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Estate Planning Basics 101: Why You Need a Plan.

estate planning basis

Contrary to what companies like Legal Zoom and other companies that sell standardized document templates might have you believe, estate planning is more than purchasing and downloading forms from the internet, filling them out and signing your name.  A customized estate plan can be complex task, and planning correctly can make a significant monetary difference in what is left for your loved ones.

Working with a Qualified Attorney


It’s important to work with an attorney when creating an Estate Plan.  Similar to doctors, a qualified estate planning lawyer will help you design your plan, taking into account your family dynamics and asset profile.  This will enable the attorney to make recommendations to help achieve the client’s goals, and ensure that the plan will actually achieve what it was designed to do.  As the client, you’ll make the decisions, but your attorney can help you highlight any potential pitfalls, and help think through and understand the sometimes complex implications of each option.  Your attorney should be able to communicate what your options are, and what the potential implication for each option. The estate plan documents that are prepared on your behalf will communicate your wishes clearly, avoid mistakes, minimize taxes, and will leave room for adjustment if any part of your life circumstances change.

Why You Shouldn’t Do Your Own Estate Plan


Unfortunately, the marketplace is flooded with companies offering a low cost “Do-it-Yourself” estate plan solutions.  Such companies have marketed their products in such a way that have led many to believe that they can create their own estate plan simply by filling out some forms.  Without the proper education and knowledge of the law, this method of planning is grossly irresponsible, and is a far cry from the advice of a qualified estate planning lawyer.  The shifting landscape of California property tax rules and the Federal and State tax code is a trap for the unwary and can result in significant costs to your estate and your inheritors if not planned for correctly.  

Designing an Estate Plan to Fit Your Family Dynamics and Asset Profile


Do you have a blended family? Do you have children from prior marriages?  What happens to your assets if your spouse remarries after you die?  How do you ensure your children from a prior marriage will receive their share of the estate after you’re gone?  Does one of your children have a substance abuse problem?  Are your assets predominately held in a qualified retirement plan, or in real estate?  Each of these factors can dictate the legal strategies behind the design of your estate plan.  As such, estate planning lawyers can designs plans that ensure your assets will remain in your family and will incorporate protection mechanisms into the estate documents that will ensure your assets will eventually pass on to the intended beneficiaries.  Furthermore, designed estate plans can potentially help minimize transfer taxes that could result in significant savings to your beneficiaries.  What clients pay for in advice from a qualified estate planning attorney is a fraction of what might have to be paid to untangle any legal issues created by an unwitting “do-it-yourself” planner.

Maximizing What You Leave Behind to Beneficiaries


This will be a key theme throughout your estate planning efforts. It’s important to get legal or tax advice and think through how each asset will pass to your beneficiaries, as well as your estate as a whole.   The best options may vary by the asset type, asset size, your age, or many other factors. You’ll want to be thoroughly informed on what actions you can take or plan now to make sure as little as possible is lost to taxes, court fees, and other expenses. 

Estate, Inheritance & Gift Taxes


A big part of a customized estate plan is to maximize the amount of your estate to your beneficiaries.  This involves planning to minimize any associated transfer taxes.  Federal transfer taxes or associated gift taxes for estates can be among the highest assessed on any financial transaction.  In addition, some states levy their own estate or inheritance taxes.

Both estate and gift taxes have exemption limits, meaning you can give up to a certain amount without incurring a transfer tax.  Further, special rules apply between the transferring of assets between spouses.  As such, many spouses utilize transfer strategies to minimize the tax costs to ensure their beneficiaries receive the maximum amount from their estate.

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