Who Needs an Estate Plan and When?

Posted by & filed under Estate planning, Estate Planning Attorney.

As we enter a new year, we often take time to reflect on our life. What have we accomplished thus far and what are our goals for the next 12 months? Although no one wants to talk about it, part of a life assessment includes how our legacy will continue after we die. Getting your affairs in order—and keeping your wishes up to date—is the best way to ensure your loved ones will be properly provided for after you’re gone. That may have you questioning who needs an estate plan – and if the answer is you.

What Is an Estate Plan?

Simply put, an estate plan outlines how you will transfer assets from your estate to your heirs after you die, and who will be authorized to take care of you if you are incapacitated. Without a plan in place, your family may be unclear about your wishes for how your property and money will be disbursed among them (or to foundations and charities of your choice). Plus, without proper planning, you’ll also be putting them through the rigamarole of probate court, which is costly, time intensive, and can be easily avoided with a little advanced planning
  • Avoiding probate court
  • Reducing estate taxes
  • Reducing capital gains taxes
  • Protecting loved ones
  • Protecting assets
  • Saving time and money
With those benefits of having an estate plan in mind, you may still be wondering who needs an estate plan. The answer is simple: nearly everyone.

Who Needs an Estate Plan?

If you have assets or loved ones—which most of us do—you should consider an estate plan. In just thinking about your assets, if the value of your estate exceeds the probate court threshold, you have your answer to who needs an estate plan: you.
How much can you have in your estate before probate court is required?  The basic answer for 2022 is $166,250.  However, real estate, regardless of value, requires some court intervention in California to transfer to your heirs.
Regardless of the value of your estate, having children, a blended family, or owning a business puts you in the category of who needs an estate plan. Remember, no matter the size of your estate, having a plan in place will help your heirs avoid probate and ensure that your wishes will be carried out. And if you are incapacitated, your estate plan becomes invaluable since it includes a financial power of attorney, and a power of attorney for healthcare, including a HIPAA authorization. These will all help your family manage your finances and care in the event you are unable to do so yourself.

When Do You Need an Estate Plan?

If you don’t already have an estate plan, now is a good time to start planning. In fact, yesterday, last week, or last year would have been better. The problem is that no one has a crystal ball to tell them when they’re going to die or become incapacitated. And short of foreseeing the future, you should be prepared at all times.
Most people tend to start their estate planning either when they retire or have a significant health issue. Here are the real times when it’s smart to start your estate plan:
  • You get married or divorced
  • You have children
  • Your spouse dies
  • You are facing an illness that may leave you incapacitated
  • You own a business
  • You are starting a blended family
  • You have children with special needs

If you an unsure if you are one of the people who needs an estate plan, it’s best to consult an estate planning attorney who can offer you the advice you need.

For more than 30 years, Joel A. Harris has been protecting the estates of families throughout California. If you want some help navigating the ins and outs of protecting your estate or establishing a trust to protect your future, feel free to visit us online, in person, or call us by phone at (925) 757-4605.

Posted by & filed under Living Trust, Trusts.

Does Your Trust Update Require an Amendment or Restatement?
If you have a revocable living trust, you may need to update it from time to time. In the process of your trust update, you may wonder if you need to amend it or if it needs to be completely restated. The answer to that question depends on what your goal is with the update.

Why a Trust Update Is Needed

A living trust can be changed at any time and for any reason. That’s the benefit of creating a revocable trust. There are several reasons you might need to amend or restate your trust, and they are usually centered around life events. These might include:
  • Death
  • Birth
  • Marriage
  • Divorce
  • Retirement
  • Changing beneficiaries
  • Adding or removing assets
  • Relocating to a new state
In addition, it’s smart practice to review your trust regularly to ensure that it continues to support your wishes. What you desire at 60 can be very different from what the 40-year-old version of you would have wanted.

When an Amendment Is the Best Bet

If your trust update only requires minor changes, an amendment is the correct choice. These minor adjustments can include changing assets or trustees. A trust amendment changes one or more provisions of a revocable trust without revoking it entirely.
Implementing numerous amendments over the years can make the trust confusing, requiring your trustee to go through additional documents to makes sense of multiple amendments. If it comes to that, it might be time to rework your trust to be clearer. That’s when a restatement is in order.

When a Trust Update Requires a Restatement

If you have multiple changes to make to your trust, a restatement could be the better option. Updates that fall into this category include removing a beneficiary or changing your asset distribution. Restating the trust means that you and your estate planning attorney will create a new document that states that the trust has not been revoked but is being restated (replaced by a new trust with the same name). Because your trust update is a restatement, you won’t have to move property out of it and then back into it (which you would have to do if you revoked the original trust).
In many instances, a restatement is preferable to an amendment because the restated trust supersedes any previous trusts and amendments. If, for instance, you removed a beneficiary, they would never know because they would not be listed in the amended trust, which will avoid any potential issues or hurt feelings.
Another reason to restate the trust is to take advantage of changes to the law.  For example, the popular “AB” trust format of the 1990’s was made almost completely obsolete by 2012 estate tax law changes, therefore almost all “AB” trusts should be restated.
Speak with your estate planning attorney if you have an older trust and need to make these adjustments.

Is It Time for a Trust Update?

For more than 30 years, Joel A. Harris has been protecting the estates of families throughout California. If you want help navigating the ins and outs of protecting your estate by establishing or updating a trust to protect your future, visit us online, in person, or call (925) 757-4605.

Posted by & filed under Asset Protection.

Top 10 Ways to Protect Your Assets with an Estate Plan
No one wants to think about death, but if one of your goals is to protect your assets for your heirs, you need to have a plan. Without an estate plan, the loved ones you leave behind could be mired in years of probate court, an expensive proposition that is the last thing most people want to endure when they’re already dealing with the loss of a spouse or parent. Today, we’re exploring the top 10 things you can do to protect your assets—and it starts with an estate plan.

1. Create and Fund a Living Trust

A living trust is a smart way to avoid probate. It is created during your lifetime and designates a trustee to manage your estate while you are alive, keeping in mind the best interests of your beneficiaries. Then, after you die, the assets in the trust flow smoothly to your beneficiaries, avoiding probate.
A living trust can be revocable or irrevocable. Most families start with a revocable trust. With a revocable trust, you can put yourself in charge as the trustee, and make changes whenever you wish. An irrevocable living trust, on the other hand, puts the assets under the ownership of the trust itself, you will be restricted, but these trusts offer tax and liability protection planning options. The latter, however, doesn’t easily allow for changing beneficiaries, so you will definitely want to discuss your options with an estate planning attorney before making a choice one way or the other.

2. Update Your Estate Plan on a Regular Basis

To adequately protect your assets, you need to review and update your estate plan regularly. This should occur when you or your family undergoes any changes, such as marriages, divorces, births, deaths, and the like. An estate plan is only as good as you and your attorney have made it, and if it falls out of date or relevance, your assets may not be distributed according to your wishes.
Generally speaking, you should make a plan to review your estate plan every three to five years or when you experience a major life event.

3. Speak to Family About Special Assets

Communication is a key component to a well-constructed estate plan, and to protect your assets, you’ll need to speak to your family. You may own a family business, have multiple properties, or have a child with special needs. All of these special circumstances need to be factored into your estate plan. Also, if you have a blended family and ex-spouses, you’ll want to discuss what you’d like to have happen after you’re gone so there is a smaller chance that there will be legal battles between family members or accidental disinheritances (if you don’t set things up correctly, one spouse’s family may inherit everything to the exclusion of the other’s!)

4. Don’t Add Additional Owners

As a widowed parent ages, one option they may consider is to add adult children as owners to their properties. In the here and now, it might sound like a good idea, but it could lead to personal financial ruin during your lifetime if that child mismanages the asset or decides to sell it. This can also lead to significant tax and liability consequences. The better choice is to add the properties to your trust. That way, you’ll retain oversight until your death, at which time the properties will smoothly transfer to your children.

5. Document Your Mental State

To create and sign a legal document, you must have sufficient mental capacity or competency to understand what you’re signing. One of the biggest reasons a will is contested is due to lack of capacity. If there is any question about your capacity, make sure you get a report from your doctor to prove you were able to create the Will or Trust that is the basis of your estate plan.

6. Explicitly Write Out All Gifts and Loans

Don’t leave your wishes to chance. The more documentation you create, the less opportunity there is for confusion. You can structure disbursements to your loved ones as loans or gifts, which will be designated within your estate plan. Discuss with your financial planner or estate planning attorney which is the better option for your family, as both have tax implications.

7. Explicitly State Whom You Are Disinheriting

Sometimes, creating an estate plan isn’t just about saying to whom you’re leaving assets; it’s also about to whom you’re not leaving assets. If you want to disinherit a family member, document the specific reasons. This is also true if you plan to give one child a different dispensation than another. The rule of the game to protect your assets is to document, document, document. Depending on your situation, a separate letter may be included with your estate plan, and sometimes even shared with the disinherited relatives before your death (be careful with the latter, as this has been known to create estate disputes before people even die).

8. Explicitly List All Personal Property Separately

Do you want your grandmother’s engagement ring to go to your daughter and the Rembrandt that’s been in your family for generations to go to your son? If so, you need to document that all specifically. Create a list to be incorporated into your estate plan.

9. Write an Explanation

Explain in a note your thought processes behind your estate plan. This note will accompany your will or trust and, although unenforceable, could prove very helpful, especially if your wishes vary from your heirs’ expectations.

10. Speak with Family Members

One of the best ways to create a smooth transition of your assets when you die is to have these difficult conversations with your family members now. The holiday season is an excellent time to do that since they’ll all be together. This allows them to have appropriate expectations and for you to protect your assets after your passing.

Protect Your Assets with an Estate Plan

Developing an estate plan is not something to be taken on lightly, and it’s certainly not something you should do on your own. You can protect your assets for the next generation with a well-constructed plan that includes your wishes and keeps your estate out of probate, but don’t procrastinate setting up or making changes to your estate plan!
For more than 30 years, Joel A. Harris has been protecting the estates of families throughout California. If you want some help navigating the ins and outs of protecting your estate or establishing a trust to protect your future, feel free to visit us online, in person, or call us by phone at (925) 757-4605.