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If you have children, own a California home or have a retirement account, it’s in your best interest to have an estate plan. In fact, it may be a good idea to have an estate plan even if you don’t have any assets. Without an advance directive, you may get treatment while incapacitated that you wouldn’t have consented to while of sound mind.

You’re the only one who makes decisions about your health

When you were a child, your parents could make decisions on your behalf if you were incapacitated. However, after reaching adulthood, you are the only one who can do so. Without proper documentation, you may not get the treatment that you want or need in a timely manner. In addition to an advance directive, you can appoint a medical agent to speak on your behalf if necessary.

Make sure your kids are taken care of

You can designate a guardian for your children with a will or trust. A trust can also hold property for the benefit of your sons or daughters until they are old enough to manage assets on their own.

You are more likely to be of sound mind when you’re younger

Perhaps the best reason to start estate planning at a younger age is that you are more likely to be of sound mind. If there is reason to believe that you weren’t capable of understanding what a will, trust or other estate plan documents were when they were made, those documents might be invalidated. This means that your home, car or other possessions may be subject to state intestacy laws.

Taking a proactive approach to estate planning may make it easier to manage your affairs while alive and after your death. Having a clear plan in place may also reduce the risk of conflicts arising between family members or your child lacking the resources necessary to experience a comfortable upbringing. It may be worthwhile to review plan documents on an annual basis after they are executed.

Estate planning is something that one must do long before it’s actually needed. Unfortunately, many people in California wait until it’s too late to have any kind of conversation about their estate plan with their loved ones. This can lead to a lot of confusion and conflict after they die. However, if you’ve been contemplating talking to your loved ones about your estate plans, here’s how you can go through with it.

Steps to talking to your family about your estate plan

Create the right tone. You need to set a relatively calm yet serious environment to talk about your estate plans to your children. An estate plan is a sensitive matter, but still, you want your family members to be receptive to every important detail you will address. During the conversation, encourage them to share their thoughts, opinions, and worries so that you can tackle any issues earlier, making sure everyone is on the same page.

Ensure that they understand what an estate plan is. Your family needs to understand the estate planning basics before you tell them your wishes and how you want them to be executed after your passing. Let them know about your instructions on guardianship when you die, your financial power of attorney, and provisions for medical care.

Keep the conversation going. The subsequent conversations will get easier once you start talking about estate planning to your loved ones. And since you can’t address any concerns or issues in one sitting, you should encourage your family members to keep talking about your estate plans.

Why is this important

Your family members will be responsible for carrying out your wishes after you die. If you do not have an estate plan, your loved ones will need to go to court in order to get permission to distribute your assets and property. This can be a lengthy and expensive process, and it is something that you can avoid by creating an estate plan.

Talking to your family about your estate plan can be difficult, but it needs to be done. If you haven’t started the conversations yet, you should do it now, before it’s too late.

If you have been looking into estate planning in California, you may have come across a revocable trust. Many financial advisors and attorneys suggest that this is one of the most powerful tools you need whether or not you have assets and beneficiaries. Read on to know more about revocable trusts and if they are right for you.

What is a revocable trust?

A revocable trust (also known as a living trust) is a separate legal entity that you sign, naming a third party entity to hold and administer your assets. The third-party entity is known as a trustee, and you—the creator of the trust— is the grantor. And, of course, the people that will receive your assets when you pass are your beneficiaries.

It is termed “revocable” because you can change the terms of the trust whenever and however you want or revoke it when you are alive. But, once dead, it becomes irrevocable or unchangeable. The trustee you named will carry out your wishes exactly as you dictated on the trust.

Furthermore, the assets in the revocable trusts are owned by the grantor. You will still file tax returns, report capital gains, and answer to creditors. This makes it different from the irrevocable trust because the trustee becomes the new owner, and the grantor is set free from legal and financial ties to their property.

Is a revocable trust right for you?

As long as you are alive in California, you could use a revocable trust. It doesn’t matter whether you have multiple estates or businesses; you can use it for features such as Durable Power of Attorney or Advanced Healthcare Directive.

With Durable Power of Attorney (POA), you can name someone that will handle your legal or financial issues on your behalf when you become incapacitated. Advanced Healthcare Directive enables you to direct medical practitioners on how you want to be treated when you can’t make such decisions for yourself. And if you have assets, a revocable trust makes it easier for your beneficiaries to get your assets.

You should note, however, that revocable trusts do not save taxes. You will still pay income and estate taxes. Fortunately, California has no inheritance tax.

Estate planning with a revocable trust gives you tremendous benefits in California. The revocable trust, however, shouldn’t be confused with an irrevocable trust. In some cases, it’s best to have a trust that no one, not even the creator of it, can change once the trust is binding. For estate owners who need more flexibility, revoking their trust might be the best solution at some point in their lives. A revocable trust gives you freedom in areas an irrevocable one does not.

Sheltering from uncertainty

Tax is a type of uncertainty for estate owners. Assets that grow in value or produce separate income are exposed to future taxes. Even without knowing now how much assets will appreciate, a trust can keep you from paying taxes. A revocable trust can even be a temporary shelter from creditors, but you need to confirm that the trust has a beneficiary.

Management from a trustee

Trusts are convenient because their creators entrust their assets to an asset manager. This manager is called a trustee and, when assigned correctly, will manage how assets appreciate, are taxed and transferred to your beneficiaries. The convenience that a trustee’s work creates gives you time to enjoy life now while having hope in how your estate is managed after death.

Self-assigned beneficiaries

With a revocable trust, you can make withdrawals and not be penalized for spending your trust’s funds. To give yourself even more authority over a revocable trust, you can name yourself as the trust’s beneficiary. This gives you the right to inherit the trust, direct the trustee and even be subject to the trustee’s advice. Even more, as the owner of the trust, you can revoke it at any time.

Estate planning in California

In some cases, a revocable trust won’t have the legal support your strategy needs. An irrevocable trust, for example, being that its status is somewhat immovable, offers more security for your assets. Trusts are secure in general, but you can’t hedge your assets in a revocable trust in the same way you can with an irrevocable trust.

Keeping the passwords to cryptocurrency wallets secret is a smart idea. If a password fell into the wrong hands, all the virtual cash could disappear. However, without the password, leaving all that cryptocurrency to a beneficiary might be a hollow gesture. The California probate process could become stressful and aggravating when heirs and beneficiaries lose access to digital accounts. For this reason, effectively organizing digital accounts must become a priority when estate planning.

Estate planning and the digital world

Digital asset” is a term that covers a significant amount of territory. Cryptocurrency, online brokerage accounts, social media profiles, emails, and even photo and file storage methods fall under the digital asset heading. Without passwords or a way to retrieve passwords, an executor or a beneficiary won’t be able to access these accounts.

More importantly, no one will try to access the accounts if they don’t know the accounts exist. Compiling a list of various digital accounts should be the first step when working those assets into estate planning.

The list should include usernames, passwords and connected email addresses. In short, an executor or an authorized beneficiary should not have any impediments to accessing the accounts. Maybe a bill requires swift payment, or transferring money to a new account has to be done right away.

Executors and heirs are not the only ones who may require access to the list and passwords. Someone with power of attorney may find these accounts helpful. Effective planning could make things easier for everyone who has business with the accounts.

Preserving account safety and security

Putting the digital account and password information in a safe place requires some deliberate thought. Writing all the passwords down on paper and putting them inside a drawer isn’t the best plan. Saving them in the cloud as a document comes with risks of being hacked. Even an executor of the estate could have a hard time getting access to a safety deposit box.

Why not put the information into an attorney-client file? The attorney’s safe or safe deposit box could keep prying eyes out while affording authorized access to others when the appropriate time comes.

Many California residents procrastinate with estate planning. However, estate planning is a good idea for adults of all ages since the unexpected could happen. People who write estate plans can also use them to ensure that their beneficiaries get the maximum possible amount without a portion of the estate being eaten up through taxes. Estate planning can also help to ensure that your assets will go to the people you want to receive them instead of them being passed to the wrong people. Here are a couple of ways estate planning can help your beneficiaries receive a greater portion of your assets.

Reducing income taxes

Some people assume that they only need to write estate plans if they are very wealthy so that they can avoid estate and gift taxes. However, people who receive certain types of assets might also have to pay higher income taxes. For example, if you have a 401(k), a traditional IRA, or another tax-deferred retirement account, the beneficiary of one of these types of retirement accounts will have the amounts they receive added to their incomes. This can bump them into a higher income tax bracket, and they will also have to pay income taxes on the total amount distributed to them. Converting your traditional IRA or 401(k) to a Roth IRA can help your loved ones to avoid having to pay income taxes on what they receive.

Avoiding estate and gift taxes

If your estate is worth $11.58 million or more as an individual, your estate will be subject to federal estate taxes. Careful estate planning can help you to reduce the value of your estate so that it falls below the threshold amount. This can be accomplished through carefully planned gifts during your life, charitable contributions, and creating a trust.

If you die without writing an estate plan, your assets might be distributed to people you did not intend to receive them. When people die without estate plans or wills, their assets are passed according to the state’s intestacy laws. Estate planning helps to avoid unintended consequences and can help your family to preserve your wealth.

Estate planning helps individuals living in Hayward, California, to ensure that their assets and property are well taken care of if they die. Why? Because without proper estate planning, the properties may not be taken care of to the extent intended. Read below to learn more about the ins and outs of what is included in an estate plan.

An estate trust is the main component of an estate plan

When you write up an estate trust, you need to make sure that the trust is congruent with the way you pass on assets outside of the will. For example, you should not list your brother as a beneficiary for your life insurance policy, and place your mom as the beneficiary on your trust. If you accidentally do this, you could be subjecting both of these people to a costly and time-consuming court battle.

Draft up a beneficiary designation

It is possible that even if you do not create a trust, your heirs could receive many of your estate assets or 401k account. For this reason, it is important to maintain a beneficiary. Also, if you fail to maintain a beneficiary, the probate court can determine how your assets are allocated. In all likelihood, if a judge is left to make these decisions, they will make decisions that go against your situation or wishes.

The letter of intent is a good add-on to the beneficiary

The letter of intent is a significant addition to the beneficiary because it gives those same beneficiaries explicit instructions for how to care for your assets. You can also include instructions for your funeral plans. While letters of intent are not technically legal documents, they are useful because they show what you want to happen to your estate planning in the event that your trust is deemed invalid for whatever reason.

Do you need to write or rewrite your estate plan? You may want to do this as soon as possible because life is unpredictable. If you need help with writing your estate plan, reach out to an attorney near you.

Creating a will is a necessary part of putting together your estate plan. This document outlines how you want to distribute your assets after your death and who you want to care for any minor children.

But many people have yet to create a will – a survey conducted by Caring.com estimates only 4 in 10 adults in the U.S. have made this legal document. Not only should you make creating a will a priority, but after you have this document, you should update it when certain life situations arise.

1. When you become a parent

After you become a parent, you should update your will to name a legal guardian. This person will become responsible for your child if you unexpectedly pass away.

2. When you experience changes in wealth

You may have experienced changes in your assets or wealth as the years have passed. When you experience a significant change in your wealth, such as receiving an inheritance, account for this alteration in your will.

3. When you want to change your executor or a beneficiary

You may not want to use the same executor or have the same beneficiaries as when you first made your will. If your circumstances have changed and you want to rename an executor or change the people who receive your assets, revise your will.

Your will is not a stagnant document and will change throughout your life. In addition to altering your will in these circumstances, plan on reviewing this legal document approximately once a year.

Upon meeting a new partner and deciding to get married after previously getting a divorce or losing a spouse to death, a person should feel hopeful about their future and their new family. 

The joy that a new marriage may bring should not, however, prevent a person from prudently reviewing their estate plan to ensure that any children they have from their prior marriage receive their intended inheritance. 

Blended families and complex estate planning needs 

Adult children or even grandchildren may expect to receive a specific inheritance upon the death of their parent or grandparent. This may even have been discussed among the family. However, when that parent or grandparent remarries, things may change. Forbes explains that a simple will may lack the ability to ensure the children and grandchildren will receive what was expected if assets first flow to the surviving spouse. 

Families must prepare themselves for any number of unexpected events after the death of the first spouse, including yet another remarriage on the part of the surviving spouse. 

Trusts for spouses and children 

Fortunately, people may select from a variety of trust types to find the one that provides for their loved ones appropriately. Some blended families find the use of a qualified terminable interest trust appropriate. According to Policy Genius, a QTIP trust allows assets to be titled into the trust. When the person dies, their surviving spouse may collect an income from the trust assets for the remainder of their life or for a certain time period. 

When the surviving spouse eventually dies, the trust assets then flow to the children or the grandchildren of the spouse who established the trust. 

Few things may prompt someone to begin the serious work of making an estate plan than to watch someone else’s family implode after his or her death. If you recently witnessed the adult children of a friend or family member break into factions as they disputed what should happen to the estate, you may have resolved to begin immediately to draft clear and complete instructions for your own family.

However, even with a will, you may leave your family with unanswered questions that lead to confusion and arguments. Sadly, it is not uncommon for divisions that occur after the loss of a parent to linger throughout the lives of the children. For this reason, you may wish to enlist the help of an experienced professional so you have every chance of creating an estate plan that your loved ones will not contest.

Heading off any arguments

Perhaps the most common mistake parents make is to put off estate planning until it is too late. Without a will or other directives, your children may have no choice but to guess at what you would have wanted and to project their own desires into the distribution of your assets. As you make your plan, you can take the following steps to reduce the chances that your kids will bicker over your estate:

  • Consider the benefits and flexibility of including trusts in your plan, which can include incentives for your loved ones and protect them from tax ramifications.
  • Discuss your plans with your family, especially if your choices may be surprising, such as disinheriting someone or including conditions in your trust.
  • Make sure your estate plan has a no-contest clause, which discourages anyone from disputing your plans by cutting out those who make unsuccessful challenges.
  • Keep your plan in a safe place but where your family can find it when the time comes.
  • Review your plan at least once a year, and be sure your family knows you are doing this so they realize you are giving careful thought to your decisions.

The options for contesting a will are limited, including proving that you did not have adequate mental capacity to understand what you were doing when you executed the document. You can reduce the chances that your loved ones will drag each other to court over your estate plan if you work with a skilled attorney and communicate your wishes to your family.

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