04/09/2019
What is an Estate Plan and Why Do You Need It?
An estate plan helps ensure peace of mind and certainty.
An estate plan helps ensure that your wishes are fulfilled after you pass. This is not an easy topic for many people to confront, but I believe it's is important for all of us to do so. It helps give you, and your loved ones, peace of mind that things will go smoothly and your wishes will be carried out during a difficult time.
A revocable living trust is essential to a proper estate plan.
I believe the pillar of most good estate plans is a revocable living trust. A trust provides an outline for the management of your assets after you are gone, or in the event you are incapacitated. Importantly, a trust helps you avoid the time and cost of probate. Together we will draft your revocable living trust to ensure your wishes are carried out, being sure to account for all of life's changes.
Additionally, your estate plan will include a Will, an Advanced Health Care Directive, a Health Insurance Portability and Accountability Act (HIPAA) Release, and a General Durable Power of Attorney. Together with your revocable living trust, these documents will ensure that your health and financial decisions are carried out in accordance with your wishes.
What is Probate and Why Should You Avoid It?
What is Probate?
In California, if you die without an estate plan centered around a revocable living trust, you may leave your loved ones to face the expensive and time-consuming process known as probate. Probate is the process whereby your assets are distributed by the Court.
When Probate is necessary.
If your total assets are valued at over $150,000 and they are not titled in a trust, your estate will have to go through probate. Probate proceedings are public, and much of your private financial life will become public. Any person would be able to find out information on the value and identity of your assets, creditors and beneficiaries. Your loved ones won’t initially be able to utilize your assets, as they will be frozen until the court grants an executor permission to access your funds and make distributions.
Probate is expensive.
Once your estate is subject to probate, things get expensive. The executor and an attorney are each entitled to 4% of the first $100,000 of the gross value of the probate estate, 3% of the next $100,000, 2% of the next $800,000, and 1% of the next $9 million. So if your estate is worth $3 million, which is not tough to achieve if you own a home in the Bay Area these days, the executor and attorney would be entitled to payment of nearly $100,000.
Probate is time consuming.
Probate generally takes 12 months, but can take much longer. If you have a will, the named executor will have to file the will with the court. If you don’t have a will, a family member will need to petition the court to be named the estate’s administrator. There are filing fees associated with this process. The executor will have to fill out numerous forms and file them with the court, as well as serving them on family members and other beneficiaries, as well as creditors. The executor will also have to set up a tax payer ID, open estate bank accounts, and ensure bills are paid and homeowners’ insurance is retained.
An estate plan helps avoid uncertainty.
If you have minor children, the children will be placed where it is “necessary and convenient” until guardianship proceedings are held. Once that occurs, you will have no say in the determination of where your minor children will reside, and who will take care of them.
This article originally appeared on www.obrienlegalgroup.com
