Estate Planning Basics 101

Estate planning refers to planning the distribution of your estate, either before or after your death. The estate planning documents are referred to as your estate plan. Generally, when an Orange County estate planning attorney at Modern Wealth Law prepares an estate plan for you, it will consist of the following documents:

Orange County Estate Planning Lawyer Documents

  • Revocable Living Trust
  • Will
  • Durable Power of Attorney
  • Advance Health Care Directive
  • Trust Certification
  • Other miscellaneous documents depending upon your individual situation

While much of estate planning is based upon federal law (estate taxes), certain laws related to estate planning are different from state to state (income taxes), or even outside of Orange County (property taxes), so you should consult with an estate planning attorney who is familiar with the laws in your area.

The Essential Estate Planning Documents

The Revocable Living Trust is the cornerstone of all estate planning documents. The Trust is a separate legal entity that holds your assets. While it is a separate legal entity, it is taxed as if you own all of the assets. For most purposes, assets in a Revocable Living Trust are treated no different than assets held in your name alone. However, in order for a Trust to be effective, you need to fund your Trust. Essentially, this means that you must transfer your assets (e.g. your house, investment accounts, etc.) into the Trust. Assets that are held in Trust will generally avoid probate.

Historically, a testamentary trust (a trust created at death through a Will) was the cornerstone of your estate plan. Today, a Will is used in conjunction with your Living Trust. The Will is intended to be a catch-all, for all assets that are not in your Trust. The concept is that any assets that aren’t in the Trust at your death, are caught by your Will and then poured into your Trust. This type of Will is often referred to as a pour-over Will.

Your Will also serves another important function. The Will is the place in your estate plan where you name the guardian of your minor children.

The combination of your Trust and your Will prepared by your Orange County estate planning lawyers at Modern Wealth Law should dispose of all of your estate assets to the beneficiaries of your choosing.

Why Do You Need Other Estate Planning Documents?

Your Durable Power of Attorney, allows you to appoint an Agent, also referred to as an “Attorney-in-Fact,” to handle your financial decisions in case of your incapacity. Similarly, an Advance Health Care Directive appoints an Agent to handle your health care decisions in case of your incapacity.

While these are considered the “basic” estate planning documents, there are many estate planning issues that must be discussed in each of these documents.

Advanced Estate Planning

More sophisticated estate planning will also include other types of trusts, such as:

  • Gift trusts
  • Life Insurance Trusts
  • Generation-Skipping Trusts
  • Grantor Retained Annuity Trusts (GRAT)
  • Qualified Personal Residence Trusts (QPRT)
  • Charitable Remainder Trusts (CRT)
  • Charitable Lead Trusts (CLT)

Other components of estate planning include advice on LLC and other entity formation, property tax reassessment issues, business succession planning, asset protection planning, and the often-overlooked issue of preparing the next generation for handling wealth.

Why do I need an Estate Plan?

Now that you know what an estate plan is, why do you need one? There are several reasons to have an estate plan prepared including the following:

  • Avoiding Probate
  • Appointing a Guardian for your minor children
  • Avoiding the payment of estate taxes, income taxes and property taxes
  • Avoiding or minimizing family disputes
  • Protect children or other beneficiaries from divorcing spouses
  • Asset protection

Experienced Orange County Estate Planning Lawyers

Each Orange County estate planning attorney at Modern Wealth Law focuses exclusively in the area of estate planning. Modern Wealth Law attorneys prepare customized estate plans for clients with a wide range of backgrounds, assets and goals. To that end, Modern Wealth Law believes in drafting estate planning documents that you can understand. We will explain the complexities of the estate and gift tax laws and provide you with explanations and instructions to assist you in the continued management of your estate plan. In short, Modern Wealth Law has the experience and expertise to craft estate plans of all levels of sophistication that are not cost-prohibitive.

If you are interested in preparing an estate plan for yourself or a loved one, contact our offices at Modern Wealth Law.