A comprehensive estate plan is one of the greatest gifts you can give your family when you die. It includes important elements, like appointing guardians for your children, and clearly states your wishes, for example, Jane Doe is the appointed guardian. The best way to ensure you've covered your family's needs is to work with a Los Angeles estate planning attorney.
Some people are overwhelmed when they discover everything the estate planning process entails. However, there are basic estate plans for those with straightforward estates.
Why Do You Need an Estate Plan Even When You Don't Have Financial Assets?
Estate plans aren't all about how many things you own. They inform your family of your wishes should you become incapacitated. They name the executor, trustee, and Powers of Attorney (POA) who will manage specific areas of your life when you can't. Importantly, they name your children's guardians should you and your spouse become incapacitated or die.
There is another reason estate plans are crucial. If you die without so much as a will (intestate), the state will manage your estate as it deems fit. This means it determines how your assets are to be distributed, regardless of your intentions.
More importantly, the state will place your children with a guardian they deem most suitable. It doesn't matter if you've informally named Friend Nancy your children's guardian. The court chooses a legal guardian and it could be Uncle Bill instead.
That alone should be sufficient motivation to consult an estate planning attorney in Los Angeles, CA as soon as possible.
How to Use Estate Planning to Provide a Legacy for Loved Ones?
Legacies are about long-term wealth and asset planning. The intention is to ensure your assets continue to benefit your family for generations after you die.
There are several ways in which you can create legacies for your family.
Trusts
There are different types of trusts that serve different purposes.
- Revocable Living Trust - You create a trust into which you transfer assets of your choosing, which are available during your lifetime. You can change the terms and beneficiaries when you feel it's necessary and you can revoke the trust entirely if you have a change of heart.
- It's a great way to keep your assets out of probate upon your death and avoid estate taxes.
- Irrevocable Living Trust - Unlike revocable trusts, which can be changed, irrevocable trusts are set. Assets in an irrevocable trust don't belong to you, they belong to the trust. This means your creditors can't use it to recover costs.
- Irrevocable Education Trust - It's a specific-use trust into which you transfer assets intended to contribute to your children's or grandchildren's education. The trust can only be used for education costs. No one can access the assets and use them to cover car payments, for example.
- Trust For Stepchildren - Stepchildren aren't automatic beneficiaries, so trust is the best way to ensure they get their share of your estate.
Gifts
Annual Gift Tax Exclusion: This enables you to give beneficiaries gifts up to a certain amount without paying gift tax. Currently, the amount is $17,000.
There are other types of gifts that play a role in legacy planning. Your Los Angeles estate planning lawyer can discuss them with you to see if they suit your situation.
Family Limited Partnership
This is specifically for those with family businesses who want to protect business assets from creditors. In this way, the business can stay in the family and contribute to the legacy you want to leave behind.
Private Foundation
A private foundation is best for families that have considerable wealth. One of the benefits is that they avoid estate tax deductions. Another is that the family always has control over the assets.
What Will Happen if You Don’t Have an Estate Plan?
We had a brief peek at the consequences of dying intestate above. Here are a few more disadvantages of not having a will or estate plan.
Asset Distribution Beyond Your Control
Intestate succession laws in your state usually have a format for distributing assets among beneficiaries. Relationships within your family don't matter and it opens the way for legal battles among family members.
Unavoidable Taxes
Experienced estate planning attorneys in Los Angeles know how to structure your estate to minimize the taxes that estates can incur. When you die intestate there is no protection and your assets can be hard hit by high taxes. This significantly decreases the funds available to your beneficiaries.
No Protection for Children
We've already seen that you have no control over who becomes your children's legal guardians, but there is more to it than that.
An estate plan could include a trust to hold your minor children's share of the estate until they become of age. It also protects the assets from creditors and other financial vultures.
Without a will, they receive their inheritance in one chunk and if they aren't old enough or responsible enough to manage it wisely it could be gone in a trice, perhaps into someone else's pocket.
Unavoidable Probate
Well-crafted estate plans can avoid the probate process altogether, usually through trusts. Probate is unavoidable without a plan. It's an expensive and lengthy process and can take up to two years or more to complete.
No Control Over Medical Decisions
Your estate plan should include a living will or advance healthcare directive that states your wishes should you become incapacitated. You should have a health or medical power of attorney who will make decisions in accordance with your will.
Without a healthcare directive, your family might make decisions in direct contrast to your wishes.
No Control Over Financial Decisions
Estate planning usually includes a durable power of attorney, someone who manages your finances while you're incapacitated. They ensure things like taxes are paid and there is money for your children to go on class trips.
Without a durable power of attorney, there might be confusion as to who controls your money. Your family might not even have access to your funds without legal documents.
Create an Estate Plan and Secure Your Family's Future
There is no doubt that the size of your estate plays no role in the need for a proper estate plan. There's also no doubt that if you want a comprehensive estate plan created specifically for your unique needs, you need to consult specialist Los Angeles estate planning attorneys like McKenzie Legal & Financial.
Our estate planning lawyers know the ins and outs of estate law as it pertains to living and deceased estates. Whether you need a trust for your stepchildren or want to add charitable organizations to your beneficiaries, you can rely on our expertise.
Call us at 562-594-4200 or complete the contact form on our website to arrange a free consultation.
