We spend our lives building a strong financial foundation for ourselves and our loved ones. After a lifetime of accumulating assets, it’s inevitable that you want to ensure that your assets are allocated according to your wishes. Estate planning provides valuable tools to assist you in managing and disposing of your estate during your life and after death.

Why Estate Planning is Important

An estate plan is a set of legal documents that outlines how you want your financial affairs handled in the event of your death or incapacitation. It also allows you to specify your medical treatment preferences and name individuals to make financial and healthcare decisions on your behalf if you cannot.

A comprehensive estate plan can minimize legal complications and potential conflicts among beneficiaries. It can also help reduce taxes, avoid probate, and protect your estate from creditors.

A Will is the Foundation of Your Estate Plan

More than half of the adults in the United States don’t have estate planning documents or even a will. If you were to die in California without a valid will, the state’s intestate laws would determine how your estate is dispersed, and it’s likely not the way you would choose.

A will outlines how you want your assets to be distributed after your death. It provides clear instructions and names beneficiaries for specific assets, reducing the likelihood of disputes among heirs.

A properly drafted will is legally binding and will ensure your wishes are honored. Furthermore, it allows you to update it as your circumstances change, such as the birth of a child or the acquisition of new assets, such as an inheritance or selling a business.

However, using a will as your sole estate planning tool does have its drawbacks. A will needs to be validated, and your estate must go through probate. This process can be expensive and time-consuming, potentially delaying the distribution of assets.

In addition, once probated, a will becomes a public document, which may not be ideal if you are someone who values your privacy.

The Versatility of Trusts

A trust is a legal mechanism in which you assign ownership of your assets to a trustee, who then oversees and manages them for the benefit of your designated beneficiaries. Trusts can be customized to address a wide range of estate planning objectives. There are two primary ways to establish a trust:

#1. During your lifetime (living trusts)

#2. Upon your death (testamentary trusts)

Creating a trust requires drafting an agreement that specifies the terms and conditions for managing and distributing your assets. You then transfer your assets into the trust, which is managed by the trustee according to your instructions. The trustee is responsible for making the distributions to beneficiaries and ensuring compliance with the terms of the trust.

Trusts have multiple benefits, such as:

• Assets placed in a trust avoid the probate process, enabling a faster and more confidential distribution.
• You can customize your trust to address specific needs, such as providing for a special needs child or managing assets for minor beneficiaries until they reach a certain age.
• There may be tax advantages as a living trust can potentially reduce estate, gift, and income taxes.

Trusts do have drawbacks, though. Setting one up and maintaining it can be more complicated and expensive than creating a will. They also require ongoing management and oversight.

LPEP Law Can Offer Practical Advice

Legal advice is crucial for drafting wills and trusts that comply with California’s laws and effectively communicate your wishes. At Lonich Patton Ehrlich Policastri, our attorneys can assist you with creating an estate plan that ensures your assets are distributed according to your wishes. We will review your goals and help you understand the benefits and drawbacks of various estate planning tools. 

Contact us for a free consultation by calling 408-553-0801. Together, we can create a customized estate plan that will provide peace of mind for you and your loved ones.

Disclaimer: this article does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter.

Estate planning is essential to protect your family’s future, especially if you have children. Having a plan in place before the unexpected occurs can make an otherwise stressful situation more manageable and ensure the best possible situation for your family. Depending on your children’s ages and needs and the size of your estate, though, different solutions might be the most appropriate way for you to leave money to your children. The following are some options to consider.

Establish a Trust

In many cases, especially if your children are minors or have special needs, a trust is an excellent way to provide for them, establish specific guidelines for the distribution of your assets, and protect their interests. It’s important to understand the different types of trusts that are available to pick the one that’s most appropriate to your specific situation. 

Revocable Trust

Also known as a living trust, a revocable trust sets out in writing what you want to happen to your assets in the case of your death. You maintain control over all assets you place in your living trust throughout your lifetime and can make changes and updates as needed. The main advantages of a revocable trust are that you can avoid the lengthy and expensive probate process and can have a trusted friend or family member manage the assets if you are incapacitated. 

Irrevocable Trust

An irrevocable trust, comes in many forms, one of the most common is known as a life insurance trust.  An irrevocable trust cannot be changed once it is established but it can offer significant tax savings and asset protection for your family. If you have a large estate, an irrevocable trust might be a good choice. 

Special Needs Trust

If you want to provide for your child’s special needs without affecting their eligibility for government-funded benefits, consider establishing a special needs trust. This type of trust allows you to designate a trustee who will manage the funds on your child’s behalf, ensuring their standard of living and care are properly maintained.

Set Up A College Savings Account

For older children, many parents choose to set up college savings’ accounts like 529 Plans to help cover future educational expenses. Assets in this type of account are excluded from annual gift taxes and estate taxes, however, your children must use the funds for educational purposes to avoid penalties, which makes them somewhat limited.

Designate Them as a Direct Beneficiary

Minors cannot receive assets directly, so you should only make your children direct beneficiaries if they are adults. Many legal documents – a will, insurance policies, retirement accounts, and bank accounts – require you to designate a beneficiary to receive the assets after your death. Designating your adult children as your direct beneficiary in these cases can be an effective way to pass on wealth. Just remember to go over your accounts and update them regularly. 

Consult with Estate Planning Professionals 

At Lonich Patton Ehrlich Policastri, we believe that estate planning should not use a one-size-fits-all approach. Instead, our Estate Planning Group works closely with every client to address their unique situation, needs, and wants. Our estate planning experts offer a full range of legal services, including setting up trusts and preparing wills. Call us today to schedule a free, no-obligation consultation to discuss your options.

Disclaimer: this article does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter.