Why Do I Need a Trust and Estate Plan?

1. Everyone Needs an Estate Plan

An estate plan tells the world how you want your assets distributed upon your death. Otherwise, the government will distribute your assets according to its rules.  The government does not provide for circumstances you may want, such as periodic distributions or waiting until a beneficiary is of-age, and as a potential creditor, does not have your best interests in mind with regards to protecting your assets.

You may think that you don’t need a trust because you have a will or that your estate is not that large, but the trust dictates what happens in the event you are ill, disabled, or pass away, and more importantly, keeps everyone out of probate court.  While a will dictates how your estate is distributed, the will must go through probate court to be administered, which is both an expensive and lengthy process.

2. Your Estate is Based on Everything You Own

The value of your estate is based on everything you own. This includes, all real estate, bank accounts, stocks, bonds, retirement plans and annuities, life insurance, a business, cars, jewelry, furniture, pieces of art etc.

3. Caring For Your Family, Especially Your Children

While you may think you can simply do your estate plan tomorrow, the sooner you establish your estate plan, the better. You may not want to spend the money or have the difficult conversation, but especially with the recent COVID-19 pandemic, it is more apparent than ever that no one can really expect what may happen in the future. In the case you become disabled or ill, an estate plan will appoint a legal guardian to care for your children if you are unable to do so.

4. Trusts are Not Only for the Rich

Trusts allow you to distribute assets to your heirs without the cost, delay and publicity of probate court. Trusts allow you to put conditions on how and when your assets will be distributed. With a will, you cannot stop the court from appointing a third party to take control over your estate in the case you become ill or disabled, rather than you selecting someone to do so in the event it becomes necessary. Not only do you potentially lose control of your estate, you also must go through the lengthy, expensive probate court process.

5. Federal Estate Tax is up to 40% on Estates greater than $12.06 million in 2022

The current federal estate tax applies to estates greater than $12.06 million for an individual, or $24.12 million for a married couple. While this may sound like a lot of tax-free money, assets in your estate are generally assessed at their fair market value, or value at the time of your passing. The explosive growth that has occurred for many assets, especially in California, may put you much closer or even over this exemption amount without you realizing.  A proper estate plan can help minimize the effects of both the tax and protect the estate that you’ve grown throughout your lifetime.

6. Leaving All Your Money to Your Spouse Tax-Free is Not Always the Best Idea

While each spouse’s exemption amount of $12.06 million was made portable in 2012 by President Obama under the American Taxpayer Relief Act (ATRA), taking advantage of this portability requires the timely filing of a federal estate tax return (IRS Form 706). This allows you to transfer any unused exemption amount from one spouse for use by the other spouse’s estate at their passing. However, there is no guarantee that this law may not change again, and there is no way to be certain what the laws may be at the time of you or your spouse’s passing and the differences to the law at the time you initially planned your estate. A properly drafted estate plan can ensure you gain the full benefit of both you and your spouse’s exemption regardless of the portability law, and provides the maximum amount of asset protection from both creditors and the federal tax.

7. Creditor and Asset Protection

Many firms offer Living Trusts and standard estate planning, but few, if any, can offer the flexibility and level of protection granted through the Personal Asset TrustSM. Any sizable estate should consider integrating this into their estate planning.

8. Two Easy Ways to Give Gifts Tax-Free and Reduce Your Estate

You may gift up to $16,000 a year to an individual (or $32,000 if you are married). You may also pay an unlimited amount of medical and education bills for someone if you pay the expenses directly to the institution​.

9. An Estate Plan is More than Just a Trust

A proper estate plan contains your Trust, Trust Certification,  Will, Power of Attorney, Health Care Directive, Funding Letter,  Schedule of Assets, and potentially even more documentation depending on the size of the estate and assets within. The combination of these documents allow you not only to decide where your assets go at your passing, but for you to ensure a person of your choosing takes control in the case you become ill or disabled, and helps your beneficiaries properly manage and protect your assets once they are in their hands.

10. An Estate Plan Must be Regularly Checked and Updated

Changes in your affairs makes it necessary to regularly check and update your estate plan every few years. You may have acquired more assets, sold or purchased real estate, had new children or grandchildren, opened an investment portfolio, or more. Many of these are new and exciting times in your life, so it can be easy to forget to reflect these updates in your estate plan, but not properly updating your estate plan can end up putting you in probate court.

There may be more mundane events that may require updating your estate plan, such as changes in relationships with family members or other beneficiaries, changing needs of beneficiaries, or even changes in the law. Even if you do not think anything requires an update to your plan, it is safer to regularly update or at least go over your estate plan. While other firms may charge an annual maintenance fee, Michelle incorporates a Free Service Package with every estate plan which includes three-year checkup meetings to make sure you don’t miss any developments that may affect your estate plan.


Free Service Package

Unlike some other offices, which charge an annual maintenance fee regularly review your estate plan, our office offers a free service package to all clients that create an estate plan with our office.

This free service package includes regular three-year check up meetings to discuss any potential changes in your life that may not be properly reflected in your current estate plan, be it a new home purchase, new children or grandchildren, or perhaps you have even won the lottery. In the drafting and editing phase, the package includes free notary services and witnessing for legal documents. It also includes monthly newsletters and client seminars and events. When the time comes, this package also includes a free meeting with the successor trustee.

We believe that establishing an estate plan goes beyond preparing the documents for the initial signing, but rather developing a lifetime relationship with our clients to provide them peace of mind that their estate will be properly prepared for the rest of their lives.

The Top 5 Reasons for an Estate Plan

1. Avoiding Probate

The most common reason why people seek the advice of an estate planning attorney is to avoid probate. While many have never even dealt with probate, they still know one thing – they want to avoid it at all costs. This stems from probate horror stories by neighbors, friends or business associates.  Avoiding probate is a very good reason for creating an estate plan.

2. Reducing Estate Taxes

The significant loss of one’s estate to the payment of federal estate tax is a great reason to put an estate plan together. Through the most basic planning, married couples can reduce or even possibly eliminate estate taxes altogether by setting up a revocable living trust.

3. Protecting Children under 18 years old

If a beneficiary is under 18 years old (a minor), the law requires a guardian to be appointed to oversee the minor’s needs and finances until the minor becomes a legal adult. You can prevent family discord and costly legal expenses by taking the time to designate a guardian and trustee for your minor beneficiaries.

4. Asset Protection

A plan to protect your assets against creditors must be created before you suspect that a lawsuit is on the horizon. A comprehensive estate plan will protect your assets during your lifetime and to your beneficiaries after your death.

5. Reducing Family Conflict

Many clients seek the advice of an estate planning attorney after personally experiencing, or seeing a close friend or business associate experience, a significant waste of time and money due to a loved one’s failure to make an estate plan.  Deciding who, in advance, will get what, when they will get it, and how they will get it after you are gone will go a long way towards avoiding family fights and costly court proceedings.