Why Do We Need Estate Planning And What Happens If We Don’t Plan For What’s Going To Happen After We Die or Even During Our Lifetime?
Everyone needs an estate plan because everyone worries about the future. A good Estate Plan is more than a Will or a Trust. The first thing that a good Estate Plan does is take care of you when you’re alive, by creating documents like Living Trusts, Advance Health Care Directives, and Durable Powers of Attorney, to designate trusted people to speak and act for you. You can give them directions about how you want to be taken care of and how you want your estate to be managed. Those are all things that can happen even before you pass away.
You need an Estate Plan for your own peace of mind. Every time I hand over a completed plan to a client, I can feel the stress lifting off their shoulders. When you are done, you know that you’ve taken care of yourself and your loved ones should something happen to you. We all know in our heads that we are not here forever, and we all have people who we care about tremendously. We don’t want to leave them with stressful situations after we die or with expenses that they can’t pay. We want to be able to give to them from our bounty. An Estate Plan takes care of your loved ones and your assets by saving them from a long, complicated path to settle your estate. If you don’t plan for what happens, your wishes and what you want may not be honored in the way you would have preferred.
Another reason you need an Estate Plan is to avoid probate. Probate is a court process that takes control away from you and your loved ones and gives it to the government. If you don’t have a will, the government looks at the language of a law and decides the best way to distribute your assets, which is not necessarily what you want to happen. For example, let’s say you have a have a great relationship with your sister, but have not spoken to your father or your brother in years. If you do not have a will, all of the people related to you will get something from your estate, based merely on their familial relationship with you. Or you may have a loved one who may not have excellent decision-making ability. Probate does not differentiate between people who have the ability to handle money and those that cannot. With an Estate Plan you can take the individual characteristics of your loved ones into account and give them exactly what you want, in a way that works best for them.
If you have a Will but are still required to go through Probate, because you have too many assets, the Probate process is a costly public nuisance. The fees set for probate are statutory, and they can become very expensive depending on how many assets you have. The process takes months, or years, during which the assets cannot be distributed to your beneficiaries. Finally, Probate takes place in a public forum. All of your assets and debts are laid out on the table for everyone to see. A good Trust-based Estate Plan will help you avoid this.
Preparing an Estate Plan can have an added benefit that I never thought about until I started writing estate plans for other people. The Process of preparing an Estate Plan will help you organize and understand your own assets. Simply understanding what you have and what you don’t have will help you make better decisions in your life. My mother grew up during the Depression. She always worried about money. She believed that she didn’t have any assets. When we put together an Estate Plan for her, we reviewed all of her assets, including her home, her savings and her income. When we did that, she was able to see that she does have assets and she’s okay.
What Basic Estate Planning Documents Should Everyone Consider Putting In Their Estate Plan?
All estate plans include a Will. A Will is a foundational document. It is where everything starts. There are a few things that a Will does. A Will is a place where you list your assets and name your beneficiaries. You can be as specific or general about what each person receives. For example, you can say that half of your estate goes to your children, or you can be as specific as saying “The rug in my entryway goes to my Aunt Jane”. You can also give money and things to charities. In additional to naming your beneficiaries, your will is the document where you name the people who make decisions after you die.
In addition to a Will, everyone should create an Advance Health Care Directive. In an Advance Health Care Directive, you assign a person to make your health care decisions if you cannot do that yourself. The person you nominate is called a Health Care Agent. In the document you give your Health Agent directions about how you want to be cared for if you are sick or injured. You can also tell them the name of your primary care doctor and explain whether you want to be an organ and tissue donor. There are even specific Health Care Directives where you can make decisions about what happens if you suffer from dementia.
It is also important to have a person who can take care of your finances and make other day to day decisions when you cannot. The Document you need for this is a Durable Power of Attorney. In a Durable Power of Attorney you name a trusted person who will serve as your Agent. As your Agent, they will have broad powers to do many things in the real world, for example, writing checks, paying bills, reading your mail or accessing your social media accounts, when you are not able to perform these tasks yourself. You can give this power to someone right now or only when you need it in the future.
Finally, if you have children, you will need to nominate a Guardian. This person takes care of your children in the event of a tragedy. In addition to creating a nomination, we encourage you to write a letter to your child and create an information sheet for the Guardian you are appointing. You want the person who is caring for your child to know as much as possible about your child, their needs, their likes and their friends.
What Is A Will And What Are The Benefits As Well As Limitations Of A Will?
A will is foundational. Without a will, you’ll go to probate, and the state of California makes decisions about who gets your assets.
There are a few things that a will does. A will is a place where you list your assets and name beneficiaries, people who will get things from your estate. You can also give things to charities and other beneficiaries. It’s your chance to say who you want to be in charge by nominating an Executor or an alternate Executor.
Within a Will you can also nominate Guardians for your children and create trusts called testamentary trusts, meaning the trusts that don’t exist until after you pass away. Those can be used to take care of children or even a pet.
A Will doesn’t give you as much control or as many options that you can have if you create a plan based on a Trust. The reason for that is that the Trust creates a structure of rules that are implemented outside the court process. Done correctly, you pretty much eliminate the need for a court to be involved, and when a court is less involved, I think we’re all happier.
For more information on Estate Planning In California, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (415) 570-9809 today.
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