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Troy Werner and his family

Written by Troy Werner

Troy Werner has been an indispensable asset to The Werner Law Firm since joining in 2009, providing exceptional legal service to its clients.

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POSTED ON: June 23, 2018

Most see estate planning as a necessity for families – to determine where your hard-earned wealth and assets will go after you pass away. That said, estate planning should not be restricted to parents and grandparents. Believe it or not, estate planning is something even the never-married should consider. Estate planning tools do not require […]

Most see estate planning as a necessity for families – to determine where your hard-earned wealth and assets will go after you pass away. That said, estate planning should not be restricted to parents and grandparents. Believe it or not, estate planning is something even the never-married should consider. Estate planning tools do not require a spouse or offspring to be justified – there are plenty reasons to use estate planning for yourself, and for the benefit of your relatives.

To understand how an estate plan can help you even if you are not married or raising children, it is important to understand just what estate planning can do in general – and why it is more than just a way to plan out the inheritance process for your descendants.

An estate plan is, at its heart, a legally-admissible guide designed to help people in-charge figure out where to distribute what you own. While the dead cannot hold property rights, they do hold the right to an opinion over where their property should go, as per their wishes before passing.

There are many ways to make these wishes clear. Some are more complicated than others, but better suited to specific types of assets, or certain quantities of wealth. A simple will can often do the job, and there are countless trusts designed for specific considerations.

More than what happens after you die, an estate plan can be used to protect yourself and your assets while you’re still alive, under specific circumstances. For example, a power of attorney is an estate planning tool that gives a person – your agent – the ability to make decisions on your behalf, with certain restrictions.

A durable power of attorney allows your agent to make decisions for you when you are incapacitated, while a regular power of attorney does not. A living will, on the other hand, leaves specific instructions to healthcare professionals as to what procedures you are not willing to undergo, should you be incapable of sharing your opinion at the time.

Estate Planning Decisions to Make

Who do you care about? Who do you trust? And where do you live?

These are integral questions that will determine exactly how your estate plan will be structured – or whether you need an estate plan at all. To address the last question first: every state has its own rules regarding estates and probate. In California, intestate law declares that if an individual has no children and no spouse, everything they own passes onto their parents. If there are no surviving parents, then it passes onto their parents’ surviving issue/offspring, from biological children to step-children or adopted children (the individual’s siblings).

Finally, if the individual was an only child, then the grandparents are next in line. From there, it keeps going until the next of kin is identified, from aunts and uncles, to cousins, and distant cousins.

If you have no concrete plans regarding your assets and properties, and do not plan to give them away to anyone specific, then letting the state handle it may seem like the easiest thing. However, intestate law still requires a probate process. This means releasing certain details of your estate to the public by way of the public record, and it can mean a very long and unnecessary process. If your estate is especially complicated, consider speaking to an estate planning professional to create a trust for your next of kin.

If you wish to handle things through a will instead, then electing an executor can help ensure that someone trusted is in charge of distributing your assets. Otherwise, there are still other tools to consider. A healthcare directive and other contingencies could help save your life and your finances. With that comes the need to choose the right people.

Creating Wills vs. Trusts

If you have decided that you would like to choose whom to transfer your assets to, then the main three choices in estate planning are:

  • A Last Will and Testament
  • A Trust
  • A Beneficiary Designation

All three have exceptions that they do not apply to, but the designation is the most restrictive. In California, certain assets allow you to name a beneficiary on your title or document of ownership, allowing for the transfer of said asset to the specified beneficiary. This skips the probate process. Included are accounts that are “Payable on Death”, or POD, and assets that are “Transferable on Death”, or TOD.

These beneficiary designations override your will, and if designed properly, can take care of most of your belongings. Try and navigate your estate with an estate planning professional to see where these apply.

Otherwise, you generally have the option between writing a will for the rest of what you own or creating a trust (or several trusts) and a pour-over will for anything not funded into your trust(s) when you pass away. The first and biggest benefit of a trust over a will is the aforementioned probate process, and the lack of privacy it may present. A trust also gives you greater control over your assets, even in death, if you wish to keep your parents or next of kin safe from any possible debt issues and accompanying creditors.

Types of Trusts to Consider

Trusts come in many shapes and forms. Some allow you to protect your family from creditors. Others allow you to dedicate a portion of your wealth to charity, and the rest to those you love. To tackle the types of trust that might help you plan out the perfect estate arrangement, it’s important to understand what a trust is.

Trusts are agreements between several parties – the grantor of the trust, the successor trustee, and the beneficiary/beneficiaries. All trusts are either living or testamentary. Living trusts go into effect as soon as the trust document is signed and notarized, effectively removing the items within the trust from your ownership. Testamentary trusts let you retain full control until you die, at which point the document kicks into effect.

From there, trusts differ depending on how they are set up, and what they are designed to do. Spendthrift, asset protection and special needs trusts are all set up in a similar yet fundamentally different way. At their core, they all protect your family from creditors, limit their inheritance tax costs (in the case of California, these are not an issue), and protect them from making mistakes by limiting the control they have. Yet their purpose, and how they achieve it, differs from one to the next.

Choosing a trust involves going over your options with a professional. It is not advisable to try to set up a trust – or most other estate planning documents – without the help of a professional. It is very easy to make mistakes when drafting these documents without extensive knowledge or experience, especially of local laws, potentially leading to disastrous effects.

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