I recently attended a California Society of Certified Public Accountants (Cal CPA) Estate Planning Interest Group presentation on basic estate planning and it reminded me of a conversation I recently had with my brother. My brother is a 30-something with a house, a new wife and a child on way. I had recently asked him if he had an estate plan or a trust. His reaction was to tell me that he didn’t need an estate plan because he would never reach the $5.34 million dollar limit.
It’s an argument I hear quite frequently from clients and friends. And it’s something that I hate to hear because it is completely wrong.
One of the main reasons you should have an estate plan is so you can control where your assets go when you pass away. If you don’t come up with your own plan, your state has a default estate plan for you. The problem with relying on the default estate plan is that you must go through probate.
Avoiding probate is the second main reason why everyone should have an estate plan in place. Probate is the process of going to court to transfer a decedent’s assets to the correct people. Probate involves hiring an attorney, going to court, paying court filing fees, and waiting for the judge to make a determination on the case. Also, through the court documents, your estate becomes public record and available for everyone to see. Right now, probate takes 1-2 years to go through in California. That’s 1-2 years before your loved ones can enjoy your assets.
The third main reason to have an estate plan is to make your wishes known. A health care directive can be used to appoint someone to make health care decisions for you if you become incapacitated. With it you can also let them know what kind of procedures and care you may want and what you don’t want. A durable power of attorney for your assets appoints someone as your financial guardian in case you are unable to take care of your finances. Do you have minor children or children on the way? Do you have pets? If something happens to you, who will take care of them? Who will be in charge of the money you left them?
An estate plan isn’t just a plan used to lower taxes. An estate plan is a blueprint for your future and the future of your loved ones. Because of that, everyone should have one.
For more information call LSL CPAs at (714) 569-1000.
By Suzanne Lieber