An estate plan is a way to prepare for the unexpected. It is the process of anticipating and arranging, during a person’s life, for the management and disposal of that person’s estate during the person’s life and at after death, while minimizing gift, estate, generation skipping transfer and income tax.
A Basic Estate Plan Includes:
Living trusts, in fact, have great value as part of estate planning, but not necessarily just to avoid probate. A living trust, if properly prepared and administered, can be a very effective tool to manage assets in the event of illness, disability or the effects of aging. In light of the aging population, the use of living trusts to minimize the risk of elder financial abuse and address similar issues, should be an important consideration in an estate plan.
Contrary to popular belief, a will, alone, does not protect your estate from probate. However, a pour-over will accompanied by a trust will ensure that your heirs receive their inheritance without having to go through the laborious probate process. The pour-over will ensures that assets not titled in the name of your trust are put into the trust after your passing. In addition, the will names guardians for your minor children or dependents, sets out your burial and funeral arrangements, and names your executors. Stand-alone wills are usually an appropriate estate planning tool for any individual whose aggregate assets are less than one hundred and fifty thousand dollars ($150,000).
A durable power of attorney is a document that allows you (the principal) to give authority to another person (your agent or attorney-in-fact) to make financial/legal decisions and financial transactions on your behalf. It is called “durable” when, by its terms, it remains effective even if the principle becomes mentally incompetent. This document allows your agent to accomplish a wide array of tasks upon your incapacity, from something as simple as paying your bills and doing your taxes to more complicated matters, such as selling your home and planning for long-term care.
An advanced health care directive, is a document that allows you the opportunity to appoint a trusted loved one to make difficult medical decisions in accordance with your wishes in the event that you become unable to make them yourself. If you have specific preferences when regard to certain medical conditions or situations, these can be addressed through this document.
Under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), the federal government allowed individuals to name personal representatives who would have various rights as it relates to access to their health care and treatment information. In order to provide for your family members’ ability to communicate with health care professionals and health insurance companies, we find it important to have an executed HIPAA as part of your estate plan.
A HIPAA authorization will allow the personal representative to communicate with health care personnel about the individual’s health status if they are either in a hospital or other medical or long-term care facility. We recommend that individuals have this document and name their spouse and all of their children so that these family members can communicate with doctors and nurses and find out how they are doing if they are ever hospitalized or in a long-term nursing facility. This is especially important for family members who are not local and wish to remain involved in their parent’s care.
The Certificate of Trust is a public document used to transfer assets, such as bank accounts, stocks accounts, mutual funds, real property, etc.) into the name of your trust. It is the proof financial institutions will seek when transferring the asset into your trust.
What are the benefits of an estate plan?
- Avoid costly and time-consuming probate process that can be:
- Subjected to statutory fees (the probate cost determined by California), and
- Take anywhere from six months to several years for your beneficiaries to receive their inheritance;
- Maintain control over your assets while planning for yourself and loved ones;
- Control who will receive your assets and when it will be received;
- Prepare for the what ifs, such as accidents and incapacity;
- Plan with a clear mind and not under the stress of a crisis while accounting for current and future concerns for family members;
- Allows you to accomplish your dreams and goals for yourself, your family, and your assets;
- Reduces income, gift, estate and generation skipping taxes;
- Keeps your family and financial affairs private;
- Prevents family conflict as your wishes are specifically laid out;
- Gives you the ability to make choices about who will assist you and your loved ones in the event of an unexpected accident, diminished capacity and eventual death;
- Eases management of your financial and legal affairs during your incapacity and after your passing;
- Provides loved ones with efficient and timely inheritance;
- Avoid Medi Cal recovery for long term care;
- Provide love ones with guidance upon your passing; and
- Provides peace of mind.