This article has been updated Sept 2021
When people think of an estate, it may bring up images of wealth. But the truth is, everyone has an estate. That’s why every adult California resident needs an estate plan with the help of a Riverside based attorney.
If you don’t have a comprehensive estate plan, you leave yourself vulnerable even while you’re still alive. If you get sick or become incapacitated, your estate plan can make sure that your bills are paid, your children and pets are cared for, and critical decisions about your healthcare are made according to your wishes.
Estate planning also involves careful calculations to determine the tax liabilities of your estate and works to legally reduce the tax bill due to the IRS upon your death when possible. The current federal exemption in 2021 is $11.7 million per individual and doubled for a couple. These exemption amounts are always changing. An estate plan, drawn up in accordance with your wishes and with consideration of future tax consequences, protects your assets and your heirs from an undue tax burden whenever possible.
Although California doesn’t levy its own estate tax, Riverside residents who die without a will leave their assets and their loved ones stuck in the probate system and subject to the costs of a probate proceeding.
Without specific guidance and a solid estate plan, the state will decide where your property goes after you die. Probate can be a long, complicated, and expensive process for your family to navigate. It’s a paperwork intensive process and requires numerous filings and hearings. It is not uncommon for the final order of the probate court to be handed down two years later! During that time, the only people who have received any money from the estate are the lawyers your family has to hire to help them navigate the system.
You can avoid a lot of the complications of taxation and probate by speaking to an experienced estate planning attorney about a comprehensive estate plan.
In California, a complete estate plan usually includes a Living Trust, Powers of Attorney, a Living Will and a pour-over will. All these documents need to be in place while you are alive because an estate plan cannot be created after you die or have been incapacitated.
What Happens If I Don’t Have an Estate Plan?
Without an estate plan or living trust protecting your assets, your family will likely end up dealing with the probate court to get access to your house or other real estate, bank accounts, investments, or to have a guardianship established for and minor children.
It’s a long and expensive process.
If you’re in a serious accident and have no estate plan to give your loved ones or trusted friend the capacity to make medical decisions on your behalf, your access to treatment and recovery could suffer.
Without an estate plan to serve as guidance, there can be expensive and time-consuming court battles and your wishes may not be considered.
What Does a Good Estate Planning Lawyer in Riverside Do?
California has so many specific issues to consider when drafting an estate plan that you need a highly qualified attorney to put together the right plan. Once your estate planning attorney has a clear picture of your assets, they will create a plan that addresses your specific challenges. There are Medi-Cal issues, Proposition 13 tax caps, and other issues to consider during the planning. A good estate planning attorney will ask you a lot of questions so they can determine what your heirs and loved ones will be facing when the inevitable happens. You want an experienced estate planning lawyer on your side who will honor your wishes while protecting your family and preserving your assets.
Estate planning is not a one size fits all or fill in the blanks area of the law – although Google might suggest it is. The truth is, trying to go it alone on your estate plan can do more harm than good.
A qualified estate planning attorney stays up to date with changes in tax and estate law and will schedule a review session to make sure your estate plan still works as intended. You want to be sure that your plan is still relevant, especially if your family dynamics change.
You want to be sure that your complete estate plan is always working with current state and federal laws.
Is a Last Will and Testament all I need?
In California, a simple will doesn’t qualify as a comprehensive estate plan. It only serves as a suggestion to the probate judge how you would like your assets distributed.
A simple will is typically not sufficient to protect your estate and spare your heirs the time and expense of probate. Having a simple will only protects your estate from being subject to the laws of intestacy.
Dying without a will in place means the state of California will control the distribution of your assets to a surviving spouse or domestic partner. From there, the state will work through your other living relatives from children to aunts and uncles to cousins.
If the state is unable to find any living relatives, the state of California becomes your heir and takes control of any money or property you held at the time of your death.
A simple will doesn’t provide any tax planning nor does it clarify how to handle your affairs if you are still alive but unable to act in your own interests.
Most California residents need a more robust estate plan to protect themselves, their heirs, and their assets from taxation and probate.
What is Probate?
Probate is the legal process that occurs when someone dies. If you die with a will, the validity of your will is affirmed, your property is valued and inventoried, your debts are paid, and the residue of your estate is distributed to your rightful beneficiaries and heirs.
If you die without a will, the court will assign a representative to handle all the details of tracking down assets, contacting potential beneficiaries, consulting with attorneys, filing proper documents, and finally determining how your remaining assets will be distributed or if your property will be turned over to the state if no living heirs can be found.
Not only is the probate process long, and it’s expensive. For Californians with assets valued over $100,000 the fees are set by statute:
- 4% fee is assessed on the first $100,000 of the estate
- 3% on the next $100,000
- 2% on the next $800,000
- 1% on the next $9 million
- half of 1% on the next $15 million
- and on estates valued over $25 million, the probate court is authorized to set a “reasonable fee” for any assets in excess of $25 million.
During the months and even years it can take your executor or court-appointed representative, there are hearings and other court appearances by lawyers who take their fees out of the estate. Basically reducing the amount that will be received by your loved ones.
Probate is a public legal proceeding. Do you want anyone who can go to the courthouse to see your assets and debts? Without a comprehensive plan, your estate will be subject to the public scrutiny of the probate court.
Subjecting your loved ones to the probate process almost never benefits them. The probate process can potentially take away your ability to preserve precious heirlooms and leaves the distribution of your estate in the hands of a judge who doesn’t know you or your family.
How Can I Avoid Probate?
Without the right estate plan for your circumstances, your loved ones could end up in a lengthy probate proceeding. Riverside residents with an estate valued under $100,000 may be able to seek relief from more complicated probate under California’s more streamlined “small estate” probate procedures.
But planning for the inevitable is always better than leaving your loved ones at the mercy of a public probate proceeding with a judge who isn’t looking out for them like you would.
There are several legal methods to avoid probate but you should always get personalized legal counsel from an experienced estate planning attorney before you modify the ownership, titling, or beneficiaries of any of your assets.
While you can make a gift of money or property while you’re still alive to avoid having that asset calculated as part of your estate in probate court. But, you also lose control or benefit of that asset while you’re still alive.
There are several ways to title real property that can result in that property being passed along outside of probate. Joint ownership with the right of survivorship allows real estate assets to be automatically transferred to the surviving owner. Similarly, if property is titled as joint tenancy, where several owners own equal shares of a property, the decedent’s share is distributed to the surviving owner(s). In California, as a community property state, any property you acquired during the relationship with a spouse or registered domestic partner passes to your partner unless you have specifically directed otherwise in your will.
You can also change designations on checking, savings and even some investment accounts to be payable on death to a beneficiary of your choosing. This is called a POD designation. You never lose control of the money held in those accounts during your lifetime, but upon your death, the designee can easily claim the balance held in your accounts.
California allows residents to hold brokerage accounts with a transfer on death (TOD) designation. Usually this is accomplished by filling out a beneficiary form. If your stocks and other similar brokerage assets are held this way, your beneficiary will be able to inherit your account without a probate hearing. Most likely, they will deal directly with the brokerage company to facilitate transfer of the account after your passing.
Similarly, if you register a vehicle in California, the DMV allows for a transfer of ownership upon your death to a person of your choosing. This person immediately inherits your vehicle once the DMV is made aware of your death.
While some of these probate avoidance methods are really just “customer service” at your financial institution or local motor vehicle office, retitling of other assets shouldn’t be entered into lightly. There are significant considerations when planning your estate and avoiding probate is only one aspect of an effective estate plan.
The best way to guard the interests of your heirs is to discuss your unique financial and personal situation with a qualified attorney and have a comprehensive estate plan written to protect you and your loved ones.
What goes into a comprehensive California estate plan?
A comprehensive estate plan is going to be customized to meet your specific needs, so you may not require all the documents listed here. Your set of customized documents may include:
- A California Living Trust
- A “pour-over” Will
- Durable Powers of Attorney to manage your financial and healthcare decisions
- A HIPAA authorization
- A Living Will or Advance Healthcare Directive
- Deeds to properties
- Designations for beneficiaries for financial assets and insurance policies
- Nominations of guardians for minor children or incapacitated family members with special needs
Several of these documents are fairly standardized but most require an in-depth understanding of your current assets, retirement accounts, and other important considerations.
You want to keep all your documents secured once they are executed and you want them where they can be accessed when you die or if you should become incapacited. You will want to make sure that, if a living trust is right for your circumstances, it is funded and your financial institutions are updated about your estate plan.
Read on for more details about these critical estate planning documents:
What is a California Living Trust?
For most people in Riverside, a California living trust will be the centerpiece of their customized estate plan. If you’re married, you may have one or more trusts depending on your unique situation. It’s a “living” trust because it goes into effect while you are alive and it survives your death to ensure your wishes are carried out.
A living trust is where you will hold certain assets so you and your designated trustee can retain control over these assets upon your death or incapacity. A trust is a long accepted mechanism to protect your estate for your loved ones or to provide for charitable bequests.
And trusts aren’t just for the wealthy. People in all tax brackets can benefit from the protections a trust provides.
While you are alive, you retain total control and ownership of your assets held in the trust. It’s “revocable” meaning you can change it as you desire. But upon your death, the assets in the trust are passed to the designated trustee and managed for the benefit of your beneficiaries.
Do I Really Need A Living Trust?
With estate plans being as unique as you are, you may not need a trust. Your circumstances might be managed quite well with a straightforward will and a plan to minimize how many of your assets will be subjected to probate proceedings.
After a consultation with an attorney who will review all your assets, accounts, and other circumstances, you may decide on a plan that works without a trust. When all your accounts have proper beneficiary designations in place and your real estate is titled in a way that is advantageous to your surviving spouse, registered domestic partner, or other property co-owners, you ensure that the proceeds are immediately dispersed at death.
A review of your situation may indicate that a will with strong probate avoidance planning can be sufficient to distribute your estate at your passing.
But if a California Living Trust is the right estate planning vehicle for you, you need a special will to transfer your property into your living trust.
What Is a California Pour-Over Will?
A pour-over will is one that moves everything that should be in your living trust into it upon your death. Even with the best of intentions, there may be instances where trust assets are removed temporarily from the trust and by some oversight they aren’t returned to the trust. Your pour-over will is the protection you need to make sure your assets are all managed according to your wishes and plans.
What Are Durable Powers of Attorney?
A “power of attorney” doesn’t refer to a lawyer.
In this critical estate planning document, an “attorney” is a carefully chosen agent who can carry out your wishes. A durable power of attorney for your property stands in for you to make business decisions, financial decisions, or handle property that isn’t part of your living trust. Basically, this person can do anything you can do, so it is crucial you choose someone you trust to carry out things as you would yourself.
Your estate plan may also include a durable power of attorney for healthcare. This document names a “healthcare agent” that you trust to make critical care decisions on your behalf. It might be scary to think about “what ifs” but it is very important that this person has a true understanding of your desires and any religious or moral concerns you have about healthcare options. It’s important that your healthcare agent has access to this document because minutes can matter in an emergency.
What is a HIPAA authorization?
Without a HIPAA authorization, necessary caregivers won’t be able to access your healthcare documents. Having a HIPAA authorization as part of your estate planning documents grants your designees access to critical healthcare information to assist your agents in making informed decisions about your care.
What Is a Living Will?
While confusing in name, your living will will be a guide to assist your healthcare agent or other loved ones to make decisions in end of life or extreme situations. You should discuss specific issues with your healthcare agent so you are confident they know your position on life saving measures like feeding tubes or “life support”.
While it is unpleasant to think about, having a living will in place can give your loved ones a measure of peace and comfort during a very emotional time.
What are Guardian Designations?
It can be very emotional thinking about the future of your children if you were to pass away while they are still under the age of 18. To give yourself some peace of mind should the unthinkable happen, you want to have guardian designations for your children.
In fact, it’s wise to have several. There are two considerations: physical custody and the responsibility of managing your children’s finances. You can name the same person to handle both aspects of your child’s care or you can name separate people to fill these important roles.
Will I need any other estate planning documents?
The truth is, you might.
Estate plans are customized to your specific needs after carefully reviewing your personal relationships, legal liabilities, and assets. Divorce, financial issues like bankruptcy, having a special needs family member, or being a party to a lawsuit can all affect your individual estate.
You may need documents and protections not covered here.
An estate plan is so much more than just a single document you have drafted once and stick into a drawer. A good estate plan is dynamic and personal and begins protecting you while you are still alive. Then it protects the interests of your heirs upon your death.
With so many state specific and probate issues to consider, Riverside residents need a qualified estate planning attorney who understands all the issues that could affect you and your family.
Reaching out to a Riverside estate planning attorney and scheduling a consultation is your first step to protecting yourself and your loved ones.
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