Rochelle & Griffith, LLP

The dangers and pitfalls or procrastination are extreme when it comes to estate planning. Putting off creating a comprehensive estate plan could come with a painful price tag –both in terms of personal tragedy and financial losses.

Take a moment to review this article to see if you should consider completing an estate plan; the benefits you and your family will enjoy once your plan is in place; and, how to go about completing your estate plan.

Do I need Estate Planning?

I have found that almost every adult needs some sort of estate planning. Take a moment to take my 30 second test to see if you are a candidate:

Yes	No
		Do you have children?
		Are there specific persons that you prefer to inherit your assets?
		Is it important for you to select for yourself who will make health care decisions for you if you are unable to do so.
		Do you own real estate?
		Is it important to you to pass on as much of your estate as possible to children or others?
		Would you like to avoid having the courts make decisions about you, your estate, or your children?

IF YOU ANSWERED “YES” TO ANY OF THE PREVIOUS QUESTIONS, YOU NEED ESTATE PLANNING!

What is Estate Planning?

“Estate planning” involves planning for the continued management of property during ones life and after as well as planning for the distribution of property after death; providing for the care of minor children; and making a plan regarding personal health care issues in the future. Estate planning encompasses more than just the preparation of a will. It should also include financial, tax, medical and business planning, necessary for a families future.

Minor Children

A properly prepared estate plan will allow the parent to select who they want to serve as guardians for minor children. Guardians are the people who the children will live with and who are the providers of care, love, nurturing and guidance as the children grow into their adulthood. Without an official selection by the parent, the court will decide who shall have the physical care and custody of minor children. Further, without an estate plan, the court (not the parent) will also decide who will manage the inheritance of minors. Of greater concern is the fact that without a plan a child will gain complete control over his or her entire inheritance at age 18. Through an estate plan, a child’s inheritance can is managed by a person the parent selects and assets can be available at all times for the child’s health, education, and welfare, with the remainder to be distributed in intervals or at a time when the child is more mature.

Owners of Real Estate

Without proper planning, inherited real estate must go through expensive probate proceedings to pass to heirs, which will substantially diminish the value of the inheritance. Probate is a court-supervised process that legally transfers ownership of property from the deceased to his or her beneficiaries. Real estate held in a living trust can transfer to beneficiaries without costly probate proceedings. Efforts to avoid probate by holding title with a spouse or children as joint tenants can be costly as there is the loss of the right to step up the basis in the property upon the death of a joint tenant. This can cause unnecessary capital gains taxes that could be avoided with some simple planning. In addition there still would be a probate proceeding required when both joint tenants died.

Other Assets

It is not just real estate. The same holds true for other assets one may want to pass to heirs. Without a trust as a part of an estate plan, other assets held or controlled by third parties such as banks, stock brokers or business partners could be subject to expensive probate proceedings. Third parties usually will not release assets they hold that are in the name of a decedent without a court order.

To Designate Who Receives the Estate:

Without a comprehensive estate plan that includes a living trust, a probate proceeding is usually required. When there is a death without a will and the estate is over $100,000, the court will distribute the assets according to a distribution plan set up by state legislators. Often the legislative plan would not be how one would choose to distribute their estate. Even with a will, the matter must still go through the probate courts. A will only states who gets the assets. The probate court must still be used to pass clear title to assets or to gain possession of assets from third parties (banks, stock brokers, etc.).

Living Trusts Avoid Probate:

The proper use of a trust will avoid probate, Probate proceedings are expensive, open to public scrutiny, and can take over a year to conclude. For example, an estate worth $500,000 would have minimum attorney and executor fees of approximately $26,000. With an estate valued at $1,000,000 the fees would be approximately $62,000.

Minimize Taxes:

In some cases, the use of a trust can also provide a means to minimize estate taxes for married couples. The actual amount of tax savings could be hundreds of thousands of dollars depending on the value of the estate at the time of death and the estate tax exemption amount for that year. Current law allows for one to pass up to $2,000,000 without estate taxes and increases the exemption amount to $3,500,000 in 2009. In 2010 there is no estate tax. However, unless changed by congress and the then current sitting President, the exemption reverts back to allowing each person to pass only $1,000,000 without estate taxes for a death on or after 2011. Without a properly prepared living trust, when one spouse dies and leaves the estate to their spouse, there is no estate tax at this point but the surviving spouse can only use their own credit on his or her death and the credit of the first spouse to die is lost. However, with a properly prepared living trust, a married couple can pass on twice as much as provided above by taking advantage of both spouses estate tax exemption.

To Appoint An Agent To Make Health Care Decisions:

An estate plan should include an Advanced Health Care Directive. This document allows one to appoint a trusted person to make health care decisions for another during any period of incapacity. It also advise that person of any specific desires one may have with regard to the use of life sustaining treatment or the withholding of life sustaining treatment under certain dire circumstances such as an irreversible coma.

SOUNDS GREAT – WHAT DO I DO NOW?

The key is to get started! To do so the first step is to make an appointment with an attorney. Estate plans are too important to be left to paralegals or computer programs. I have found that the hardest part of estate planning is making the appointment. Don’t wait until you have all your paperwork and files organized as you may not need all you think you need to get started. After an hour and a half meeting with an attorney you will understand the process, make selections of who will be involved in your plan, decide who will receive your estate and when, and address important health care questions. Most important, you be on your way to having peace of mind knowing that you have taken care of this important planning task for you and your family. Services for California residents only.