Estate planning: leaving a legacy

An estate plan is not just for the wealthy. Anyone can—and should—consider estate planning. Reasons for estate planning include preserving family wealth, providing for a surviving spouse and children, or leaving your legacy for a charitable cause. Without an estate plan, don’t assume everything will automatically go to your spouse. An estate plan can also ease the transition in complicated or blended family situations.

What is an estate plan?

An estate plan is a strategy for managing your finances in the event of your disability or death. It will need to be reviewed and updated regularly. A basic estate plan includes:

1. Will – Identifies the guardian of your minor or special needs children, who will carry out your wishes, and how your property will be distributed.
2. Financial Power of Attorney – Identifies who will control your finances, like managing bills, insurance, taxes, or selling property, if you’re not able to do it yourself. It has legal effect only until the point of your death.
3. Advance Healthcare Directive or Living Will – Identifies the person who will make your healthcare decisions if you’re unable to and states what medical treatment you wish to receive.
4. Health Insurance Portability and Accountability Act (HIPAA) Release – Permits your healthcare agent to access your medical/insurance information to assist in your treatment.

Do I need a will or a trust?

• Simple Will –written instructions for distributing your assets after your death, which must be reviewed and approved by a judge. Wills are often preferred for smaller estates since they have lower start-up costs. However, a will is subject to administration through the Probate Court. Probate is the legal process of administering an estate in accordance with state law. It can be an expensive and time-consuming process. A will can also be challenged in court and can complicate asset transfers. It is also considered public information, so it’s not a good option if you want to keep things private.For some smaller estates, your heirs may be able to use simpler and less costly procedures. These include:
  • Small Estate Affidavit – can be used to transfer personal property (such as money in a bank account), which allows heirs of estates worth no more than $184,500 to provide a notarized form directly to the bank or other institution holding the property. This maximum limit is adjusted every three years and will be increasing slightly as of April 1, 2025.
  • Property Transfer – a faster, non-probate court procedure to transfer certain real property. Based on AB 2016, a bill passed into state law in 2024, if your primary residence is worth no more than $750,000 at the time of your death, your heirs will be able to petition the court to transfer ownership of the home to them without having to open a full probate case. Details and forms should be available here before the April 1, 2025, effective date.
• Revocable Living Trust –an estate plan that can be changed over time by the trust creator. It is not subject to probate and settles the estate more quickly. It can reduce estate taxes and prevent beneficiaries from paying capital gains taxes. Revocable trusts offer greater privacy protection and can assign a professional trustee to manage the details. They can have higher initial start-up costs, but these costs are often far less than going through the probate process. They must also be funded and titled properly.
• Irrevocable Trust – an estate plan that transfers ownership of assets to a beneficiary, removing them from the estate of the person who created the trust. It is set up to reduce estate taxes, access government benefits, and protect assets from creditors. Irrevocable trusts cannot be changed or terminated without the permission of the beneficiary or by court order.

Where do I go for help?

Most estate plans are set up by an attorney experienced in estate law. You may also need a financial advisor to help you make investment, insurance, and tax decisions. Estate planning is a complicated sector of law. Just because you think you can do it yourself, doesn’t mean you should. Research and shop around for licensed professionals to help you.

• Estate and trust attorney –can set up wills, estate plans, and trusts on your behalf and may be able to provide legal help to your trustee. To find a lawyer in your area, check the California State Bar Association’s Certified Lawyer Referral Service. Before hiring an attorney, look them up at the California State Bar Association to see if they have any disciplinary actions against them.
• Financial advisor –guides and advises on financial investments and estate planning. Check if a financial advisor is licensed with the DFPI before using their services.