Code (§§ 13200 to 13208).

These are just some of the biggest concerns; however, there exist many more important issues and concerns that individuals and families face each day as a result of not having a comprehensive estate plan at the time of incapacity or death of a loved one.

How will the above issues be resolved by attaining an Estate Plan?

  1. 1.    Perhaps the most important benefit of an Estate Plan is the ability to provide for and ensure that young children are taken care of should the parents become incapacitated or pass away.  An Estate Plan will allow parents to select whom they wish to become guardians of their young children.  That is not to say that a Court in California wouldn’t select the same individuals, but remember, that a Court might also select someone whom you would never select yourself.
  1.     People work hard their entire lives to save money, buy a home, and purchase property that make their everyday lives more enjoyable.  As such, they should have the ability to ensure that all of their possessions are passed down to the people they select.  Perhaps the Smiths want all their assets to go to their children but don’t wish for them to squander it all away due to grief or immaturity.  With a proper Estate Plan, they can select how, when and at what increments their children will receive funds.
  1.    According to the San Diego County Court Website, “probate” is defined as follows, “Probate is the court-supervised process for identifying and gathering the decedent’s assets; paying taxes, debts, and expenses; and distributing the balance to beneficiaries. Probate deals with transferring the property of someone who has died (decedent) to the heirs or beneficiaries, deciding if a will is valid, and taking care of the financial responsibilities of the person who has died.” This essentially means that, the Court will be deciding to whom your estate will be given and how it will be distributed. Having your estate go through the probate system can take years in addition to the Probate Court charging fees or a percentage (5%) of the “gross” value of the estate.  A proper Estate Plan can help avoid probate.

If you share some of these same concerns or have unique ones of your own, please feel free to contact our office to schedule a free consultation.