Friday, November 30, 2012

The Basics of California Estate Planning


Creating a proper estate plan is an essential action for residents of California who own any sort of assets. Some basic strategies include executing a last will and testament; establishing a health care directive; and designating power of attorney rights. Depending on the value of the estate, creating a trust could further protect the inheritance assets.

Any strategies you employ for your estate planning, need to comply with California state and federal laws. The state of California has some of the most complex probate laws in the United States, therefore it is highly advisable to work with an attorney who specializes in probate and estate planning as they will be current on all the latest laws and legal strategies.

You may be wondering what probate is if you have never heard of the word. Probate is used within the US to settle estates that are not protected by a trust. This process may vary depending on whether the deceased has any sort of estate planning in place before passing. People who pass away without leaving a Will, have their heirs go through a process called intestate succession in which the state of California decides who gets what from that estate. Typically, debts are paid first and then the remaining heirs get what’s left after taxes have been taken out. Many times this process can take a long time and be much more expensive than if the deceased had put a will in place.

One thing that is particularly important to understand, is if California residents do not want to bequeath gifts to direct lineage relatives there needs to be something in place to distribute the estate elsewhere. In order to disinherit relatives the Will must include a disinheritance clause which states the reason why heirs are not entitled to estate assets.

The reason why including the disinheritance statement is important is to minimize risks of heirs contesting the Will later down the line. Often times, disinherited relatives try to claim the decedent was under the influence of another person or was of unsound mind and they should get more because of this.

If a will is contested this can freeze up assets for the other heirs for many months or longer. This act can force personal representatives to sell inheritance assets to cover legal expenses. Defense fees can easily bankrupt small estates and leave nothing for designated beneficiaries.

A properly executed will provides direction as to how estate assets should be distributed. This document is also used to appoint representative, called an executor, charged with duties required to complete estate settlement process. Without these written directives, the estate must be settled according to California probate code.

How much time it takes to settle an estate depends on many factors. One of the most prevalent is estate value. In California for example, estates without real estate appraised with values of less than $150,000 are exempt from probate.

These “small estates” must undergo a 40-day waiting period to . Afterward, the personal representative needs to present a legal affidavit to the bank or other institution to access control of the asset before distributing the inheritance designated to the beneficiaries.

Aside from protecting assets and giving instruction to how assets are to be distributed upon death, estate planning is the most effective strategy for establishing advance health care directive. This is a document which allows people to document the type of medical treatment they do or do not want to have if they are terminally ill.  A similar document is the power of attorney for health care which allows a person to name an agent with power of attorney to make health care decisions for them.

You can also use estate planning to grant Power of Attorney rights for financial decisions and asset management. This is an important decision and should not be taken lightly. The individual who is granted with POA powers should be someone who can be trusted to make smart financial decisions for you as well as difficult decisions on your behalf if you become incapacitated.

Giving someone peace of mind is one of the best gifts you can give to a loved one. With the holidays just around the corner, this can be a gift you can give to those you love to show them that if you are no longer here they need not worry about the consequences to their lives.  Remember, without written directives, decisions surrounding your estate will be left to the courts and chances are they won't be what you wanted. Additionally, putting affairs in order can reduce family friction.

If you enjoyed this post, please comment below.