While contemplating one’s mortality and end-of-life choices might be difficult, estate planning does not need to be a melancholic task. In reality, estate planning can bring about a sense of affirmation and assurance, knowing that you are solidifying your legacy and making sure your preferences are honored posthumously. Entry-level estate planning involves creating a compilation of legal documents that work together to direct the distribution of your assets upon your death. More robust, comprehensive estate planning may also provide directives concerning the management of your affairs during your later years, particularly in scenarios where you may be incapacitated and unable to make independent decisions. Creating or updating an estate plan can be complicated, but the San Francisco estate planning lawyers at Von Rock Law are here to guide you through the process. Contact us today at (866) 720-0195 to learn more in a personalized consultation.
Estate planning is often used in conjunction with comprehensive strategies for wealth management, but estate planning itself is not exclusive to the wealthy. While individuals who possess an extensive portfolio of assets may certainly wish to ensure that these will be distributed to loved ones or deployed to support cherished causes, the absence of a properly established plan could arguably lead to even more significant long-lasting and financially demanding repercussions for the friends and families of those who leave behind more modest estates. While the number and complexity of the documents involved may vary widely from one situation to the next, careful estate planning remains an important act of care for both self and others regardless of whether the estate includes expensive real estate property, sizable IRAs, or high-value artwork.
The most important reasons to have an estate plan include:
- Protecting beneficiaries: One of the main functions of an estate plan is to designate who will receive assets when the owner passes away. If the estate owner dies without an estate plan, the courts may decide who gets their assets, which can take years and accumulate expensive legal and court fees.
- Protecting young children: People with young children need an estate plan to ensure that their children are taken care of if the unthinkable happens and both parents pass away. If a guardian is not named in the estate plan, the courts will name a legal guardian.
- Reducing tax burdens: Certain estate planning provisions––such as irrevocable trusts or gifting––can be used to help beneficiaries reduce or avoid estate taxes.
The specific contents of an estate plan will vary depending on numerous factors, such as the size of the estate and the wishes of the owner. However, estate plans generally consist of five main components.
A Last Will and Testament is a necessity for virtually everyone, but especially for people with minor children and individuals whose estates include major assets, such as homes and cars. A will outlines the wishes of the estate owner regarding who should receive each of their assets upon their death. In addition, a will can designate a legal guardian for minor children.
When someone dies without a will, their assets are subject to California’s intestate succession laws. According to the Superior Court of California, the assets of someone who dies intestate are divided among the deceased person’s heirs, sorted by degree of kinship. You can learn more about setting up a will and how to ensure your assets find their way to the beneficiaries you choose by scheduling a consultation with the experienced San Francisco estate planning attorneys at Von Rock Law.
While everyone should have a will, more complex estates may also require a trust to safeguard assets. In addition, assets left to beneficiaries in a will are subject to the probate court process, which can be lengthy, time-consuming, and complicated. The probate process is also public, while the distribution of assets held within a trust is private. According to the California Courts, however, property held within living trusts may be transferred to the trust’s designated beneficiaries directly, outside the probate process. Certain types of trusts also have tax advantages. While a revocable living trust is subject to estate taxes, assets held within irrevocable trusts are not considered part of the taxable estate.
A trust is a legal entity. The trust’s founding document, also known as the “trust instrument,” will designate an individual or an institution, such as a bank or law firm, as a “trustee.” The trustee holds legal ownership of the trust’s assets and manages them on behalf of another person or organization, identified as a “beneficiary.” Trusts usually have a primary set of beneficiaries who receive benefits during their lifetimes. After this initial set of beneficiaries passes away, another set of beneficiaries, typically their children, begins to derive benefits. The estate owner may also add an incapacity of trustee clause to their trust, which would grant a successor trustee the authority to manage the trust during periods of incapacity.
A durable power of attorney assigns a trusted individual to handle the finances of the estate owner if he or she becomes ill or incapacitated and is unable to manage their finances on their own. This includes paying bills, managing bank accounts, and signing financial documents. In many cases, the durable power of attorney is a trusted family member or close friend. However, individuals who have complex financial arrangements, or who do not wish to impose on their friends and family for this service, may choose to hire an estate planning attorney to act in this capacity.
An estate plan should also include a medical power of attorney, which grants a trusted person the authority to make important decisions related to the estate owner’s medical care when he or she is unable to make these decisions themselves. Just as with the durable power of attorney, a medical power of attorney is typically a trusted family member or other loved one. This person should also generally have the same views and would recommend medical decisions that the estate owner would likely make themselves, or would be familiar with the principal’s perspectives and preferences and willing to make medical decisions that align with those, rather than pursuing their own. A backup power of attorney should also be listed in case the primary one is unavailable to make a decision for some reason.
Some types of property, such as assets from a 401(k) plan, can transition to your descendants without being specified in your will. This illustrates the importance of naming a beneficiary—and a secondary beneficiary—for such accounts. Similarly, insurance plans should have both a primary and a contingent beneficiary, as life insurance payouts may also be eligible for transfer without probate.
In the absence of a named beneficiary, or if the designated beneficiary is deceased or incapable of receiving the assets, the decision on the disposition of your funds might fall into the hands of a court. A judge who is not privy to your personal circumstances, values, or intentions may not make a decision that aligns with your preferences.
Whether you are looking to create an estate plan for the first time or update your existing plan, the team of dedicated San Francisco estate planning lawyers at Von Rock Law is here to help. We evaluate the needs of our clients and help them develop a plan that aligns with their values and goals, incorporating the components that best protect their assets to ensure that their wishes are carried out in the event of death or incapacitation. Contact us today at (866) 720-0195 to learn more about how to protect your assets with an estate plan.