Planning Your Estate
So You Don't Have An Estate Plan? That Could Be Costly.
by Terrance Green (Write for us!)
(Click on the links within the article to get definition of that word)
Just what is an estate plan? A basic estate plan is comprised of a trust, will, durable
power of attorney (for management of property and personal affairs), and durable health care power of attorney. Who needs an estate plan? Practically everyone.
The most common excuse heard for why people put off their estate plan is this, "I will be dead so who cares. Let the family fight over it if they want it." Ask yourself; is this the legacy I want to leave? Absolutely not. You want to leave a loving legacy; a legacy that shows it mattered enough to you to take care of your family to ensure that your affairs are in proper order.
Executing a durable power of attorney ensures that if you are alive but incapacitated (i.e. car accident, dementia, etc.) you have selected someone to "step into your shoes", acting on your behalf regarding your non-trust assets. This may include filing your federal and state income taxes, filing a lawsuit on your behalf (which may be the cause of your incapacity), inheriting on your behalf, and paying your health care premiums so you do not lose your existing coverage. A durable power of attorney typically costs $150. Without this document, your loved ones will need to petition the court to
be appointed your conservator. A conservatorship is a slow, public process and it may cost between $3,000 and $6,000.
Executing an advance health care directive, also known as a living will, enables you, while you have capacity, to nominate trusted individuals to make your health care decisions on your behalf. This document enables you to specify certain health care wishes in advance such as burial preference, anatomical gift preference, cadaver and organ donation, and life sustaining treatment preference. Any decisions not specified in this document are left to the discretion of your health care agent.
There are many reasons to execute a trust, including probate avoidance and lowering your estate taxes. Probate is the process of a judge supervising the changing of title from your name to your beneficiary's name upon your death. Probate is typically a slow process since there are only two sitting judges for all of San Diego County. The process typically takes between nine months to two years to complete. Court fees and filing fees vary, but are usually hundreds of dollars. Attorney fees are statutory and are calculated based on the gross value of your assets. For example, if you own a home that is not titled in the name of a trust, it will go through probate. An attorney is paid between 1% to 5% of
the gross value of the home, depending upon the size of your estate. If your home is valued at $500,000 (mortgage or no mortgage), an attorney may be paid as much as $20,000 in probate fees to change the title of the home. Alternatively, if your home was titled in the name of a trust, your successor trustee would pay as little as $10 to change title. Probate should always be avoided whenever you own real property due to these unnecessary expenses.
Besides the fore-mentioned benefits, an estate plan also helps avoid disinheritance in blended families, name guardians for your children, and give your successor trustee the power to manage and control your trust assets if you are incapacitated. As you can see, there are many benefits of a basic estate plan. It serves as the foundation for more sophisticated estate planning as wealth increases
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