NJ 101.5 recently posted an article, “Here are the important estate planning documents you should have.” It explains that there are generally a “Big Three” of documents that just about everyone should have—a will, a general durable power of attorney and a health care proxy. In California, we add a fourth document - a Trust - for anyone with an estate whose gross value exceeds $150,000 so that probate can be avoided.
A will lets you give away your assets at your death in the way you want and in a way that’s appropriate for your beneficiaries. In addition, a will allows you to name an executor to handle the administration of your estate. If you don’t name one in your will, an administrator will be appointed to settle your affairs. The process goes a lot more easily when you name an executor in your will. Then downside to only having a will is that the estate must go through probate before it can be distributed to the heirs. If a trust is involved, no probate is necessary for assets titled in the name of the trust
A general durable power of attorney is a document in which you designate a trusted individual as your agent to act on your behalf on financial and property issues in the event you’re unable to do so. If the power of attorney is durable, its effectiveness continues after your incapacity. This will allow someone to act on your behalf if you become incapacitated in the future. Giving this power to an agent—along with the designation of a health care agent in a health care proxy—may eliminate an expensive guardianship proceeding if you become disabled or incapacitated down the road.
A health care power of attorney lets you designate an individual to act on your behalf for medical decisions if you are unable to make those yourself. A health care power of attorney is usually coupled with a living will.
At the same time, you should review all of your beneficiary designations to be certain they’re current and reflect your wishes on the disposition of each asset. An asset with a beneficiary designation generally deems it a non-probate asset, so it won’t be distributed under your will. Changes to your will do not change the distribution of that property. Retirement accounts and life insurance policies are the most common assets that pass by beneficiary designation, as well as POD (payable on death) and TOD (transfer on death) accounts.
Along with the “Big Three,” some folks may benefit from creating a revocable living trust, which can hold property during your lifetime. Others may need to set up irrevocable trusts, which are used most often for estate tax planning purposes. One of the most common of these is an irrevocable life insurance trust (ILIT), which can eliminate the value of insurance proceeds from your taxable estate at your death.
Talk with an experienced estate planning attorney to make sure you have all the documents you need.
Reference: NJ 101.5 (September 13, 2016) “Here are the important estate planning documents you should have”
One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call our office today to schedule a time for us to sit down and talk about your estate plan, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.