Some people do not understand why estate planning is important because they think that it is simply a matter of drawing up a will when you are old and gray. In reality, there are some very good reasons why every responsible adult should put some effort into the process.
Efficient and Effective Asset Transfers
If you state your final wishes in a will, the people that are named in it as inheritors will play a waiting game. The document would be admitted to probate by the executor, and it can take close to a year for the probate process to play out.
Most people would want their loved ones to receive their inheritances in a more timely manner. Plus, the heirs would receive lump sum distributions with no spending safeguards or asset protection.
A living trust can be used as an alternative if these drawbacks are not very appealing to you. The principal would be protected from the beneficiary’s creditors, and you can set up incremental distributions over an extended period of time.
Probate would not be a factor, so the estate can be administered in a more efficient manner.
This is one of a number of different types of trusts that can be used. There is an ideal solution for every situation, so you should work with an attorney to explore your options.
Protect Your Assets
Legacy preservation is a part of the estate planning process. If you own a small business, you can utilize a limited liability company or a family limited partnership to protect your personal assets.
There is also the matter of nursing home asset protection. Most seniors will incur assisted living costs, and over 30 percent will require nursing home care. A year in a quality nursing home in the Los Angeles area will cost over $100,000.
The majority of elders will qualify for Medicare, but it does not cover long-term custodial care. Medi-Cal will pay these bills if you can qualify, and you can utilize an irrevocable Medi-Cal trust to develop a financial profile that will lead to eligibility.
Estate Tax Efficiency
Most people are not exposed to the federal estate tax because there is $11.7 million exclusion this year. This is the amount that can be transferred tax-free before the tax would be levied on the remaining portion.
The value of your home and all other property that you own is part of your estate for tax purposes, and the exclusion is going down to $5.49 million adjusted for inflation in 2026.
Since it carries a 40 percent rate, this tax can significantly reduce the taxable portion of your estate. Fortunately, there are estate tax efficiency strategies that can be implemented to mitigate the damage.
Make Incapacity Choices
The state could be petitioned to appoint a conservator to act on your behalf in the event of your incapacity if you do not take the matter into your own hands. You can avoid a conservatorship if you include an incapacity component in your broader estate plan.
A living will is a document that is used to state your life support preferences and organ and tissue donation choices. You should also have a durable power of attorney for health care to name someone to make medical decisions on your behalf that are not life-support related.
The other piece of the puzzle is a HIPAA release, which will give the health care agent the legal right to obtain your medical information.
There is also the financial part of the equation, and many people become unable to handle their own affairs due to cognitive impairment. If you have a living trust, you can empower a disability trustee to fill the role if it becomes necessary.
A durable power of attorney for property can be utilized to name someone to manage assets that are not held by a trust.
Take Action Today!
We are here to help if you are ready to work with a Los Angeles, CA estate planning lawyer to put a plan in place. You can call us at 310-337-7696 to schedule a consultation appointment, and you can fill out our contact form if you would rather send us a message.
- How Does a Testamentary Trust Work? - June 6, 2023
- How to Use Your Estate Plan to Protect Your Blended Family - June 2, 2023
- What Can I Do to Prevent Probate Disputes After I Am Gone? - June 1, 2023