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.
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 that a judge decides on after your death. Wills are preferred for smaller estates since they have lower start-up costs and are easier to prepare and administer. A will is subject to 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 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.
• Revocable Living Trust – an estate plan that can be changed over time. 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 have high initial start-up costs and must be funded and titled properly.
• Irrevocable Trust – an estate plan that moves assets to a beneficiary. 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.

• Trust attorney – sets up a trust on your behalf and provides legal help to your trustee. Before settling on someone, 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.