Estate Planning

On my website, I give a brief description of why everyone needs an estate plan. Most people believe that if they don't have many assets, or if they're unmarried or don't have children, then they don't really need an estate plan. Others may understand that an estate plan is necessary, but they're young and planning for something that is not going to take effect until after they're dead is just not a very high priority.

The reality is everyone needs an estate plan, and the sooner you put one together, the better off you will be.

So what exactly is an estate plan?

An estate plan is basically a list of instructions for certain people, selected by you, to follow upon the occurrence of certain life events. Notice that I have avoided limiting this to what happens when you die. That is because, in addition to post-death planning, a comprehensive estate plan includes instructions for many things that will happen while you're still alive. These instructions include a "living trust," trusts to protect your assets from creditors and others, trusts you establish for the benefit of charities, trusts for people with special needs, and other trusts. Other pre-death tools in an estate plan include durable power of attorney for financial decisions. If you become incapacitated and are unable to make decisions about your finances (including moving assets into a trust or paying bills), then a durable power of attorney for financial decisions will instruct someone you trust to do these things for you. You can also designate someone to make medical decisions for you if you cannot do so yourself. This is known as an Advance Health Care Directive in California.

There are a lot of other things that you can include in an estate plan, including the traditional will that sets forth who gets your assets when you die, who administers the estate during the probate proceedings, and who will take care of your minor children if both parents die before the children turn 18.

What Happens If I Don't Have an Estate Plan?

Actually, in California, a lot of things happen if you don't have an estate plan. The problem is, you won't have control over of it. When you die without a will or any other estate plan (known as dying intestate), California law determines who inherits your assets (including your spouse, your children, your parents, etc.), who will administer your estate, and who will be the guardians of your children, among other things. This can be a big deal if you are estranged from any family members and you want to make sure that they don't inherit any part of your estate when you die, or on the flip side, if there are specific individuals or charities that you make sure get some or all of your estate when you die.

Even while living, if you are incapacitated, without an estate plan you will not be able to control who makes decisions regarding your medical treatment or financial decisions. Again, the court may step in and appoint a conservator, which can be a long and complex process.

So What Should I Do?

At the very least, you should begin thinking about your estate, and what your plan would look like. The State Bar of California has more information on what to do in estate planning, including information on wills and living trusts.

In my next post. I will talk about living trust, what they can and cannot do, and when you should have one, and when you don't need one.