David T. Hornsby | California Trust & Estate Planning

Why is an estate plan so important?

The Estate Planning process helps you plan for the future based on an evaluation of your current situation. It often includes planning for your retirement, the possibility of disability or incapacity, and for death. It encompasses a multitude of financial, emotional, legal and tax issues. Proper estate planning serves to minimize future conflicts and expense, while it speeds up the administration of the decedent’s estate.

Most people don’t like to think about death or disability, but are relieved once they’ve completed a properly designed estate plan. A proper estate plan can eliminate many legal and emotional problems associated with death.

Everyone’s situation is different and so too is everyone’s estate plan. Since it would be impossible to discuss all the potential benefits of a proper estate plan, I have simply listed below those benefits most common in a majority of estate plans.

Please note, however, that proper estate planning also includes financial planning, which is not discussed in this pamphlet. Financial planners, accountants and insurance agents can help you identify other estate planning issues not addressed in this pamphlet.

A. Nomination of guardian for minor.

When minor children are involved, every estate plan should include a Nomination of Guardian. If one parent dies or becomes incapacitated, then usually the surviving parent will retain sole custody of any children, unless special circumstances exist. If both parents die, then usually there must be a court action to appoint a legal guardian for the children.

In such a proceeding, the court will always look first to the desires of the parents, preferably expressed in a written Nomination of Guardian. The court is required to appoint a nominated person as guardian unless this would not be in the best interests of the children. By preparing a Will with a Nomination of Guardian you can avoid a court appointed guardian not of your liking.

B. Avoidance of probate.

What is probate?

Probate is a process where the executor of the estate furnishes to the court an inventory of the decedent’s assets, written appraisals of the values of assets, and the decedent’s will, if one exists. When the assets of a decedent must go through probate, the process usually takes at least six to twelve months. The attorney for the estate and the executor often receive large statutory fees. Other costs of probate include: referee fees, appraisal fees and other court costs.

How do I avoid probate?

There are two primary ways to avoid probate. One way is to hold property in joint tenancy. However, this can lead to many other problems too numerous to mention in this pamphlet. The other method is to hold title to assets like residences, bank accounts, stocks and bonds, in a revocable living trust. Probate of assets held in a living trust is not required. Assets held in a living trust can be promptly distributed after the trust creator dies.

C. Reduction of estate taxes.

For estates approaching or exceeding $11,200,000 for single persons and $22,400,000 for couples, certain types of trusts can be utilized to avoid or minimize federal estate tax. These limits are to go down to $5,490,000 (single) and $10,980,000 (coouple) starting on January 1, 2026.  Every dollar above the federal exemption amounts will be subject to an estate tax of 40%. 

D. Plan for incapacity.

If you are incapacitated, someone else must make health care decisions for you. California law defines who can make the decisions if you fail to provide instructions. All individuals should execute an Advanced Health Care Directive naming an agent to make health care decisions. This form should be customized to provide guidance to your agent and should also include, when appropriate, certain limitations on the powers of your agent.

In addition to health care decisions, you should also consider preparing a general Durable Power of Attorney for financial matters so that someone can manage your property if you should become incapacitated. A general Durable Power of Attorney can be immediately effective upon execution of the document, or it can be a Springing Durable Power of Attorney, which becomes effective only upon incapacity.

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