Planning Ahead Can Save Your Beneficiaries A Lot

BY PERRY SMITH SCV Business Journal Editor

The idea of a will dates back to Roman times, but it’s a document that’s just as relevant today in terms of protecting one’s interests.

Nowadays, if someone dies without a will or a trust, the court has a process that spells out how that person’s property will be distributed.

But as an estate planning attorney will be quick to point out, that system may not distribute the assets the way the person would like. Known as probate, it’s a process that can be costly, take months and, in general, be a hassle that you’d like the loved ones you’re leaving behind to avoid, if possible.

The way to do that, says Michael Yeager of Yeager Law on Cinema Drive, is to plan ahead.

“Estate planning is really about giving people legal authority to act on your behalf when you cannot, which might be incapacity, it might be death, it could be a lot of different situations — you just might not be available,” Yeager said. “So that’s really what estate planning is — you’re getting that authority without having to go to court.”

Traditionally, most people think of a will as end-of-life planning, and a trust as a tool for the “ultra-wealthy,” said Yeager.

And while those are scenarios when it’s especially important to have these documents ready, it’s also a good idea to have these documents prepared long before then, just in case.

And estate planning at a younger age might look a little different, but it’s no less important, he added.

“When you’re young, you might not have not have a lot of assets and think, ‘I don’t need to do estate planning,’ but if you have children, who’s going to take care of those children, who’s going to take care of the money for them, those sorts of concerns,” are all important things for parents to think about, Yeager said. “Whereas estate planning at an older age tends to focus on, ‘I’ve got assets, I might be having some health issues, maybe I have some genetic disease or a diagnosis that I’m worried about,’ which tends to be more focused.”

“But people will think about it for years before they’ll call and do it,” he added, “and the unfortunate ones never do it all.”

To transfer or inherit property after someone dies, you must usually go to court, according to state law in California, and dealing with the courts and the property of someone who has died is very complicated. Sometimes, however, family or relatives may be able to transfer property from someone who has died without going to court. This is where proper estate-planning documents become critical.

Poole Shaffery, the SCV’s largest law firm, offers a few bits of advice for when one is thinking about planning his or her will, on its website: “An important part of will planning is deciding on a fiduciary who will pay off your bills, take stock of remaining assets, and assist in distributing them to beneficiaries,” according to Poole Shaffery. “This person will have the most important job, which is why they need to be someone you completely trust. Your attorney can also act as your fiduciary.”

There are also a few important factors in estate planning that an experienced attorney can help with, which include: will revisions to account for new assets; setting aside money to pay for estate taxes, if applicable; setting up long-term care for a disabled beneficiary under your care; inserting proper language to prevent accusations of fraud; and naming a trustee to hold assets for beneficiaries who are under the age of 18.

Beyond these basic considerations, there are also countless nuances where a legal expert can help, notes Steffanie Stelnick, owner and attorney with Stelnick Law.

While California law sets a threshold of value for when an estate must go to the courts to undergo the probate process, there are also state and federal tax laws that your attorney can help you navigate as well.

How your counsel helps you navigate these waters can make a big difference in your bottom line for your beneficiaries, particularly in their tax bill.

“For anyone who hopes to pass down assets to future generations, a basic knowl- edge of federal (and sometimes state) gift and estate taxes is essential,” Stelnick said. “When you die, you will leave behind an estate made up of tangible and intangible assets. The value of that estate combined with the value of any qualifying gifts you made during your lifetime is subject to federal gift and estate taxes at the rate of 40%.”

Of course, you want to avoid forcing your loved ones to forfeit that much of your hardearned assets to Uncle Sam, Stelnick said, which is where the lifetime exemption can come into play.

Each taxpayer is allowed to use this exemption to reduce the amount of taxes owed, she added.

The American Taxpayer Relief Act of 2012 set the lifetime exemption amount at $5 million, to be adjusted annually for inflation. In 2018, however, tax legislation was signed into law that increased the lifetime exemption amount for 2018 and for several years thereafter. In 2026, these amounts are scheduled to revert to the previous $5 million exemption adjusted for inflation.

For 2023, the individual lifetime exemption amount is set to increase to $12.92 million, an increase of almost $900,000. A married couple can shield a total of $25.84 million from federal gift and estate taxes, representing an increase of $1.72 million.

“To put those figures in perspective,” she said, “the increase prevents the loss to Uncle Sam of $344,000 worth of assets for an individual and $688,000 for a married couple.”

For more information on estate planning, contact Michael Yeager of Yeager Law at (661) 471-2177 or visit Yeager. law. 