Many people fear planning for the future. It’s hard to blame them; no one likes considering their own mortality. Plus, planning your estate is seen by many as an unnecessary chore. What is the purpose of making an estate plan, anyway?
The truth is, as a responsible person, you probably make adequate preparations regarding many aspects of your life. One such kind of preparation entails developing an estate plan. Plus, in California, an estate plan serves as more than just a way to identify potential heirs to your estate. Read on to get a deeper understanding of the purpose of an estate plan in California and why you should start the process of estate planning today!
What Is the Purpose of Making an Estate Plan? The Basics
There are so many reasons for making an estate plan rather than waiting until it’s too late. An estate plan can:
- Outline the nature of the end-of-life treatment you expect when that time comes
- Care for your immediate family after your death; this includes making medical decisions and other life decisions
- Save on the probate costs for your financial assets
- Reduce the costs incurred on estate taxes
- Reduce the time commitment of probate
- Ensure property distribution takes place according to your wishes
- Outline how other beneficiaries apart from your primary heirs benefit from your estate assets.
Making a proper estate plan, therefore, forms an essential part of ensuring that each of the issues outlined above. Estate plans guide future decisions regarding advanced health care directives, treatment of close family members (like children), and property ownership. They give you a say in who gets what when you die, and they make the whole process easier for your loved ones.
What Is the Purpose of Making an Estate Plan? The Details
Still not convinced? Let’s take a deeper look into some of the more compelling reasons for estate planning.
Allows You to Choose Your Beneficiaries
With a proper estate plan, you can conveniently choose the rightful beneficiaries—contingent beneficiary, the primary beneficiary, what have you—of your estate assets before your death. With effective estate planning tools, you can decide the potential heirs to your property when you’re still healthy and of sound mind. During this time, you can avoid any form of undue influence as an estate owner and write down your beneficiary designation allotments in the form of a will.
By creating this plan ahead of time, you minimize the complex issues that develop among your potential heirs and beneficiaries when you die without a will (e.g. siblings, spouses, and other beneficiaries squabbling about who gets what). Also, with a proper estate plan, your heirs and beneficiaries will respect every decision as outlined in your will. The personal representative can distribute your property according to your wishes after the court validates the will.
Ensures that Proper People Take Charge of Your Assets
With adequate state planning in place, you can choose the right people to preside over your assets after your death. With estate planning, you have the opportunity to scrutinize and assess your chosen personal representative. Remember that the individual you choose as a personal representative must have high integrity standards and competency to ensure fair distribution of property and adherence to your wishes. Most times, selecting a close family member or a friend you trust is a good idea.
Also, the person in charge of your property distribution should act with fairness and according to California probate law and public record. Such a person must have the ability to file federal estate taxes and any other type of estate tax. An estate plan plays a critical role in allowing you to select the right person for this important position.
Prepares for Potential Incapacitation
We all hope for a long, enjoyable retirement plan, but incapacitation can happen at any time of your life. This may entail losing sound judgment or becoming terminally ill. Preparing for this by developing a proper estate plan can help you in such situations.
With a good estate plan, the personal representative can conveniently distribute designated property among the desired heirs if you are incapacitated. Also, during the period of incapacitation, an estate plan minimizes the stressful moments that come from your close family members. Some family members may want the will written in their favor; a comprehensive estate plan will reduce the chances of such incidents. The issue of neglect or mistreatment is less likely to happen since each of your descendants must respect whatever you’ve indicated in the will.
Creating an estate plan when still healthy can play a significant role when you become incapacitated in your own wellbeing as well. Long-term care insurance, medical power of attorney, and other similar arrangements can ensure that you are provided for and properly looked after. You can even designate powers of attorney to family members or a special needs trust to care for applicable beneficiaries in this part of estate planning.
What’s the Difference Between a Will and an Estate Plan?
Though people might use these two terms interchangeably, a will and an estate plan do not always imply the same thing. However, the two terms have a close correlation since they go hand in hand.
An estate plan defines a detailed plan that comprises important estate planning documents used during your lifetime and others after your death. Alongside the will, there exist other important documents that make up an estate plan. Such comprehensive documents in an estate plan answer questions such as:
- Who has the financial power to make your financial decisions?
- Who has the healthcare power to make your healthcare decisions? Will they make appropriate health care decisions and medical directives?
- Who receives your estate assets and other personal property at your time of death?
On the other hand, drafting a will entails the most important aspects of the estate planning process. A living will essentially describe the heirs and beneficiaries of your assets when you die, and the individuals who will take care of your minor children (in case of any). In most instances, the will also names an executor who will preside over the distribution of your estate. This person will make decisions with confidence, guided by your estate documents when distributing your property, real estate, life insurance proceeds, and other and retirement assets.
Ways to Avoid Probate in California
Most people view probate as a lengthy and complicated procedure. Sometimes, the probate process can drag on even when dealing with a simple and straightforward estate or one with adequate estate planning. Also, larger estates that experience many legal issues can take more than a year to complete probate.
In addition to a cumbersome process, most estates that undergo probate lose some value through court fees, estate taxes, and other expenses during the legal process. If you plan on helping your surviving loved ones avoid probate, know that many alternatives exist. Here are a few good solutions for a complete estate plan that can circumvent probate:
Revocable Living Trust
A revocable trust can minimize the chances of your estate going through probate. Depending on your intentions, a trust can go into effect during your lifetime (living trust) or after your death (testamentary trust). There are various types of trusts, and since trust property isn’t a probate asset, your beneficiaries can easily receive the property (trust assets) from your trustee at the appointed time.
The trustee has the sole responsibility of taking care of your trust assets. Therefore, when you die, this person makes sure the plan for the trust is executed. Through a trust document, you can specify how your trustee should distribute the trust assets among your heirs and beneficiaries. Many trusts are also a convenient way to circumvent inheritance tax obligations.
Pay-on-Death Accounts and Registrations
To avoid probate, you can convert your retirement accounts and bank accounts into payable-on-death accounts. You’ll also need to file a simple form that outlines your heirs and beneficiaries. When a death occurs, the money then goes directly go to your beneficiaries.
In this scenario, you don’t need any additional form for probate since the entire process has no complexities. You can also include other items of property, such as vehicle registrations and security registrations, in your pay-on-death accounts.
Joint Ownership of Property
Joint ownership of property exists in various forms. They provide an easy way to inherit property and avoid probate when the first owner dies.
When taking part in joint asset ownership, you need to indicate the nature of your ownership and how you want to hold the title regarding the ownership of assets. After this, you won’t need to file any additional documents. If one owner dies, transfer of property to the other legal owner happens without the need for probate. You can avoid probate by owning property as a) joint tenancy with rights of survivorship, b) tenancy by entirety, or c) community property with right of survivorship.
What Is the Purpose of Making an Estate Plan with an Estate Planning Attorney?
If you find it challenging to delve into the estate planning process on your own, you’re not alone! However, a qualified estate planning attorney can be both expensive and unnecessary unless your estate is particularly complex. Instead, you can seek estate planning tools like a legal document assistant.
At A People’s Choice, we have plenty of experience in handling issues concerning estate planning and distribution of property. As an estate planner service, we can help you make a comprehensive estate plan, guiding you through every component along the way. We ensure that every individual receives top-notch service at affordable prices, thus avoiding the costly and time-consuming formal probate process.
Contact A People’s Choice today to kick off your estate plan. You can also call us at 800-747-2780. We’re here to help!
Leave A Comment