Saturday, February 04, 2012 Be Cautious of "Simple" Estate Plans
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Beware of “Simple” Estate Plans
“I just need a simple will” or "I am looking for a simple living trust." It’s a phrase estate planning attorneys hear practically every other day. From the client’s perspective, there’s no reason to do anything complicated, especially if it might lead to higher legal fees. Unfortunately, what may appear to be a “simple” estate is all too often rife with complications that, if not addressed during the planning process, can create a nightmare for you and your family at some point in the future. Although the list can be long, some common complications may include:
Probate - Probate is the court process whereby property is transferred after death to individuals named in a will or specified by law if there is no will. Probate can be expensive, public and time consuming. A revocable living trust is a great alternative that allows your estate to be managed more efficiently, at a lower cost and with more privacy than probating a will. A living trust can be more expensive to establish, but will avoid a complex probate proceeding. In California, the cost of probate is high, and the fees are governed by California law. The cost of probate is based on a percentage of the estate in California. Additionally, the probate process in California takes, on average, well over a year.
Minor Children - If you have minor children, you not only need to nominate a guardian, but you also need to set up a trust to hold property for those children. If both parents pass away, and the child does not have a trust, the child’s inheritance could be held in a frozen account, as ordered by the court, until he or she turns 18, at which time the entire inheritance may be given to the child. By setting up a trust, which doesn’t have to come into existence until you pass away, you are ensuring that any money left to your child can be used for educational and living expenses and can be administered by someone you trust. You can also protect the inheritance you leave your beneficiaries from a future divorce as well as creditors.
Second Marriages - Couples in which one or both of the spouses have children from a prior relationship should carefully consider whether a “simple” will is adequate. All too often, spouses execute simple wills in which they leave everything to each other, and then divide the property among their children. After the first spouse passes away, the second spouse inherits everything. That spouse may later get remarried and leave everything he or she received to the new spouse or to his or her own children, thereby depriving the former spouse’s children of any inheritance. Couples in such situations should establish a special marital trust to ensure children of both spouses will be provided for.
Taxes - Although in 2011 and 2012, federal estate taxes only apply to estates over $5 million for individuals and $10 million for couples, that doesn’t mean that anyone with an estate under that amount should forget about tax planning. Currently, in 2013 the estate tax laws are slated to change, and the amount an individual may die with tax free falls to $1,000,000.
Incapacity Planning – Estate planning is not only about death planning. What happens if you become disabled? You need to have proper documents to enable someone you trust to manage your affairs if you become incapacitated. There are a myriad of options that you need to be aware of when authorizing someone to make decisions on your behalf, whether for your medical care or your financial affairs. If you do not establish these important documents while you have capacity, your loved ones may have to go through an expensive and time-consuming conservatorship proceeding to petition a judge to allow him or her to make decisions on your behalf.
By failing to properly address potential obstacles, over the long term, a “simple” will can turn out to be incredibly costly. Bradley Erdosi, an experienced estate planning attorney, can provide valuable insight and offer effective mechanisms to ensure your wishes are carried out in the most efficient manner possible while providing protection and comfort for you and your loved ones for years to come.
Thursday, January 12, 2012 What is your New Year's Resolution?
2012 is here. Are you keeping to your New Year’s resolutions? According to Forbes, there are 12 resolutions we should all make – and “plan your estate” is number two. Here is the list:
1. Set goals;
2. Plan your estate;
3. Check your credit;
4. See where your money is going;
5. See where you can cut back;
6. Make sure you have the right amount of insurance;
7. Build an emergency fund;
8. See if you can refinance your debt;
9. Pay down bad debt;
10. Get on track for retirement;
11. Consider saving for education;
12. Make sure your investment portfolio is properly diversified.
As to plan your estate, the author recognizes that we never know when we might need estate planning documents, and that these are “notoriously easy to procrastinate so it’s good to get them out of the way.”
The full article, 12 Financial Resolutions for 2012, is available online at http://www.forbes.com/sites/financialfinesse/2011/12/28/12-financial-resolutions-for-2012/
Monday, October 17, 2011 Welcome to our new site and Happy National Estate Planning Awareness Week!
Welcome to our very first blog and our completely revised website. As luck would have it, this week is National Estate Planning Awareness Week.
In 2008, Congress passed a resolution declaring the third week of October as National Estate Planning Awareness Week. According to the resolution passed by Congress, “Many Americans are unaware that lack of estate planning and financial illiteracy may cause their assets to be disposed of to unintended parties by default through the complex process of probate.” The resolution goes on to state that “careful planning can greatly assist Americans in preserving assets built over a lifetime for the benefit of family, heirs, or charities.” It is estimated that over 120 million Americans do not have proper estate plans to protect themselves or their families in the event of sickness, accidents, or untimely death. This costs many families wasted dollars and hours of hardship each year that can be minimized with proper planning.
For young families, estate planning is particularly important, as those who stand to lose the most are their young children. In the event of the death of both parents, who will care for the children? Who will handle the affairs of the estate and ensure that property will be transferred according to the wishes of the deceased parents? If there is no estate plan or will, the courts will appoint a guardian for the children, and the guardian may be an individual who does not share the values and beliefs of the deceased parents.
Or in the event of divorce and remarriage, how will property pass from the former spouse to the children living in a household with a stepparent?
In the event of the death of the primary breadwinner, consider if there is sufficient life insurance coverage for purposes of income replacement to support the surviving spouse and children who were dependent upon the primary breadwinner for their daily maintenance and support.
Advanced age and substantial wealth are not the primary indicators of the need for an estate plan. Young families, especially those with children who have special medical or educational needs, should seek the advice of an estate planning attorney who can guide them in providing for the current and future needs of their young children.
Please feel free to contact us if we can be of assistance.
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