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Leslie Daff, JD, MBA - Orange County Estate Planning Lawyer

Friday, January 6, 2012

Tax & Estate Planning Tip #4: Resolve to Get "The Basics" in Place

This year, resolve to get your basic estate plan in place or have your existing plan reviewed due to the myriad tax law changes last year.

 An estate plan ensures your financial and medical affairs are handled upon your incapacity and death without court intervention (conservatorship or probate).  It also enables you to minimize taxes and distribute your assets to beneficiaries in the manner you choose.

Without proper planning, your property can end up exposed to statutory probate fees in probate court.  If you die owning a house with a fair market value of $500,000, for example, a probate administrator and attorney will be entitled to probate fees totaling $26,000 (if the house is worth $1 million the fees will be $46,000).  For this reason, people often create a revocable living trust-centered estate plan, generally ranging in price from $750 to $2,500.  Property held in the name of a revocable living trust avoids probate.

A revocable living trust-centered estate plan typically consists of five documents: 

1.  A Revocable Living Trust is a contract between you as grantor (granting assets to the trust) and you as trustee (managing trust assets) for the benefit of the beneficiary (you while you are living and others you name after death). 

 2.  A Pour-Over Will acts as a safety net to pour assets that may not have been transferred to the trust before death into the trust so they can be distributed according to the trust’s terms.  You also nominate guardians for minor children in your will.

 3.  A Financial Power of Attorney enables a person you name to handle assets that are not in your trust during your incapacity (e.g., get them into your trust before death).

4.  An Advance Health Care Directive allows you to express your preferences regarding end-of-life care and to name an agent to make medical decisions for you if you cannot make them yourself. 

5.  Finally, a HIPAA Authorization circumvents medical privacy laws, enabling the people you name to discuss your medical condition with your health care providers.

Take steps now to protect your family and preserve your assets by at least getting “the basics” in order.

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