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Estate Planning

Estate planning is not just about money.  Estate planning is the responsible way of planning for and protecting you and your family, both during life, and after death.

While nobody wants to think about death, incapacity, or disability, establishing an estate plan is one of the most important steps you can take to protect yourself and your loved ones.  Proper estate planning not only puts you in charge of your finances, it can also spare your loved ones of the expense, delay and frustration associated with managing your affairs when you pass away, become incapacitated, or disabled.  Moreover, proper estate planning eliminates the need for a court to get involved upon your incapacity or death. 

There are many benefits to proper estate planning, some of which are highlighted below.  For a comprehensive discussion about living trusts and estate planning, please contact our Orange County estate planning law firm for a consultation.  

Providing for Incapacity

One of the most important and compelling reasons for proper estate planning is to plan for incapacity.  If you become incapacitated (whether because of dementia, a stroke, Alzheimer's Disease, or any other debilitating illness), you are legally prohibited from managing your own financial affairs.  Many are under the mistaken impression that a spouse or adult children can automatically take over for them in case they become incapacitated.  The truth is that in order for another person to be able to manage your finances, they must petition a court to be appointed Conservator and declare you legally incompetent.  This process is often lengthy, costly and stressful.  Moreover, nearly everything about you becomes public record.  Even if the court appoints the person you would have chosen, they will have to come back to the court every year and show how they are spending and investing each and every penny.  If you want your family to be able to immediately take over for you, you must designate a person or persons that you trust in proper legal documents so that they will have the authority to withdraw money from your accounts, pay bills, take distributions from your IRAs, sell stocks, and refinance your home.  This is accomplished through various estate planning documents such as a California living trust and California durable power of attorney.

In addition to planning for your financial well-being should you become incapacitated, you should establish a plan for your medical care.  The law allows you to appoint someone you trust - for example, a family member or close friend to make decisions on your behalf about medical treatment options if you lose the ability to decide for yourself.  In California, an advance health care directive is the legal document which allows you to designate the person to make such decisions.This document should set forth your preferred medical treatments such as the use of extraordinary measures should you become permanently unconscious or terminally ill.  In addition to an advance health care directive, it is also important to have a "HIPAA Authorization" or similar authorization for someone to access your protected health information.  This document allows in individual or individuals to have access to your medical information, discuss things with your doctors, etc.  A HIPAA Authorization is a very important document, often overlooked by people.

Avoiding Probate

If you leave your estate to your loved ones using a will, everything you own will pass through probate.  The process is expensive, time-consuming and open to the public.  The probate court is in control of the process until the estate has been settled and distributed.  If you are married and have children, you want to make certain that your surviving family has immediate access to cash to pay for living expenses while your estate is being settled.  It is not unusual for the probate courts to freeze assets for weeks or even months while trying to determine the proper disposition of the estate. Your surviving spouse may be forced to apply to the probate court for needed cash to pay current living expenses. You can imagine how stressful this process can be.   With proper planning, your assets can pass on to your loved ones without undergoing probate, in a manner that is quick, inexpensive and private.

Providing for Minor Children

Those with minor children have extra special considerations when doing proper estate planning.  Because minor children do not have the legal ability to hold or manage money, special planning must be done to allow the appointment of a person or persons you would like to manage your assets, for the benefit of any minor child.  If done correctly, this will eliminate the need for court involvement should you be survived by a minor child.  Without any such planning, it is likely any funds passing to a minor child will be frozen until a guardian over money is appointed by the court.  Similarly, your estate plan should nominate a guardian to care for and raise your minor children. You should give careful thought to your choice of guardian, ensuring that he or she shares the values you want instilled in your children. You will also want to give consideration to the age and financial condition of a potential guardian.  Make sure that your plan does not create an additional financial burden for the guardian.

The person in charge of the finances (referred to as the "trustee") need not be the same person as the guardian to care for your children.  In fact, in many situations, you may want to purposely designate different persons to maintain a system of checks and balances.  Without a proper plan which designates a trustee and guardian, the decision as to who will manage your finances and raise your children will be left to a court of law.  Once a court is involved, any individual appointed by the court will have certain burdens and restrictions placed on them, such as having to provide annual accountings until the minor turns 18.

Other issues to consider in this respect is whether you would like your beneficiaries to receive your assets directly, or whether you prefer to have the assets placed in trust and distributed based a number of factors which you designate, such as age, a child's needs, educational accomplishments, etc.  All too often, children receive substantial assets before they are mature enough to handle them properly, often times with devastating results.

Planning for Death Taxes

Under the American Taxpayer Relief Act of 2012, death taxes are no longer a concern for the great majority of Americans.  This law, signed into law in 2013, provides for a federal estate tax exclusion of $5,000,000 per person (indexed annually for inflation) before any death tax is imposed.  Further, the tax rate for any amounts over the exclusion is 40%.  The Act also added "portability" between spouses.  For simplicity purposes, this means that a surviving spouse who is a citizen can "port" over the unused exemption of his or her last deceased spouse.  So, a married couple can pass on $10,000,000 (indexed annually for inflation) before an estate tax is imposed (assuming no lifetime gifts in excess of the annual amount which can be gifted tax free).  Many states have their own separate estate and inheritance taxes. However, California has abolished California estate tax.

In the event of a taxable estate, there are many effective strategies that can be implemented to reduce or eliminate death taxes, but you must start the planning process early in order to implement many of these plans.

Start Planning Today!

A well-crafted estate plan should provide for your loved ones in an effective and efficient manner by avoiding conservatorship during your lifetime, probate at death, estate taxes and unnecessary delays.  You should consult a Certified Estate Planning Specialist to review your family and financial situation, your goals and explain the various options available to you.   Once your estate plan is in place, you will have peace of mind knowing that you have provided for yourself and your family in case the worst happens.


Merhab Robinson, Jackson & Clarkson assists clients in Lake Forest, CA and throughout Orange County & the Greater LA area including Irvine, Newport Beach, Costa Mesa, Corona Del Mar, Aliso Viejo, Mission Viejo, Dana Point, Santa Ana, Huntington Beach, Fountain Valley, Tustin, Laguna Beach, Laguna Woods, Garden Grove and Laguna Hills.



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