What Is Estate Planning?
When you hear the term “Estate Planning,” you may envision a long process of sitting in an attorney’s office. However, the reality is that estate planning is actually much simpler and more affordable than many people think.
It’s about protecting your assets, defining how you want your possessions distributed and minimizing taxes. A financial professional can help you create a plan that is right for you.
What is an Estate?
When most people think of estate planning, they envision long hours in a lawyer’s office, huddled over stacks of papers. The reality, however, is that the process is easier and more affordable than ever before. Regardless of your wealth, a proper estate plan is one of the most thoughtful things you can do for those you love.
An estate is simply everything you own that has a monetary value, from your house and car to your jewelry and coin collections. When you die, your estate will be distributed to those whom you choose, and you’ll want to do so in a way that minimizes taxes, fees and court costs.
A properly prepared estate plan from Los Angeles probate attorney can help you achieve all of these goals, and more. In addition to the standard last will and testament, an estate plan should include documents such as a personal info organizer, durable power of attorney , health care surrogate, and a living trust.
Many of these documents can be found with an online estate planning service, but it’s always best to consult a qualified financial and legal professional about your individual needs and situation. For example, if you have young children, your estate plan should also contain documents naming guardians for them.
A well-drafted and executed estate plan will also ensure that your wishes are carried out in the event of your incapacity or death. Like the world-class Olympic runners who carefully execute the handoff of the relay, your estate plan is the final pass of responsibility and wealth from you to those you care about most. And that’s the kind of race you want to win!
What is a Will?
A will is a legal document that sets forth your wishes for the distribution of your property, who should be guardian of any minor children, and how you want your affairs to be managed if you become incapacitated. A well-crafted will can also minimize taxes and ensure that your estate is distributed exactly how you want it to be.
A lot of people think that estate planning is complicated and only for the wealthy, but everyone should have a basic plan in place to make sure their loved ones are taken care of when they can no longer take care of themselves. Most estate plans include a will, but there are many other documents that can make up an estate plan as well, including trusts and power of attorney.
The main reason for estate planning is to ensure that your family members are cared for in a way that reflects your values and preferences. You may not want to leave everything to your children, or you might prefer to give more to one child who has worked hard or to a charity you support. A good estate plan can make that happen without the kind of squabbling that sometimes occurs when a family member passes away with money, especially in families with several siblings.
The other big reason for an estate plan is to minimize taxes. Someone can eat up a significant amount of your wealth if you don’t plan properly. There are ways to decrease the amount your heirs have to pay, but it takes work with a qualified financial and legal professional. You might even be able to reduce or eliminate federal and state inheritance and estate taxes entirely.
What is a Trust?
A trust is an important component of your estate plan that allows you to transfer assets and property during your lifetime and upon your death. You can control who receives your property, and you can also minimize estate taxes.
A person who manages the money and property in a trust is called a trustee, and this can be you or someone else. The trustee follows the instructions in the trust document describing how to manage and give out the assets or property.
When establishing a trust, it is important to consult with an attorney who has experience in creating these documents. This is because state law varies and a trust should be tailored to your specific situation.
There are several types of trusts, including revocable living trusts and irrevocable trusts. A revocable trust can be changed at any time, but an irrevocable trust cannot be amended or modified after creation.
In addition to setting up a trust, you should also complete beneficiary designations. This is a list of people or organizations who will receive your assets and property. If you don’t have a beneficiary designation, the default is usually your spouse or children. It is important to keep these updated throughout your life.
Another important part of an estate plan is a power of attorney and health care proxy. This is a legal document giving someone you trust the legal authority to make financial and health care decisions on your behalf in case you become incapacitated or are no longer able to handle your affairs. These individuals are known as fiduciaries and are obligated to act in your best interests. They must follow the terms of your estate plan and the law.
What is a Fiduciary?
A fiduciary is someone who acts in the best interests of another person or entity. This duty requires loyalty, good faith, care, confidentiality, and prudence. A fiduciary must not take advantage of his or her position for personal gain. A fiduciary must also keep true and accurate records of the assets that he or she manages on behalf of others.
Fiduciaries are legally obligated to do what is best for their clients, regardless of whether it is financially advantageous for the fiduciary to do so. This means that a fiduciary cannot recommend a particular investment or other financial strategy simply because it is his or her own business interest. Fiduciaries are compensated for their services, however, so they do not have to act solely on the basis of profit.
Those who act as fiduciaries must always disclose conflicts of interest and explain the rationale behind their decisions. Fiduciaries must also carefully weigh all potential risks and rewards when making recommendations to their clients. If a fiduciary fails to meet his or her duty, he or she may be required to pay compensation (damages) to the person or entity who has suffered as a result.
Creating an estate plan is essential, no matter how big or small your possessions are. It is a way to ensure that your wishes are carried out when you die or become incapacitated. A well-formed plan allows you to determine who will receive your property and can also help your heirs pay less in taxes, fees and court costs. It can even help your heirs avoid the need for probate. A well-crafted estate plan also includes documents such as a health directive, which defines your wishes regarding end-of-life care should you be terminally ill or near death.
What are the Benefits of an Estate Plan?
Estate planning is an important process to consider whenever you have assets. While the initial process may seem overwhelming, especially for those with complex needs, it is well worth the time to put an estate plan in place.
Without an estate plan, your family could spend months, or even years, waiting to receive anything from you after death, and that delay can cost your loved ones. This can also lead to family conflict, fighting over the estate, and even the loss of valuable assets due to taxes. An estate plan can help reduce these problems by avoiding the probate process and saving on attorney’s fees.
Another benefit is being able to choose exactly who gets what. This can be especially helpful for those with blended families. It can also allow you to make individualized plans for specific beneficiaries, such as giving more to one child who did a lot of the work caring for you in your later years and less to another who has special needs.
A final benefit is being able to protect your assets from frivolous lawsuits and other challenges. This can be done by transferring your assets to trusts or other legal vehicles and by naming specific people as fiduciaries. This can also help to minimize estate taxes.
An estate plan can be as simple or as complicated as you like. Regardless, it is always a good idea to have one in place and keep it up to date as your life circumstances change. Many employers offer legal plan benefits that can help with the costs of putting an estate plan together. You can also explore the many online resources available for estate planning, which are simpler and more affordable than ever.
When you hear the term “Estate Planning,” you may envision a long process of sitting in an attorney’s office. However, the reality is that estate planning is actually much simpler and more affordable than many people think. It’s about protecting your assets, defining how you want your possessions distributed and minimizing taxes. A financial professional…