What does Estate Planning Mean?
Estate Planning is a general term to describe the planning, administration and distribution of your assets during incapacity or death. The term “estate” is often confused to refer to a large home or someone with a large amount of assets. But an estate is simply the assets you own at any given point in your life or upon death. Therefore, estate planning refers to the planning, administration and distribution of your assets. Since most people only give away assets at death, estate planning is often thought of as planning for the distribution of your assets at death, but it can also refer to the management and distribution of your assets during your lifetime as well.
Your Estate Plan & Essential Documents
To make the term estate planning slightly more confusing, people often refer to certain legal documents as their estate plan. However, there is no actual legal document called an estate plan. When people refer to their estate plan, they are referring to several different documents. The four cornerstones of every estate plan, include a Trust, Will, Power of Attorney for Finances and an Advance Health Care Directive. California uses an Advance Health Care Directive instead of a Medical Power of Attorney and a Living Will. These documents, combined with others, are what people refer to as your “estate plan.”
Categories of Estate Planning
There are also sub-categories within estate planning. The most common sub-categories of estate planning are business planning, asset protection, elder law, special needs planning and international estate planning. Many estate planning attorneys are comfortable with advising on one more of these subcategories. However, each of these subcategories has unique issues that need to be addressed by someone that devotes their practice to estate planning and these subcategories. These issues often overlap. For example, a physician with a successful medical practice, personal assets in the U.S. and China, and a child with a disability, will likely need guidance on basic estate planning, business planning, asset protection, international estate planning and special needs planning.
Planning for Estates, Finances and Taxes
Furthermore, estate planning often overlaps with other general categories of planning and it can become difficult to determine where one category starts and the other ends. The most common overlapping areas with estate planning are financial planning and tax planning. When we work with clients, we are often coordinating between the client’s CPA (for tax planning) and financial advisor (for financial planning) to make sure we are creating one cohesive plan. Ideally, your CPA and financial advisor are already working together as a collective unit for you. Estate Planning is the final piece to your overall planning.
An example of estate planning overlapping with tax planning is when we address issues such as income taxes, estate taxes and property taxes. Many don’t realize that estate planning involves creating an estate plan that is going to be tax efficient for your beneficiaries. Similarly, with financial planning, we can discuss how we use some financial planning structures to avoid estate taxes or how we need to change titling to ensure your estate plan is effective. More recently (as of December 2019), retirement planning has become a much bigger issue with income taxes and asset protection planning.
As you can see, estate planning spans many different areas and is intimately intertwined with your other tax and financial planning goals. If you’re already discussing your financial planning and tax planning goals, you should also ask how your estate planning fits into the overall picture.
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.
