What Is Estate Planning And Why Do I Need A Formal Written Estate Plan?

What Is Estate Planning?

The phrase “estate planning” is thrown around quite a bit these days. Insurance agents and investment advisors whose businesses primarily consist of counseling their clients with respect to “investment” products often use the term. However, in the legal field the term “Estate Planning” is more involved.

A true Estate Plan is one that encompasses every aspect of planning for the disposition of your assets, including such things as:

■ A review of the character of your property and existing property agreements (if any),
■ Discussions about how you wish to structure your estate plan and dispose of your property,
■ Analysis of the tax impact of your proposed estate plan,
■ Advice on how to minimize the impact of taxes,
■ Recommendations for alternative estate planning techniques, and
■ The preparation of the documents necessary to carry out your chosen estate plan.

A basic estate plan consists of the following documents (i) a Will, (ii) Living Trust, (iii) Durable Powers of Attorney for Assets, (iv) Advance Health Care Directives, (v) Nomination of Guardians, and (vi) in most cases, whatever legal assistance is necessary to transfer a person’s assets to the Trust, such as a deed for real property.

Why Do I Need A Formal Written Estate Plan?

In California, everyone has an estate plan even if they have no Will or Trust. That is because California law provides a detailed scheme of who is entitled to your property when you die. However, very few people would be happy with the results under the law because the law does not take into account an individual’s wishes or family situation. Regardless of who you are, how much money you have, who you want to inherit your estate or when you want them to receive distribution, your wishes are likely very different from the basic disposition provided under state statutes.

The law of succession for those who die without a will or trust, distributes your estate outright first to your children, if any, then to your parents, if any, then to your siblings, if any, and so on. This can be a problem for those with minor children. For example, if a couple with children died, California law provides that the couple’s property would pass to their children. As such, the children would be entitled to full ownership of the property at age 18. Most people consider age 18 far too young an age to receive a full inheritance. With a well thought out Estate Plan you can make sure that your children are well cared for (food, clothing and schooling) by a responsible adult trustee and that they receive their inheritance at an age when they are more mature and less likely to blow through their inheritance on frivolous items.

Another pitfall with the "No Estate Plan" philosophy is that the basic law of inheritance does not provide for many common wishes, such as if you wanted to put some assets aside to care for a disabled child, sick parent, uncle or aunt. For most individuals and family businesses, estate planning is very important.

In California, having a proper estate plan in place will typically avoid probate. It will also make your wishes known in case something happens. We recommend using an experienced estate planning attorney who has tax expertise. If you are in Southern California, feel free to email us directly to see if we can assist you with your estate plan.

Posted by Henry (Hank) Moravec, III, a partner at Moravecs, Varga and Mooney. Hank Moravec is an incredibly committed, passionate and hard working estate planning attorneys. Any questions or comments regarding this post or your own situation should be directed to: hm@moravecslaw.com or (626) 793-3210. The firm website is http://www.moravecslaw.com

The office is located in San Marino, California, a suburb of Los Angeles in the San Gabriel area. The firm, however, represents clients throughout California and the office is easily accessible to Los Angeles, Orange, Santa Barbara, Riverside, and San Bernardino Counties. San Marino is a short drive from Los Angeles, Pasadena, Arcadia, Alhambra, Glendale, Burbank and the surrounding cities.