Estate planning means preparing for possible incapacity and inevitable death. An estate plan can include many different types of documents, including wills and trusts. The variety of tools available will allow for a customized and comprehensive estate plan. There are many misconceptions regarding estate planning. Here your Sacramento estate planning attorney will dispel some of the common myths.
Estate plans are not only for the rich or elderly
One common misconception is that, if you are young and not too wealthy, you don’t really need an estate plan. The truth is, everyone has an estate, regardless of wealth, so everyone needs an estate plan. Your estate is made up of your personal property, bank accounts, retirement accounts, life insurance policies, and real estate. All of these possessions can disposed of through a properly constructed estate plan. If you don’t have a plan, on the other hand, the probate court will likely decide who get your property after your death. Most clients would rather make those decisions for themselves. Creating an estate plan is the easiest way to do that
The size of your estate does not really matter
Many clients who have only a few possession, but do not own a home or vehicle, believe they have no reason to create a plan . What many clients fail to consider are the personal possessions that may have sentimental value. For instance, who do you want to get your family heirlooms, your wedding ring, your family photos? Something else to consider if you have children is who should be their guardian if you die while they are still minors. The same is true for your pets. If you die without an estate plan, the state will make all of these decisions for you.
Trusts serve as more than just tax shelters for the wealthy
Contrary to what many people believe, trusts are not solely used as tax shelters. Although they do come with certain tax benefits, trusts are most often used to ensure that your family will have the funds they need in the future, once you are no longer there to provide for them. Trusts also help your family avoid the need to go through the probate process. They can prevent the need for a conservatorship, as well, if you ever become incapacitated.
Family may not automatically take care of your children if something happens to you
Many people assume that, if they die while their children are still minors, the family that survives them will automatically take them in and care for them. The truth is, if you do not address this issue in your estate plan, a judge and not your family will ultimately decide who will raise your children. An impartial judge many not share your family values or religious beliefs, so your views on proper child rearing may not be taken into consideration. If you have a will that identifies a guardian for your children, you can maintain control over your children’s future.
When you need to update your plan
After your estate plan has been created, your estate planning is not necessarily complete. It is just as important to keep it updated. If you get married, divorced, have a child, or one of your heirs dies, it is very likely that you will need to change the terms of your plan. A will or trust can be modified at any time during your lifetime.
Why you must not forget to fund your trust
After your trust has been created, there is one more very important step. All of the property or assets that you intend to be controlled by the trust must actually be transferred to the trust. This is known as funding the trust. In most cases it simply means changing the ownership of that property from you to the trust. The specific method of funding your trust depends on the type of assets you are including in your trust.
The benefits of using a trust for incapacity
Incapacity can be the result of an accident or illness. It may also be temporary or permanent. Regardless of the type or cause of your incapacity, a living trust can allow you to plan for the possibility by identifying someone to manage your finances and medical care through an established trust. Trusts also allow your private affairs to remain private, unlike the probate process, which is a matter of public record.
If you have questions regarding estate planning contact the Northern California Center for Estate Planning and Elder Law for a consultation, either online or by calling us at (916) 437-3500.
Timothy P. Murphy
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