What is the Main Purpose of Estate Planning?
One of the main purposes for estate planning is probate avoidance. Let’s breakdown those terms a bit further. Let’s start with what is estate planning.
What is Estate Planning?
Estate planning refers to the planning of your “estate.” Your “estate” refers to the assets you own during your lifetime or at death.
What is Probate and why do you want to avoid it?
Probate is the court process of distributing your assets upon your death. The distribution will be based upon your Will or intestacy. Intestacy refers to the distribution of your assets under California law if you do not have a Will.
Probate is expensive, long, public and generally out of your control. Your beneficiaries (those that will inherit from your estate), will be saddled with years of probate administration, unnecessary expenses, and face one hurdle after another. Probate fees often amount to approximately 3-5% of your estate and will take at least a year to complete. In Southern California, most probates are taking one and a half to two and a half years. The Courts are overcrowded, lack resources and not prepared to handle the sheer amount of probates that are filed every day.
Avoiding probate is important, but there are many other important purposes for estate planning.
Estate Planning Allows You to Choose Your Beneficiaries
Another purpose for estate planning is to ensure your assets pass to your appropriate beneficiaries.
Without a Will or a Trust, your assets will pass under the laws of intestacy. Under intestacy, your assets will pass to your spouse, if any, and/or your closest blood relative. The division under intestacy depends upon whether your assets are community property or separate property. Community property passes to your spouse. Separate property passes between your spouse and/or your closest blood relatives. Even if those are your intended beneficiaries, the percentage distributed to each is often different than your intentions. It may also mean your assets pass to someone you don’t want to receive any assets, or means your assets don’t pass to someone you do want to receive your assets.
Estate Planning Ensures the Proper People Are in Charge
A third purpose for estate planning is to make sure the proper person is in charge of your estate. Depending upon the document and the circumstances, the person in charge of your estate is referred to as the Trustee in your Trust, the Executor in your Will, the Attorney-in-Fact or Agent in your Durable Power of Attorney for Finances. This person is responsible for following the terms of the Trust, Will or Durable Power of Attorney and ensuring your wishes are fulfilled.
While these are some of the main purposes of estate planning, your driving force for estate planning may be something completely different. For parents with young children, it may be choosing a guardian to help raise them if you pass prematurely. For those with large estates, it may be avoiding income and estate taxes. For those in professional fields, it may be asset protection. For those with intended beneficiaries with financial instability, it may mean protecting the beneficiaries from themselves.
Regardless of your situation, everyone needs some form of estate planning. The main purpose or the specific reasons for estate planning for you may be completely different than someone else in the same economic position.
Modern Wealth Law is a full service estate planning and probate law firm with its principal offices located in Irvine, California. Each Orange County estate planning attorney at Modern Wealth Law practices exclusively in the areas of estate planning, asset protection, probate administration and trust administration. Each estate planning lawyer brings a sophisticated level of understanding to these complex and technical areas of the law. We are dedicated to providing you and your family with the finest legal representation throughout Orange County and Los Angeles County.
John Wong advises on all aspects of estate planning, probate, asset protection and trust administration. He believes that estate planning is about planning for life; while having protections in place should the unexpected occur.
