Reason #1: You Decide
If you do no planning, you will die intestate. Dying intestate means that your assets will pass to your family members according to statute. Even if you have not spoken to a family member in 30 years, if they are designated as a person to receive a share of your property under the laws of intestacy, then they will receive that share irrespective of your wishes. Estate planning is a way to ensure that the ones you cherish will receive what you want YOU want them to receive, and not what the law mandates.
Reason #2: Probate Avoidance
If your estate is valued at more than $150,000 after taking statutorily excluded assets into account, then your estate will be subject to probate. A formal probate is very expensive and it takes a long time to complete. Probate subjects the estate to scrutiny as it is a public process and you need court approval before taking any action in connection to the estate. If you set up a trust, then your estate will not be subject to probate because trust property goes through a process called trust administration when you pass away. Fees for trust administration are much more affordable for your heirs. In the long run, it is actually cheaper to pay the upfront cost of a trust and go through trust administration than it is to pay for a much cheaper will and go though probate because probate fees are set by state statute and they are very high.
Reason #3: Financial Planning
Many people set up trusts for tax planning or financial reasons. If your estate is worth more than the $5.34 million, you should have a trust in place because if your estate is worth more than the federal exemption amount, you will be taxed at VERY high rates. Some people need financial planning for reasons other than tax savings. For example, if you know that your mom or dad is going to need MediCal, or that one of them needs to be placed in a skilled nursing facility that has income limitations, planning can be done so that your loved one will not be denied the care that they need.
Reason #4: Incapacity Planning
Incapacity planning is a very important aspect of estate planning. When you purchase a Strahle Legacy Planning Will or Trust Package, a financial power of attorney that only takes effect if you lose capacity, and an Advanced Health Care Directive are included. The health care directive is important because it will instruct your loved ones on what medical actions you want taken if you are not able to communicate your wishes. But most importantly, the financial power of attorney will allow them to pay for your care, the house, and continue the obligations of your life when you are not able to perform these obligations. You can only create a power of attorney when you have capacity. You cannot create one once you have become incapacitated. Once you are incapacitated, your loved ones must file a Conservatorship Petition in court in order to take any action on your behalf whether it involves medical decision making, decisions involving your person, or your finances. Conservatorships are expensive, and they take a long time to get approved. The proposed Conservator is subjected to investigation, and even the Conservator's credit score becomes an issue because of the bonding requirement. If formalities such as service of process are not properly followed in the Conservatorship process, there can be weeks of delay before it is granted whereas a power of attorney becomes effective immediately following the procedure that you designate for determining your incapacity.
Reason #5: You Have Minor Children
If you have minor children, you need planning. If tragedy strikes your family and suddenly your child is without parents, you should want to ensure that your child will receive proper care and financial assistance when you are gone. There is no greater gift that you could give your child than financial and emotional security. With a living trust, you can nominate guardians for your child. You can choose anyone in the world that you trust to raise your child whereas if you leave the nomination up to the state, the state might not choose who you would envision for your child's upbringing. Furthermore, in order to receive funds from any kind of life insurance or worker's comp claim, a Guardianship must be set up in court if the money is left outright to the child. A Guardianship can take a long time to be approved, and in some instances, it can take years. Your child cannot receive one dollar of the money owed to them until the Guardianship is approved. To leave your child in a financial predicament such as this would be unfair if you have the means to set up a trust for them. Not only could you set aside funds to be distributed upon your death to your child, but you could avoid the whole Guardianship process by making the trust the life insurance beneficiary instead of designating your child as an outright beneficiary. Give the gift of stability to your child by creating a trust.
Reason #6: Let Your Heirs Grieve Instead of Argue
You do not want your children and grandchildren to fight over your belongings when you are gone. If you have a will or trust that gives clear, unambiguous instruction on what should happen to your assets, it leaves less room for argument among your children, and more time for grieving and healing.
Reason #7: Blended Family Planning
Blended families (families made up of second and third marriages with step children) often require planning to ensure that children from prior marriages do not get left out. There is a trust that can be set up to ensure that your spouse does not cut out your children in favor of his or her own if you pass away first. Furthermore, this same type of trust can be used to prevent a future new spouse of your significant other from taking everything that was meant for your children. There are adverse income tax consequences for setting up this type of trust, so if you have a trust like this already or you would like to create one, please set up a free consultation so that we can weigh the risks and rewards. Sometimes, the tax savings of setting up a standard Revocable Living Trust may outweigh the benefits of control that this other trust would provide. There are also ways to prevent your children from being left out such as hiring a private professional fiduciary for trust administration or nominating a trust protector. On the other hand, if you have a strong fear that your children will not receive what you believe should be their property, then this trust may be right for you.