Estate planning is the process of planning how you would like your assets to be distributed after you’re gone. There are a few different ways to do this, and which ones you use depend on your personal preferences and state law.
This article will go over the basic types of estate plans and some reasons why you may want one.
Probate is the legal process that determines what happens to a person’s property when they die. In some cases, such as if a person dies without a will, probate can be very lengthy and expensive. This is why many smart people opt for an estate plan, specifically a will in combination with a trust.
A will lets you designate who receives what property and where they live. It can also specify who acts as an executor, or someone who helps manage the deceased’s property. A will generally will need to go through the court process called “probate,” which is time-consuming, expensive, and public.
A trust, on the other hand, can do all of what a will does, but it does it privately, without the need for probate, and can save your heirs hundreds of thousands of dollars in expenses and taxes.
Document your assets
Before you can figure out how to distribute your assets after you’re gone, you have to know what assets you have. You should create a list of all of your assets including:
Real estate (houses, apartments, land)
Income producing property (shares, bonds, etc.
Identify your heirs
The next step in planning for your estate is to identify who will receive your property. This can be children, other family members, or friends.
It’s important to note that if you’re married and you don’t include your spouse as an heir, they may not get anything. The same goes for any children you may have – if you don’t name them as heirs in your will or trust, they may not receive any property. It’s critical to identify all potential heirs before creating a will or trust.
Consider a will
If you die without a will, state law determines how your assets are distributed. This can lead to unintended consequences, such as your children receiving nothing and all of your assets being distributed to distant relatives.
You can’t write a will until you have decided who gets what. Unless you are very wealthy and have complicated assets, a simple will may be sufficient. However, if you own valuable property or investments outside of the state, or if you have close relatives who may contest the will, it may be wise to consult with a lawyer.
It is possible to create an online will, but this is not recommended. Although an online will may be less expensive than one prepared by an attorney, there is no assurance that it is valid. It may not contain the necessary elements required by state law to establish a will.
A last will and testament can be written in accordance with state law, but whether it is enforced depends on whether the country where the deceased resided recognizes foreign wills.
Understand the different types of wills
A will is the document that directs how your property will be distributed at your death. There are several types of wills, and which type you should prepare will depend on your personal situation.
Testamentary wills are the most common type of will. In this will, the testator (the person who writes and approves it) nominates an executor to handle distribution of property and official administration of the will.
Naming an executor is one of the most important things a testator can do, as this person will play a large role in carrying out the wishes expressed in the will.
Living wills, or healthcare directives, are becoming more popular as people seek to have more control over what happens to them medically at the end of life. These wills specify what medical treatments and procedures a person wants (or does not want) in order to promote quality of life until death.
Create a living will
Another important part of estate planning is creating what’s called a living will. A living will lets you specify your medical care preferences in case you become unable to make decisions for yourself.
This can be particularly important if you are in the process of creating an advanced healthcare directive, which allows you to specify your medical care preferences in the event that you are unable to make decisions.
If you have both of these documents prepared, then doctors and other healthcare professionals will follow the instructions in the advanced healthcare directive. If you only have one of these documents, then they will follow the instructions in that one instead. It is very important to have both of these documents prepared and filed so that your wishes are followed.
These documents can be very helpful and prevent prolonged medical care that may not be in someone’s best interest.
Decide who will manage your estate
Once you’ve decided to do estate planning, the first step is to decide who will manage and distribute your assets when you die. There are two primary ways to do this:
You can authorize someone to manage and distribute your assets. This person is called a fiduciary. You can also authorize someone to simply manage your assets. This person is called a trustee.
If you only want one or the other, that’s fine! Most people opt for a fiduciary to manage and distribute assets, though some prefer trustees. It all depends on how much trust you have in someone, and how much they will be able to handle the responsibilities of this job.
For example, if you have a close friend or family member who is very smart with money, then giving them the job as trustee may be a good idea. However, if you have someone who is less smart with money then giving them the job of fiduciary may not be a good idea.
Choose a guardian for your children
If you have children, you should also consider who will be their guardian if both you and your spouse die. You can also choose a financial guardian to manage the children’s finances until they are 18.
Some states allow you to name more than one person as a child guardian. In this case, the court will decide which person is appropriate based on their standards.
You can also name more than one person as a financial guardian. In this case, the court will determine which person is most appropriate based on their standards.
It’s important to discuss this with your spouse and agree on who will care for your children in the event of your death. This can help reduce tension after death and ensure that your children are taken care of by someone they know and trust.
Plan for special circumstances
Although it may feel overly dramatic to think about this, it’s important to consider what will happen if you die before your partner. What would happen if one of you was ill and the other had to care for them?
These are circumstances that most people don’t plan for, but can potentially have an impact on your estate planning. It’s important to discuss these scenarios with your attorneys so that they can include these details in your plans.
You and your partner should also think about whether you want to raise children together, or whether one of you would want to adopt or raise a child from another family. These questions should be answered as part of your estate planning as well.
If there are children from previous marriages or relationships, then it’s also important to discuss how this will affect their inheritance. Your attorneys can help you with all of these questions as well.
In all cases, it’s critical that you not try to do this yourself. Wills and trusts, especially in California, are complicated, and if you DYI your estate plan, you risk creating years of problems for your heirs and loved ones. Please call me today (California Estate Planning Attorney Eric Ridley) for your free peace of mind planning session.