What is Estate Planning?

Estate planning is a process. It involves people – your family, other individuals and in many cases charitable organizations of your choice. It also involves your assets and all the various forms of ownership and title that those assets may take.

As you plan your estate, you will consider:

  • How your assets will be managed for your benefit if you are unable to do so
  • When certain assets will be transferred to others, either during your lifetime, at your death, or sometime after your death
  • To whom those assets will pass

Estate planning also addresses your welfare and needs, planning for your own personal and health care if you are no longer able to care for yourself. Like many people, you may at first think that estate planning is simply the writing of a will. But it encompasses much more. A will is one part of that planning process, but other documents are needed to fully address your estate planning needs.

As you consider it further, you will realize that estate planning is a dynamic process. Just as people and assets and laws change, it may well be necessary to adjust your estate plan every so often to reflect those changes.

In starting to consider your estate plan, you should ask yourself the following questions:

  • What are my assets and what is their approximate value?
  • Whom do I want to receive those assets – and when?
  • Who should manage those assets if I cannot, either during my lifetime or after my death?
  • Who should have the responsibility for the care of my minor children if I become incapacitated or die?
  • If I cannot take care of myself, who should make decisions on my behalf concerning my care and welfare?

With tentative answers to these questions, you are ready to seek the advice and services of a qualified lawyer who will discuss with you the various documents that you need concerning such issues as title to assets, taxes, and management of your estate.

No matter who you are you must have the following documents:

  • A will – used to indicate how you want certain assets and possessions to be passed on to your loved ones after your death.
  • A living trust with an incapacity clause – allows assets to pass to heirs without going through the probate process and allows the person you designate, legal authority to handle your affairs in case you become incapacitated.
  • Durable power of attorney for health care – a person you appoint communicates your wishes detailed in a living will/advanced directive on your behalf to doctors and or family in the event you cannot.

Whatever the size of your estate, you should designate the person who, in the event of your incapacity, will have the responsibility for the management of your assets and your care, including the authority to make health care decisions on your behalf.

If your estate is small in value, you may focus simply upon who is to receive your assets after your death and who should be in charge of its management and distribution. If your estate is larger, your lawyer will discuss with you not only who is to receive your assets and when, but also various ways to preserve your assets for your beneficiaries and to reduce or postpone the amount of estate tax which otherwise might be payable on your death.

If one does no planning, then California law provides for the court appointment of persons to take responsibility for your personal care and assets. California also provides for the distribution of assets in your name to your heirs pursuant to a set of rules to be followed if you die without a will; this is known as “intestate succession.” Contrary to popular myth, if you die without a will, everything does not automatically go to the state. Your relatives, no matter how remote, and in some cases the relatives of your spouse, will have priority in inheritance ahead of the state. Nonetheless, they may not be the people you would want to inherit from you; therefore, a will is the preferable approach.

Your estate consists of all property or interests in property which you own. The simplest examples are those assets which are in your name alone, such as a bank account, real estate, stocks and bonds, and furniture, furnishings and jewelry.

You may also hold property in many forms of title other than in your name alone. Joint tenancy is a common form of ownership which takes assets away from control by will or living trust. Beneficiary designations on securities accounts and bank accounts are alternatives which must be carefully considered as well. Finally, assets which have beneficiary designations, such as life insurance, IRAs, qualified retirement plans and some annuities are very important parts of your estate which require careful coordination with your other assets in developing your estate plan.

The value of your estate is important in determining whether, and to what extent, your estate will be subject to estate taxes upon your death. Planning for the resources needed to meet that obligation at your death is another important part of the estate planning process.

If you do seek advice, wills and trusts are legal documents which should be prepared only by a qualified lawyer. However, many other professionals and business representatives may become involved in the estate planning process. For example, certified public accountants, life insurance salespersons, bank trust officers, financial planners, personnel managers and pension consultants often participate in the estate planning process. Within their areas of expertise, these professionals can assist you in planning your estate.