ESTATE PLANNING THROUGH ALL STAGES OF LIFE
ESTATE PLANNING FOR YOUNG ADULTS
If no real estate is owned, and assets are below the state threshold (for example: $100,000 in California; $75,000 in Arizona; or $60,000 in Colorado), an estate plan should be a “Will Package,” composed of a will, a Power of Attorney for Finances, and a Power of Attorney for Health Care (which includes the ‘living will’ relating to life support).
ESTATE PLANNING FOR YOUNG FAMILIES WITH CHILDREN
Even if a young family has no other wealth than life insurance policies or death benefits, a trust is essential (as opposed to a will).
• Avoids costly and restrictive court supervision for children
• Keeps children protected from their own poor choices into maturity
When a person or a couple has children, whether or not they own real estate or have assets in excess of the state threshold, they ought to have a living trust. The reason is because up until 18, ANY money passing to the children (such as from life insurance or retirement accounts) will pass through an expensive and difficult court-supervised process; and at younger ages (18-25, for example), you can usually expect a young person to exercise poor management of their inheritance. To avoid court involvement and poor management choices without a living trust, you would have to force retirement and insurance assets into probate, at a cost after death of tens or even hundreds of thousands of dollars. An estate plan should be composed of a Living Trust, a will, and Powers of Attorney for both Finances and Health Care.
ESTATE PLANNING FOR MIDDLE-STAGE INDIVIDUALS AND FAMILIES
In addition to the issues previously addressed for families with children, in the middle stage of life, typically more assets are acquired. A trust is essential for people with investments and/or ANY real estate, in order to avoid the potentially very large cost of probate of those assets. Probate thresholds vary by state. For example, in Colorado, any real property of any value must be probated. In Arizona, the probate procedures and thresholds vary by the type of asset but most moderate estates end up in a costly and lengthy probate. The probate threshold for real estate in the state of California is only $50,000!
With a home and other real estate investments, as wealth is added, a Living Trust with a will, and Durable Power(s) of Attorney for Finances and Health Care are absolutely essential to ensuring ongoing care and protection of growing children and significant probate cost avoidance.
ESTATE PLANNING FOR OLDER CLIENTS
At this stage, the issue now is often the value of the assets held, which creates a larger estate. A well-drafted estate plan can help avoid or minimize very high estate tax (up to 40%).
With retirement wealth and other assets, as well as grandchildren to consider, the ‘basic’ estate plan still serves, but should be modified to maximize estate tax savings for a surviving spouse; further, important additional estate tax vehicles such as Irrevocable Life Insurance Trusts should be employed when appropriate. The estate plan should be composed of a Living Trust with tax shelter provisions or advanced tax planning structures, a will, Power(s) of Attorney for Finances and Power(s) of Attorney for Health Care.
Additionally, estate planning tools can be used to prepare financially for long-term care and other age-related support issues. Your attorney's knowledge of resources including available government assistance is critical to planning in this area.