Estate & Gift Planning in California

The sad reality is that a large portion of citizens of California do not know what will happen to their belongings after they pass away. If you do not create a will or provide other estate planning, the California Legislature has setup a scheme that will be used to determine who receives portions of your estate. This default scheme rarely aligns with what a decendent would have actually done had he or she left an estate plan.

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Avoiding the High Cost of California Probate

California residents that fail to plan for their death subject their estates to the high cost of California probate. A lot of people will avoid creating an estate plan because they believe that it will cost too much. However, the cost of an estate plan while you are alive will be dwarfed by the cost of probating your estate in California. Please visit our Cost of Probate Calculator to see how much probate will cost your estate. It is for this reason that probate avoiding mechanisms like living trusts, beneficiary designations, and appropriate titling of real property are important in any California estate plan.

Probate and trust laws are fairly ridged and complex and may result in unexpected consequences if you do not prepare your plan correctly and update the plan on a regular basis. Creating an estate plan is the first step in a comprehensive estate plan. Regular updates to your estate plan and a review of what assets you have obtained or disposed of is the only way to ensure that you have protected your estate from the high cost of California probate.

Estate Tax

Clients will often ask what they need to do to limit their estate's federal tax liability. For most people the answer is nothing. For 2015, the estate tax exemption has been increased to $5.43 million ($10.86 million for married couples). A large portion of the population will simply not have enough in their estate at the time of death to be concerned with estate taxes. However, clients often overlook certain assets when determining whether or not their estate will breach the estate tax threshold. For example, life insurance policies that have named the estate as beneficiary will be counted in a decedent's estate. If you do have life insurance policies that would cause your estate to go over the estate tax threshold, I can help you examine your existing estate and assist you in taking steps to mitigate or even remove the liability from your estate.

For clients that are lucky enough to have an estate that would be subject to estate taxes some planning might be in order. Lifetime gifts, trusts, and family partnerships may provide solutions. It should be noted that just because your estate exceeds the exclusion amount it does not mean that you need or should take measures to remove property from your estate. In fact, it might disadvantage your heirs if you do gift it to them now. Each person's situation is different and requires a thorough examination of the situation in order to determine the best course of action.

Standard Estate Planning Components

Wills and Living Trusts

A lot of people are surprised to find out that their property may not be disposed of as they would expect when they die. Any part of an estate that is not disposed of by a testamentary instrument will pass to his or her heirs by intestate succession. Intestate succession is essentially a default estate plan created by the legislature in the state in which you reside when you die. Unfortunately, this default estate plan can have some unintended consequences. It is important that everyone create a plan and review that plan to ensure your wishes are honored after your death.

A Will is the first thing that most people think of when they hear estate planning. While a Will is an important part of an estate plan, it is only a small part of a comprehensive plan. Unfortunately, California probate costs are pretty high. California probate can also be very slow. Due to the over-worked and understaffed court system in California, probate can last 12-24 months. While there is no way to avoid probate all together, you can limit the amount of property that is subject to probate. This saves time and money. It may also allow your loved ones to enjoy the property much quicker.

Power of Attorney

A power of attorney is a legal document that allows a person of your choosing to act for you in a number of different capacities. You can pick and choose which powers you would like to grant to your attorney-in-fact. You can also control the length of time the person has this power. A power of attorney can be used for any number of different things and are widely used in estate planning.

You are able to designate how long a person has a power granted by a power of attorney. However, some certain powers of attorney cease to operate upon the happening of specific events and all powers of attorney cease to operate upon the death of the grantor. A standard power of attorney ceases to operate when you become incapacitated. This is why most estate plans include what is called a durable power of attorney. These types of powers of attorney will continue to operate even in the event that you become incapacitated. It is important that this power last beyond the date of incapacity because it will allow someone to make sure that your bills are paid, accounts are collected, documents are executed, etc. while you are unable.

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