An estate plan is an important part of life planning, but despite the lavish sounding name, you don’t have to be the Monopoly Man to have an estate.
In fact, virtually everyone has an estate. Whether you consider yourself to be in the prime of life, or are entering one of life’s later phases, the benefits of creating an estate plan now can make all the difference to your family’s future.
At the Law Office of Vidhya Babu, our mission is to guide our clients in San Mateo and the California Bay Area through the process of estate planning. We demonstrate to our clients why estate planning is important, and help them to understand their options and take control of their family’s future.
So if you’ve ever wondered what’s an estate plan, or are simply curious about the benefits of an estate plan at any age, read on.
Why Estate Planning is Important
Let’s be honest: people are often afraid to discuss estate planning because it means considering their own mortality – and that can be scary. But estate planning means far more than that.
Estate planning isn’t just about what happens to your assets after death, but also how they are managed during your lifetime. Estate planning is vital to ensuring that your family, including minor children and loved ones with special needs, are well looked after even after you’re gone.
Estate planning is important because it creates a plan for the unexpected. Whether it’s an unforeseen illness or a devastating accident, estate planning answers questions like what will happen to you if you become incapacitated.
An estate plan can establish a plan for caring for your children if you are unable to, and can even help minimize federal estate taxes that could otherwise reduce the amount of financial support they receive.
Estate planning gives you peace of mind knowing that there is a plan in place for when the unthinkable happens. And that is something you can benefit from at any age.
What’s An Estate Plan?
So just what is an estate plan? Before we answer that question, let’s take a step back to understand what an estate actually is.
You don’t have to be a millionaire to have an estate – virtually everyone has one.
An estate is the totality of all the things that an individual owns: Homes, vehicles, businesses, bank accounts; financial assets like stocks, bonds, even cryptocurrencies. Even personal items like jewelry and family heirlooms are all part of your estate.
Therefore, an estate plan is the legal set of instructions for what will happen to all those assets after you have passed away.
An estate plan names your heirs and beneficiaries, and how your assets will be distributed among them.
But estate planning is about more than just who will receive your assets when you pass away. An estate plan creates a framework for how your assets will be managed during your lifetime, and also provides guidance for important health and end-of-life decisions.
A comprehensive estate plan will cover a variety of issues and circumstances, such as:
- Last Will and Testament: The most common estate planning document, a will is a legal document that gives instructions for how your estate is to be distributed after your death. The will names an executor of your choosing to handle your affairs, including payment of taxes and debts, and distribution of the remaining estate including finances, properties, and other assets. Without a will, your assets will be distributed according to state law in a legal process called probate.
- Revocable Living Trusts: A revocable living trust allows you to manage and distribute your assets during your lifetime, as well as after death. Because it is “revocable”, the trust can be changed or even canceled at any time, as long as you are mentally fit to do so. A living trust is a popular option because it can potentially avoid the probate process.
- Irrevocable Trust – A form of trust where the terms are permanent and cannot be changed. Once you create an irrevocable trust, you give up direct control of your assets, but gain strong asset protection from creditors, and tax advantages which can potentially shield the estate from estate taxes.
- Power of Attorney: Power of Attorney is an important estate planning document, giving an appointed person the power to manage your finances in the event you become incapacitated. Granting power of attorney is a serious decision, but can prevent a court from appointing a conservator to handle your finances on your behalf in that situation.
- Advance Healthcare Directives: Sometimes referred to as a living will, an advance healthcare directive is a broader legal document. It often includes a living will, which allows you to dictate end of life instructions, and can also appoint a healthcare agent to make those decisions for you if you are unable to communicate. This form of estate planning is important because it can relieve your family of the difficult burden of making those decisions on your behalf.
- Guardianship Designations: If you have young children, estate planning means establishing a plan for their care in the event the unthinkable happens. An estate plan can define who will be granted guardianship over your minors, as well as those with special needs, ensuring they are well looked after.
An estate plan isn’t just a single document. Rather, it is a complete framework that acts like a safety net, protecting your family and assets when the unpredictable occurs.
The Benefits of an Estate Plan Provide Value at Any Age
It is a common misconception that an estate plan is only for the ultra wealthy, or for those entering the later stages of life.
On the contrary, at the Law Offices of Vidhya Babu, we believe that forming an estate plan is beneficial for individuals at any stage of life, even if you don’t have a large estate.
Without an estate plan, state law will dictate how your possessions and assets are divided, and even how medical decisions will be handled. By creating an estate plan, you gain control over your estate and how your loved ones are cared for.
Consider what can happen without an established estate plan:
- Extensive Probate: Without an estate plan, the court will decide how your assets are passed on via the probate process. This can take months, or even years, with your family awaiting the court’s decisions.
- Family Disputes: An estate plan leaves clear instructions for how your assets will be divided. Without one, family disagreements can create unnecessary drama and contention.
- Unnecessary Taxes and Fees: While there is no state estate or inheritance tax in California, proper planning can help you minimize federal estate taxes for larger estates that could significantly reduce what your heirs and beneficiaries inherit.
- Lack of Control Over Medical Decisions: In the event you are incapacitated, crucial decisions about your health and treatment can be left in the hands of others, or can burden your family with difficult medical decisions.
Estate plans are about making proactive decisions beyond simply how your wealth is distributed:
- For young families: creating an estate plan gives you peace of mind knowing that your minor children will be properly cared for by guardians of your choosing, and not appointed by the court.
- For working professionals and homeowners: an estate plan helps safeguard your real estate, investments and retirement accounts.
- For older adults: healthcare directives ensure you are able to make your own health decisions, as well as to clarify your wishes and avoid family conflict.
Regardless of your age, an estate plan gives you peace of mind knowing that you are in control of your family’s future.
The Law Office of Vidhya Babu: Experienced Estate Planning Attorney and Trusted Advisor
Creating an estate plan isn’t something that you have to dread. Planning for the future and ensuring your family is cared for is an important decision, and creating an estate plan now ensures its benefits will be able to care for your family.
At the Law Offices of Vidhya Babu, we help our clients in San Mateo and throughout the San Francisco Bay Area form effective estate plans by discussing their options and creating a customized approach to selecting the right tools for your personal circumstances.
We understand the unique needs of Bay Area families – high home values, complex assets, and unique family structures. We have deep experience working with families from a wide range of financial and cultural backgrounds and will customize our approach to your needs.
Whether you’re just starting to think about estate planning, or need to update an existing plan, we are here to help you every step of the way through the estate planning process. Let us help you create the best future for your family.
Contact the Law Offices of Vidhya Babu today for a free initial consultation, and take the first step in securing an estate plan that provides your family with security and peace of mind.
**DISCLAIMER**
This blog post is for informational purposes only and does not constitute legal advice. Please consult with an attorney to discuss your specific circumstances.