Estate Planning

The Basics: What is Estate Planning?

Estate planning is the legally recognized process by which you dispose of your assets (before and/or after death) and carry out certain wishes with respect to your assets and loved ones.


What are the Benefits of Estate Planning?

A well-thought out estate plan has the following benefits:

  • Arranges for the orderly disposal of your assets according to your wishes and values, both before and after death
  • Eliminates uncertainties in the probate process
  • Reduces the cost of the probate process
  • Maximizes the value of your estate by anticipating and controlling taxes and expenses
  • Allows you to name a guardian for your minor children in the event you are unable to care for them
  • Provides financial support for your children and loved ones in the event you are no longer able to provide for them
  • Allows you to name a trusted person to care for you and your assets in the event you are no longer able to
  • Allows you to name a trusted person to make important healthcare decisions for you in the event you are unable to make them for yourself, including end-of-life decisions


What If You Don’t Have an Estate Plan?

What happens if you die without an estate plan? In legal jargon this is known as dying “intestate.”

The good news is that the state in which you live has established a default estate plan for everyone who dies without having established their own.

The bad news is fourfold:

  1. Cost. Your state’s default estate plan is often more expensive to administer than an attorney-drafted estate plan. Your loved ones are likely to receive less than they would if you had established your own estate plan. In many cases your estate will pay more to dispose of its assets than you would have paid up front for an attorney-drafted estate plan.
  2. Delays. Your state’s default estate plan takes longer to administer. Your children and loved ones are forced to wait longer to receive their inheritance, even if they don’t have any other means to support themselves in the meantime.
  3. Uncertainty over who will receive your assets. The state’s default estate plan is unlikely to dispose of your assets in the way that you would prefer. Your assets may not go to your loved ones. Your assets could go to people that you don’t know and would not have chosen to benefit.
  4. Uncertainty over custody and care of dependents. Fourth, the state’s default estate plan may handle custody and care of your minor children differently than you would have wished. If you have minor children it is especially important that you establish an estate plan.


What are the Tools of Estate Planning?

Each individual or family has their own unique set  of circumstances, assets, and goals. As a result each estate plan is unique. However most estate plans share some similarities. At a basic level most estate plans include the following:

A Simple Estate Plan Includes:

  • Will
  • Power of Attorney
  • Living Will and Healthcare Power of Attorney (these two may be combined into a single document called an Advance Healthcare Directive)
  • Appropriately titled and registered assets (e.g. real estate, bank and brokerage accounts, vehicles, etc)
  • Beneficiary designations

The will can handle more than the disposition of assets. It may also communicate intentions and desires regarding guardianship and financial arrangements for any minor children or dependents you leave behind, funeral/burial arrangements, and other wishes you want to communicate to your family and loved ones.


A Slightly More Complex Estate Plan (but still relatively simple) Includes:

All of the above, plus:

  • Revocable trust (often called a “living trust”)


More Complex Estate Plans:

Complicated situations require complicated estate plans. If one or more of the following applies to you, you may require more complicated estate planning:

  • Estate that is large enough (now or in the future)  to be concerned with estate and gift taxes
  • Business owner (e.g. closely held corporation, partner in a partnership, sole proprietorship)
  • High-risk profession or other circumstances with significant creditor exposure
  • Beneficiaries with significant creditor exposure
  • Live or lived in, or own property in, a community property state (including California)
  • Divorced or widowed
  • Unmarried couple
  • Non-citizen spouse
  • Children with widely different levels of wealth or ability
  • Step-children and/or children from multiples marriages, or other situations where family tensions can arise
  • Child or dependent with special needs
  • Charitable intent (e.g. desire to make significant charitable donations in addition to providing for loved ones)
  • Beneficiaries two generations away and/or significantly younger than you (e.g. grandchildren)

Given the wide variety of circumstances that may exist, it is impossible to generalize which tools are called for in dealing with each of the above situations. A competent estate planning attorney can help you understand your options.


Do I Need an Estate Plan If My Estate is Too Small to Pay Estate Tax?

Yes. Protecting your assets from the estate tax is one goal of estate planning, but it is not the only goal. A proper estate plan accomplishes important goals other than estate tax reduction.

Furthermore it is important to keep in mind a few things about the estate tax:

  • The value of your estate is measured and taxed at the time of death (or shortly thereafter). Your estate may be small today, but it could be much larger at the time of death.
  • States impose their own estate tax in addition to the federal government’s estate tax. Your state’s exemption amount may be smaller than the federal exemption amount. Even though your estate is too small to pay federal estate tax, you may be subject to state estate tax.

If you aren’t sure whether you should be concerned with estate tax you should speak with a competent estate planning attorney.


What is Probate?

Probate is the legal, court-supervised process by which your assets are collected, your debts are satisfied, disputes are settled, and any remaining assets are transferred to your beneficiaries. The probate process is designed to protect the interests of both creditors and beneficiaries.

Not all estates need to go through the full-blown probate process or even be probated at all. One common goal of estate planning is to avoid probate.

Discuss with a competent estate planning attorney whether your estate plan is properly designed to minimize or avoid the costs, delays, and hassle of probate.


How Much Does Estate Planning Cost?

It is no secret that competent estate planning is expensive. The high cost is the reason why many people delay or avoid estate planning.

While it is expensive, it shouldn’t be more expensive than it needs to be. I believe in establishing the most cost effective estate plan that fulfills my client’s needs. I will encourage you not to pay for more estate planning than you need. If your situation calls for a simple estate plan, that’s what I’ll recommend.

Relatively simple estate plans with a living trust tend to run anywhere from $1500 to $3000 or more, depending on the level of complexity, the amount of customization required, and the amount of work necessary to fund the trust.

Plans without a living trust may cost less, but complex wills (such as those including complex testamentary trusts) may cause the plan to fall into the same cost range as a plan with a living trust.

If you need a more complex estate plan I will be able to give you a cost estimate after learning more about your situation.

I have a great track record of sticking to my estimates.

More information about my billing rate and practices.