Estate Planning Basics

Estate planning is not a complex labyrinth to be entered only by the über-wealthy. It's really just the process of answering some basic questions such as:

  • How will your assets be managed during your life and distributed at your death?

  • How will your children be raised in your absence?

  • How will you be cared for and who will manage your affairs if you can't make decisions for yourself?

  • How can you maximize the inheritance your heirs will receive?

If you don't plan at all, then California law and the courts will answer the first three questions for you, but probably not in the ways you would want. And the legal system will do little to help you maximize your heirs' inheritance.

Proper estate planning puts you in charge of these decisions.

At a minimum, you should have a plan that covers the Five Essentials...

Control the Inheritance of Your Assets

Chances are you have strong feelings about who should inherit your assets (and when). Chances are also that your assets will not be distributed the way you want without special instructions from you. Therefore, properly documenting your intentions is a must.

Avoid Probate

Probate is a slow, expensive, public, court-supervised process of distributing your assets. California has a particularly burdensome probate system that can easily strip tens of thousands of dollars from your estate. But with proper planning, probate can almost always be avoided. 

Minimize Taxes

Once your assets reach a certain value, you will have to pay estate taxes, at a current rate of 46%. But there are steps you can take to ensure you don't owe more than is necessary. In many cases some basic planning could help you pass hundreds of thousands (or even millions) of dollars more to your heirs. Even if your assets will not be subject to estate tax, there are a number of techniques that can help you minimize income, gift, property and other taxes. 

Nominate a Guardian for Your Children

In addition to ensuring that your children's inheritance is properly managed, it is also critical to name the person you want to raise your children in your absence. Without proper guidance, the guardian the state appoints could be the last person you would want entrusted with that responsibility.

Plan for Your Own Incapacity

Family and wealth protection is not just about what happens after your death. At any given age, you are significantly more likely to suffer a serious disability than to die. If you become incapacitated, who will handle your affairs? Who will make medical decisions for you? What should those decisions be? Answering these questions now will save your family great time, expense and anguish and ensure that you are cared for the way you want. 

Addressing these basic objectives generally begins with a few common estate planning tools...