Estate Planning

WHY YOU NEED A SOLID ESTATE PLAN IN CALIFORNIA

An estate plan is a collection of documents that outline how your wealth and property should be distributed tomorrow if you should die as much as it is about a set of documents designed to manage and protect your assets and beneficiaries today. And that’s basically the sum of why you need a solid estate plan: protections for all whom and which you love and worked hard to attain.

The possible components of an estate plan are many.

BASIC COMPONENTS OF AN ESTATE PLAN IN CALIFORNIA

Wills. The term “wills” refers to a few different documents in estate planning. The two most common are the last will and testament (or testamentary will) and the living will. The first is a document that, among other things, outlines how your property will be distributed upon your death rather than the State of California deciding it if you were to die intestate (without a will). A living will is something entirely different. This legal document indicates your preferences on medical care.

Trusts. The term “trusts” also refers to a few different documents in estate planning. There are living trusts, joint trusts, special needs trusts, among other types of trusts. Trusts can be revocable or irrevocable. The living trust is similar to a testamentary will with two important exceptions: (1) trust assets avoid probate proceedings; and (2) trust assets can be shielded from creditors, lawsuits, and liabilities. The other types of trusts depend on your needs, wants, and circumstances. For example, you can set up a gun trust or special needs trust.

Life Insurance. You may never have thought of it, but life insurance can be an integral component of many estate plans. It provides immediate cash for funeral expenses and payment of the insured’s income taxes and debts. It can be used to pay estate taxes, too. Beneficiaries can also receive proceeds without having to pay income tax on the cash payout. Among other possibilities, proceeds from life insurance can also be used to fund a buyout of the decedent’s share in a closely held business.

Powers of Attorney. In California, powers of attorney (POA) are a way to make sure your voice is heard even when you can no longer speak for yourself. A general POA has broad powers to manage your financial affairs but you decide what is assigned to the POA––they don’t decide. What’s more, in California as well as most other places, a general POA cannot gift money or property to themselves. A limited POA, on the other hand, is just that: a power of attorney appointed for a more specific or narrower purpose. A durable POA can have as broad or narrow authority as the general or limited POAs with the difference that their  authority does not cease if you should become incapacitiated. The powers of the general and limited POAs expire upon your incapacitation unless specific language instructs otherwise.

HIPAA Authorization & Health Care Directives. The HIPAA authorization is important because it authorizes the use or disclosure of your protected health information to someone else. Advance healthcare directives are basically another type of power of attorney but specific to your health care preferences.

There are other important documents that can make up part of your estate plan. For example, if you are an owner of a business, you may want to incorporate a buy-sell agreement and/or a succession plan. Ultimately, what goes into your estate plan is based on why you need an estate plan. It’s for protection, of course, but protection of what or for whom? Children? A Partner? A business? Real estate?

At KLEIN.LAW, we customize estate plans. The key is the integration of the right documents intended to complement each other rather than work against each other.