Close monitoring of your assets is crucial to keeping your affairs in order, with special emphasis on real estate. In this context, the question of what is estate planning often arises. What may appear to be an insurmountable process to come can prove to be quite a useful tool in your arsenal. The true procedures can be simplified after considering a few important considerations; after which, you’re good to go!
What exactly is estate planning?
Estate planning refers to the process by which there occurs a transfer in the ownership of your property following your demise. However, it is not merely restricted to real estate. It may also encompass the designation of a legal guardian for your children to facilitate a seamless transfer of the same, following any case of incapacitation.
Moreover, estate planning is also inclusive of the scope of various other laws impacting the current nature of the plan. Estate planning serves as a good way to ensure the prevention of any disputes between heirs at the sudden occurrence of the death of the owner. It works on the principle of fair apportion of the property, to the rightful receivers.
Why you NEED estate planning!
In this day and age, estate planning is a pragmatic requirement for anybody who owns a property and wishes to leave a legacy. Here are some advantages that you can obtain upon opting for estate planning:
Protecting the interests of the beneficiaries
The essential objective of estate planning is to ensure that no conflict arises when a change in ownership of the property is required. Setting a brief framework of rules to govern the occurrence of such a situation. Estate planning orchestrates a clear delegation of the total value, smoothly.
During the course of estate planning, you can even ensure that your successors are relieved from the burden of wading through the often-complicated tax system. Through this process, one can create various trusts or funds with the intent of decreasing the probability of tax complications.
Encompasses all types of assets
Estate planning need not be limited to physical assets. This process can even include the transfer of financial or online assets. This enables beneficiaries to receive the full extent of their inheritance and reduces unaccountable assets. This also extends to the digital assets stored by individuals.
Prevents familial conflict
An extremely common case of familial conflict arises when the question of property transfer occurs. Squabbles between siblings are one such unfortunate scenario. Estate planning provides you with a one-stop solution for any such contingency. It lays down the rules through which property can be distributed, keeping disputes at a safe distance.
Caters to members with special needs
Parents who raise children with special needs often find themselves concerned with leaving a sustainable future for their children. However, with the help of estate planning, you can ensure that all of the interests of your offspring will be safeguarded.
The term ‘estate planning’ often evokes a foreboding sense of complexity in the minds of the listeners. Such allusions have no bearing in the real world, where estate planning offers a comprehensive solution to people who wish to equitably allocate their assets. Here are some common myths to steer clear of:
Estate planning is only for a select portion of the population –
It is quite common to find people categorizing estate planning as an activity that only needs to be considered during the conclusive years of our life span. There is nothing further from the truth. The benefits of estate planning can be derived by any given person, regardless of the phase of life that they are in. Death is quite unpredictable, and the interests of your loved ones always need to be a priority. As a result, it is advisable to invest in estate planning as soon as you can.
Estate planning is expensive
Another myth that often hinders people from engaging in estate planning is that estate planning requires a vast sum of money. On the contrary, the entire process can be completed without tugging at your purse strings. With time, the estate planning market has evolved enough to offer clients inexpensive plans that cater to their estate planning needs seamlessly. Some examples of pocket-friendly options include wills, term life insurance plans, trusts, and more. Ensure to find an estate planning lawyer who can tailor a plan to your financial situation.
The estate planning dictionary
Before heading down the journey of estate planning, it is important to understand a few terms that you will be interacting with. Here is a comprehensive dictionary to help you out during this process:
A will is a legally recognized document that dictates the terms by which the assets must be divided between the rightful recipients. It carefully lays the path to be followed right from the sharing of the assets to their imminent distribution.
A trust is an established relationship between three involved parties – the trustee, the grantor, and the beneficiary. These refer to the owner of the party, the intermediary who controls the release of the property, and the recipient of the same, respectively. The purpose of the trust is to safeguard the property from being released to any other interested parties and ensure the protection of the beneficiaries.
3. Durable power of attorney
To understand durable power of attorney, it is important to first understand the meaning of the term ‘power of attorney’. It refers to the capacity of the attorney to act as the agent of a client for as long as the client is not mentally incapacitated.
On the other hand, ‘durable power of attorney’ refers to the agency bestowed upon the attorney, which exists even in the occurrence of some form of incapacity of the client.
Probate refers to the entire administrative process that is to be followed during the distribution and allocation of the property of a deceased person. It can be of two types – without a will or the administration of the will itself. An executor or probate administrator is to be appointed for the due procedures to be followed.
What happens in case of no estate planning?
If the deceased leaves behind their property without estate planning, then the matter proceeds to a probate court. It is essentially responsible for undertaking the entire distribution process and assigning the designated recipients. A probate court encompasses every aspect of the life of the deceased that is relevant in terms of beneficiaries. This includes financial net worth, investments, or guardianship rights in the case of minor children.
Probate court is also applicable in case of incapacitation, which includes the additional point of end-of-life decisions. This process often ends up tearing families apart, since sentiments come into play here. Moreover, it is also a huge drain on your finances, since court proceedings can prove to be quite expensive.
Understanding California Estate Planning Laws
The estate planning laws may be subject to certain variations depending on which state they fall under the purview of. Here are a few pivotal ones to be aware of if you reside in California:
1. California durable power of attorney laws
- The essential purpose of this law is to allow for the appointment or selection of an individual to make decisions regarding artificial life care.
- It authorizes the attorney-in-fact to make life support decisions after witness signatures (2 members) who can testify to the consent of the principal and the signing of a statutory declaration.
- Provides the principal, when in complete capacity, to revoke the appointment of the attorney-in-fact, through acceptable forms of communication
2. California living wills law
- The living wills law is a law that provides individuals the right to express their preferences for medical treatment in the occurrence of physical/ mental incapacity in some form.
- The existing preference can be revoked at any point in time, without consideration of the physical or mental condition of the individual. It merely needs to be expressed to the attending physician.
- Physicians who are unwilling to fulfill the requirements of the living will are required to transfer the individual to a capable one, at the earliest possible.
3. California living wills law
The California living wills law provides various laws applicable for the living will to be considered as a viable source.
The crucial definitions as per this law aim to identify mental incapacitation, which deems the living will to be invalid. A rudimentary paraphrasing of such definitions would be as follows:
- The incapability of the individual to either understand the nature of the act, recollect it or even comprehend the nature of their relationship with biological relations.
- When the individual is afflicted by any scientifically known medical illness, which results in symptoms such as delusions or hallucinations.
Moreover, this law also says that in case of the death of an individual without a will, then the case goes to the probate court. The distribution of all assets will happen based on the dictum of the court, rather than any expressed wishes.
A minimum requirement of two witnesses is provided, to be able to attest to the validity of the testator’s signature.
4. California Euthanasia laws
- Euthanasia, which refers to the artificial termination of one’s life in case of medical ailments or some form of a permanently debilitating condition, is illegal in most states. However, California provides individuals with the option to consider the same in terminally ill cases.
- Under the guidance of a physician, the individual may make use of lethal medications in accordance with the End-of-Life Option Act in case of a permanent ailment.
A brief checklist for Californians
The entire procedure of estate planning, may at times feel overwhelming. However, considering the righteous objective of the process, it is important to see it through to completion. A good way to ensure the same is by creating the following checklist:
1. Rudimentary familial information
This refers to all the minor details regarding your entire family. It includes names, phone numbers, dates of birth, address, and much more. Maintain documentation proof of the same as well, to be submitted upon request. Collect the details from every single member, to streamline the overall process.
2. Choice of guardianship
The decision regarding guardianship is an extremely important step to be cleared on the way to estate planning. Consider the various aspects involved in a child’s life, and decide after thorough deliberation. It is prudent to maintain at least two choices for the same.
3. Designated trustees
A trust refers to the third-party protection of the assets before it is released to the beneficiary. Another crucial factor to consider is that of designating a trustee to oversee the functioning of the trust in case of your absence. For this decision, two choices are to be maintained as well.
4. Health support agents
This refers to the appointment of agents who will make life decisions in case of the incapacitation of the individual. It is inclusive of decisions such as medication, life support, etc.
This brings us to the most important stage of estate planning. Identification of the beneficiaries needs to take place to re-apportion the resources after the owner’s death. Highlighting the other aspects concerning the beneficiaries is also quite crucial.
6. Assets to be distributed
The penultimate aspect of the California estate planning checklist is the asset(s) to be divided. Assets need not be restricted to their physical form.
All in all, estate planning serves as an excellent process for the equitable distribution of resources to the rightful receiver. It is an extremely pivotal process, which needs to be followed by any given member of the state. Estate planning helps you live a worry-free life while safeguarding the future of people depending on you. With economical portions of estate planning programs, access to this market has drastically increased. It is important to remove any preconceived notions regarding its necessity. Rather, everything should pursue estate planning regardless of their situation. If you wish to contribute to a better tomorrow and provide a cushion to your beneficiaries, then estate planning is the roadmap to follow.