Scare Tactics
Here on Main Street in Jackson, California, my office is busy getting ready to celebrate Halloween with the community. This year just as they have every year since 1965, the Jackson Lions Club will host their popular annual Children’s Halloween Parade. Following the costume judging at the Fire Station at 5:30 p.m. on Main Street, there is a parade at 6 p.m. walking south on Main Street to the Civic Center. Before the parade, ghosts and goblins trick-or-treat on Main Street in Jackson. My law center is always ready to hand out 300 treats before the parade begins.
In honor of this month’s Halloween parade, I thought it would be the perfect time to discuss estate planning scare tactics and what makes estate planning so scary. You must put your estate plan in writing because it is scary what California will decide for you if you fail to plan. You must consider signing a trust if you own real property, or if you have over $100,000 in assets, because it is scary what probate fees your loved ones will have to pay if you fail to plan. It is scary to think about what taxes your loved ones will have to pay when you die. It is even scarier to think about the “no contest” clause.
Put Decisions in Writing!
You have the power to take legacy planning into your own hands by making decisions for your estate and putting them in writing. If you fail to put your estate plan in writing it is scary what California will decide for you if you fail to plan. Legacy planning requires you to not only make tough decisions but to have them put in writing so that your wishes are known upon your incapacity or death. In the state of California, if you die without a Last Will and Testament, California law will design one for you. The problem I see in most cases is that the Last Will and Testament California designs is not the one the Decedent intended. I see this whenever somebody died with a partner, but they were not married so California law does not provide for their significant other. I see this whenever somebody dies with stepchildren that they wanted to receive inheritance, but California law does not provide for a stepchild if the gift was not in writing. I see this whenever somebody dies leaving a biological child that they did not want to receive an inheritance because of estrangement, but their wish was not in writing, so California law does not omit the child.
An expert tip for legacy planning is to plan your estate as of right now. Do not procrastinate thinking that your circumstances and objectives will change in the future. You can review and update your plan in five years or if there has been a change in circumstances due to a change in marital status, a change in residence, and the birth of a child or the death of a spouse.
Avoid Probate!
In California, you must consider signing a trust if you own real property, or if you have over $100,000 in assets, because it is scary what probate fees your loved ones will have to pay to transfer money and property into their names following your death. Most people want to avoid probate because they want to avoid the fees. The executor/administrator and the attorney for the executor/administrator are paid a percentage of the gross value of the estate as follows: 4% of the first $100,000; 3% of the next $100,000; and 2% of the next $800,000 of the gross value of the probate estate.
Pay Taxes!
It is scary to think about what taxes your loved ones will have to pay when you die. If you die in 2024, the first $13,610,000 of an estate is exempt from taxes, up from $12,920,000 in 2023. You don’t have to be scared of estate taxes if your estate is below the taxable amount. I recommend talking to your attorney and your accountant.
No-Contest!
It is scary to think about the no-contest clauses. These clauses are used to discourage contests of wills and trusts by providing that any beneficiary who contests the will and trust forfeits what they would have received under the trust. I recommend that the beneficiary seek legal counsel because sometimes they are objecting to the executor/trustee’s actions, not the will/trust document.
