The following Q & A should help you understand some basic principals about estate planning and how it can benefit you. The answers provided below are not meant to be exhaustive, but rather to provide you some basic estate planning knowledge.

What is Estate Planning?
Estate Planning exists to advise a client how to organize and arrange his or her property so as to allow the client to dispose of that property at death according to the client's desires while minimizing the cost of transferring the client's property to the client's beneficiaries as well as the time it takes to do so. Estate Planning also enables a client to make sure someone is prepared to manage that client's property if that client is no longer capable of doing so.

Do You Need Estate Planning?
Since estate planning benefits a client not only in the orderly passing of his or her property at death, but also can serve to make sure that a client's assets and personal affairs will be managed according to the client's desires while the client is alive if the client is no longer able to do so, everyone can benefit from some estate planning. In other words, the need for estate planning is more than a function of one's wealth.


How Can Estate Planning Help You?
Estate Planning can help you in the following ways:
  1. Proper planning will make sure your property goes to the people whom you want to have it when you die and not some unexpected beneficiary.
  2. Proper planning can allow you to avoid the expense and delays associated with probate.
  3. Proper planning can help minimize or eliminate taxes that the government imposes on wealth transfers, "estate taxes" or "death taxes".
  4. Proper planning can help reduce or eliminate capital gains taxes on property transferred at death.
  5. Proper planning can make sure that if while you are alive you are no longer capable of managing your estate, someone can pick up the pieces for you.
  6. Proper planning can provide some asset protection.
  7. Proper planning can avoid conflicts in the event it is necessary to appoint someone as guardian of your minor children.
  8. Proper planning can avoid conflicts in the event it is necessary to appoint a conservator to manage your affairs.


What is Probate & Why is Probate Such a "Bad" Word?

Probate is the court supervised process designed to transfer property from one who died to a beneficiary. Although probate provides a very orderly and fair process for the transferring of wealth, it is a very time consuming and often expensive process.

Since probate utilizes the court system, it is necessary to accommodate the court's busy schedule when probating an estate. Thus a typical probate could take anywhere from 9 months to years to complete. However, to most people, the biggest drawback to probate is its cost which is discussed below:

A probate attorney is entitled to a fee based on the value of the estate which amounts to $4,000 for the first $100,000 of the estate, 3% of the next $100,000 of the estate and 2% of the remainder of the estate up to $1,000,000 and so on.

The executor of the estate is entitled to the same commission. In addition, the probate process requires the use of a probate referee to value non-cash property in the estate (such as stocks, bonds, and real estate), and the probate referee is entitled to 1/10th of 1 percent of the value of the non-cash assets of the estate as his fee. In addition, in California, probate requires the posting of a bond unless the will waives a bond and the executor is a California resident. A bond can be quite expensive. Lastly, since probate is a court process, a probate will always require court filing fees.

Are All Estates Subject to Probate?

No. In California estates that are worth less than $150,000 are not subject to probate and can be passed in a less costly and time consuming manner.

Also property passing between spouses is not subject to probate regardless of how much the property is worth. Lastly, property isn't subject to probate if by operation of law it passes to a beneficiary at someone's death. For example, joint tenancy accounts or jointly held property with rights of survivorship pass to the survivor without probate. Life insurance proceeds pass to the beneficiary without probate. Retirement benefits can pass to a beneficiary without probate. Property in trust will pass to a beneficiary without the need for probate, hence the popularity of Living Trusts.

Are all Estates Subject to Estate Taxes?

Yes & No.  Although theoretically all estate are subject to estate taxes, today the Federal Government has made estate taxes all but mute except for very, very large estates whose net worth is over $5,450,000 for a single individual and twice that for a married couple. And gifts to spouses and charities are never subject to estate taxes.

This figure, $5,450,000 is called the "unified credit" amount, and goes up every year for inflation. (In 2016 the amount was $5,430,000).

Given the fact that so few people have to worry about estate taxes, estate planners today are more concerned with minimizing capital gains taxes that might be owed when a beneficiary sells an inherited asset and protecting wealth from creditors.

Of course, what "Congress have given, Congress can take it away." Estate taxes might be eliminated in the future or the "unified credit" amount might be decreased. Whatever the case, proper estate planning can put your mind at ease.


Will Drafting

A will is the document people have used to leave their wealth to others upon death for centuries. A †will is an efficient way†to establish who will manage a personís estate upon death and who should benefit from a personís wealth. If a person dies without a will (or trust) upon death, any assets they own which are not in joint accounts or subject to pay on death beneficiary designations will be distributed according to state intestate law. This means any charity dear to that person will lose out as well as many potential relatives and even step-children unless they were legally adopted by the deceased person. Will drafting takes the same careful consideration as drafting a trust as both instruments determine how an estate will be administered, distributed, and by whom. However, today, in California, a person (especially a single person) whose total estate is worth more than $150,000 is advised to use a trust in lieu of a will otherwise upon death, the beneficiaries might have to go through an expensive and time consuming probate process. An estate planner can advise you how to avoid probate and whether will drafting is appropriate for you.


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