estate planning

Do I Need an Estate Plan?

Almost everyone needs an estate plan. Many people think the term “estate plan” is something only high net worth individuals need. Not true.


All adult humans need some level of estate plan.

Many people think the term “estate plan” is something only high net worth individuals need. Not true.

An estate plan is a set of documents that protects you and your family. Essential estate planning documents include:

  • Advance Health Care Directive and HIPAA
  • Durable Power of Attorney
  • Will

Everyone over 18 needs these documents: 

Advance Health Care Directive and HIPAA

The Advance Health Care Directive and HIPAA allows a family member or friend authority to talk to your doctors and make health care decisions for you if you can’t.

Every adult needs these essential estate planning documents regardless of net worth. These essential estate planning documents have nothing to do with taxes.

If you own a home in California, then a Will will not be enough. Real property worth more than $50,000 will go through probate. When you pass away, your Will names the beneficiaries of your home, but your home will have to go through probate to get to them.

Durable Power of Attorney

The Durable Power of Attorney allows a family member or friend to manage your assets and pay your bills if something happens to you and you need help.

Will

The Will states how you want your assets to be distributed when you pass away and who you trust to administer the distribution.

Notice that these first two documents aren't just for old people. 

The Advance Health Care Directive and HIPAA and the Durable Power of Attorney are documents you need while you are alive. You will need formal written authorization to give someone who cares about you the right to take care of you if something happens. What can happen?  Think car accident, sickness, temporary disability.

In fact, many parents learn the hard way that medical staff won't talk to them about their 18 year old's condition after a car accident. The medical staff will need to see an Advance Health Care Directive and HIPAA signed and notarized by your adult child before they will talk to you.

Parents will have the same issue if they need to talk to their adult child's bank of financial institution. The bank or financial institution won't talk to you about your child's account without first seeing a Durable Power of Attorney.

Many of our clients with children leaving home to start college ask us to prepare our Young Adult Essential Estate Plan for their son or daughter.

What is Probate?

California Probate is a complicated court procedure that requires a judge, attorney, executor and appraisers, and it is very expensive and time consuming. A simple California probate usually takes one year to complete. 

Revocable Living Trusts Can Help Avoid Probate

Fortunately, you can plan your estate to avoid probate, with a revocable living trust. If you establish a revocable living trust, which, like a Will names the beneficiaries of your estate, and you transfer your probatable assets to it, then your family will avoid probate.

Assets that go through probate in California include:

1) Real property worth more than $61,500,

2) Bank accounts, brokerage accounts and other assets that total are worth more than $184,500.

Retirement plans, such as IRAs and 401ks, do not go through probate so long as you have named a beneficiary.

As a California resident, if you own your home (whether or not it's paid off) your estate will be subject to probate. If you have large bank and investment accounts, your estate will be subject to probate.

If your estate is subject to probate, then your estate plan should include a Revocable Living Trust along with a Pour-Over Will, Durable Power of Attorney, Advance Health Care Directive and HIPAA.

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