Estate Planning Considerations for the New Year
By Tom “Tex” Lawson, Director of Military Outreach
As we welcome the new year, it is a good reminder to review the estate planning you have done to see if it still reflects your desires and wishes. Here we’ll discuss some common errors we see frequently and ask you to consider a few points that are not always obvious. Some of the key factors that might trigger an update include scenarios like getting married, getting divorced, having a child, or updating a trust or will. Other considerations could include something simple like opening a new account or rolling over a retirement account.
Beneficiary Designation Check-Up
Check that all of your retirement accounts (IRA, Roth IRA, 401K and other retirement accounts) have the correct beneficiary designations. If you changed jobs and have an old company retirement account, make sure that it is properly accounted for. You wouldn’t be the first person to unintentionally leave an account to an ex-spouse. Retirement accounts typically pass outside of probate because they are going to a “person” - such as your spouse or your children. You can also set up contingent beneficiaries in the event the designated beneficiary predeceases you. Further, you can name numerous beneficiaries. As for accounts that are not retirement accounts, you can add a TOD (Transfer on Death) designation which will supersede a will and requires only the death of the owner. There are some limitations regarding real property.
Don’t Die “Intestate”
That is, don't die without a will or a trust. Don’t die without the minimum estate planning. If you are one of those folks who say, “let the kids sort it out,” pay close attention. Depending on the state in which you pass, your assets will go through the process of “probate” where a judge will decide how your assets are divided. It can be a very lengthy and expensive process.
How much are probate fees in California (as of 2020)?
Estimated value of real and personal property*
4 percent on the first $100,000.
3 percent on the next $100,000.
2 percent on the next $800,000.
1 percent on the next $9 million.
one-half of 1 percent on the next $15 million.
Estimated attorney's Probate fees.
Update Your Trust
When it comes to estate planning, if you own significant assets or real property, in most cases “a trust is a must.” A trust allows you a certain level of control over your estate that wills cannot provide. The structure of trusts allows you to decide how and when your assets will be distributed. If you have young children, this can be a great way to ensure they do not receive their inheritances in one lump sum. Trusts can be created with certain life milestones in mind, allowing children to receive funds after graduating high school or college or even after marriage and, in most cases, avoid the time and expense of probate. You should also revisit who your “Successor Trustee” will be. Your successor trustee will take over the administration of your trust when you die or if you become incapacitated. Typically, it does not make a lot of sense to put in a relative or friend the same age as you and your spouse, for obvious reasons. If you name an adult child, does he have a good relationship with his siblings? Be careful! Do they live close by, or are you making them fly across the country to take care of you? Sometimes a corporate trustee makes sense to take out emotion.
Living Will
A living will is a legal document expressing an individual's medical treatment preferences in the event they become unconscious or otherwise unable to communicate. Think carefully who you want to pull the plug on you!
Get an Attorney
We can help refer you to an attorney. Please email or call us to set up a time to begin estate planning!
