Do I Need an Estate Plan?
The first question I often get when people learn that I am an estate planning attorney in Orange County is: “Do I need an estate plan? I’m not rich.” The simple answer is yes. Let’s first start with what exactly an estate is, what it is not, and then we can discuss planning.
What is an “Estate?”
Many mistakenly think that an “estate” is only for the extremely wealthy. The truth is, as soon as you are born you have an estate, whether that is one dollar or one-hundred million dollars. Essentially, your estate is what you own. Your estate includes obvious things, such as your bank accounts and your home. But it may also include other things that are less obvious, such as life insurance you have on your own life, where your spouse or your children are the beneficiary. The general term “estate” is often confused with the more specific terms such as “probate estate” and “trust estate.” These terms are often used when you die to distinguish between your assets that are either in trust or not. Please see my article on How Do I Fund my Trust? to learn more about these differences and why they are important.
The Default Estate Plan
So now that you have learned what an estate is, let’s answer the question, “Why do I need an estate plan?” The simple truth is, the state and federal government has already created an estate plan for you. There are laws in place (both at the California level and the federal level) regarding the distribution and taxation of your estate. So the question is not “Do I need an estate plan?” The real question is “Do I need a customized estate plan?” To answer this question, we need to know what happens if you let the government decide your estate plan for you. For most people, intestate succession (the government’s default estate plan) is not the estate plan they desire for several reasons.
Problems with Intestate Succession – The Government’s Estate Plan
Assuming you have read the article above on Intestate Succession in Orange County, CA, and after reading that, you think to yourself, “That doesn’t sound so bad!” Think again!
Problem #1 – The Probate Process
If you die without a customized estate plan, your estate will go through the probate process. In summary, the probate process in Orange County is the process by which the government/court supervises the distribution of your estate. There are at least 3 major reasons why you want to avoid probate in Orange County, California: 1) High Cost of Probate; 2) Probate is open to the public; and 3) Probate is a very lengthy process (usually at least one year after death).
Problem #2 – Supervision of Minor Children
The Government’s estate plan does not state who shall be the legal guardian of your minor children if both parents are deceased. For more information on this problem see: What Happens to Your Child if You Die?
Problem #3 – Distributions to Minor Children
The intestacy laws in Orange County, California state that distributions shall be made at the age of majority (18 years old). Even if your child is the most responsible 18 year old in California, there are many other reasons you may not want to give your 18 year child/adult, complete access to all of your assets on the day he or she turns 18.
Solution – Customized Estate Planning
Many of these problems can be avoided by creating a customized estate plan. As discussed above, most of these problems are not just problems for the ultra-wealthy; these are the problems faced by regular, everyday families across Orange County.
If this article only left you more confused about estate planning, please contact John Wong, an Orange County Estate Planning Attorney at Modern Wealth Law to further discuss these issues and your specific family situation. Or, for more information, see the California Bar Article: Do I need an Estate Plan?
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.
