When it comes to estate planning, there is some misinformation out there. As you begin the estate planning process, it is important to know what facts you read about are true and which are outdated, or simply untrue.
The attorneys at Galanti and Copenhaver can help you with all of your estate planning needs. Our attorneys have experience handling many different types of estate plans and can help our clients with any stage in the estate planning process. Contact our office today to get started with an estate planning consultation.
Myth #1 - The Government Will Take Your Property If You Do Not Create a Will
Some people are under the mistaken impression that the government will seize their property immediately upon their death, leaving their loved ones with nothing if they do not have a will. In California, if you pass away without a will, your estate will go through the probate process, but this does not give the government title to your property. Rather, your estate will be distributed according to California state law.
The distribution of your estate will depend on who your closest heirs are according to California intestate succession laws. Additionally, assets that would not be distributed through a will would not be distributed this way. Examples of these other assets include a 401(k) account or life insurance proceeds (these assets would be distributed to the beneficiary you have on file for these accounts).
Myth #2 - To Avoid Estate Taxes, You Must Have Your Assets in a Trust
Many people are afraid of estate taxes and are worried that their beneficiaries will be left with large taxes to pay if they do not use a trust in their estate plan. When making your estate plan, it is important to remember that there are both federal and California state laws that may apply. However, when it comes to estate tax, keep in mind that federal law as of 2019 allows you to shield up to 11.4 million dollars (as an individual, this is higher for a married couple) as an estate and gift tax exemption. This generally means that if your estate is worth $11.4 million or less, your beneficiaries will not owe federal estate taxes on the assets they receive. Many people pass with estates worth less than this exemption limit, so their heirs are not affected by estate tax, whether or not assets were in a trust according to their estate plans.
Of course, you will also have to consider California state law. Currently, there is no estate or inheritance tax in California. However, a bill has been proposed this year that if passed, would impose an estate tax that would affect estates worth $3.5 million or more. If your estate may fall into this category, you will want to pay close attention to this bill and potentially adjust your estate plans accordingly. This is one of the many reasons having an attorney help you plan your estate since your attorney will know the current laws that will apply to your individual circumstances.
Myth #3 - Any Form of Estate Planning Will Protect Assets from Creditors
Another myth out there is the belief that having any type of estate plan in place will protect all of your assets from creditors, shielding you from financial liability in the event you are sued. For example, if you have a living (revocable trust), you still hold title to your assets. This means that if you are sued, these funds will still be in your name, and therefore, they are subject to any financial judgment entered against you.
Typically, the only way you will be able to protect your assets in this way is to create an irrevocable trust. This is a special type of trust that completely transfers title of the assets within the trust from you over to the trust. To do this, you must give up total ownership and control over the asset or assets you place in the trust. The trust will have title of the assets. The drawback to using an irrevocable trust for this purpose is that the trust cannot later be modified or changed unless certain circumstances apply to make this possible under California law. Your lawyer will be able to review your personal financial situation and give you advice regarding what type of estate plans are best for you and your estate.
The California estate planning lawyers at Galanti and Copenhaver are here to help you with all of your estate planning questions and concerns. Give us a call today to set up a consultation to discuss your future.