Do I Need an Estate Plan If I’m Not Wealthy?

Hi. This is Marc Herbert from Herbert Law Office with the Question of the Week. Over the weekend, I got asked, do I even need an estate plan since I’m not rich? Well, my answer always is that depends. So if you have a house or any kind of land in California worth $55,000 or more, you should have a full estate plan.

If you have young heirs under 25 years old, in my opinion, you should have a plan. If you have $160,000 sitting in banks, that’s subject to probate. So you definitely want to have a plan to avoid that. If you have children from prior relationship, a disabled heir, either a disabled child or parent, if you want to avoid some of the crazy results we see in probate court, if you’re a single person either never married, widowed or divorced, you should definitely have a plan in place.

A full and complete estate plan is going to help you protect your assets and your loved ones. So to me, a full estate plan includes a trust which is designed to avoid all the costs and all the delays and all the stress on your loved ones for having to go to a probate court, plus avoiding all the unnecessary taxes once they get done with the courthouse.

You can also do periodic distributions, if you like, for young heirs so that they get a little bit of money when they’re 18, a little bit more at 21, and the rest at 25 years old or 30 years old, if you like. And again, a trust protects children from prior relationships, disabled children or parents. And it really allows you to take advantage of some unique tax laws, both on the federal side and the state side that you can’t really do otherwise.

So any of the scenarios that I just talked about a few minutes ago can be resolved quickly and easily by creating your own trust. For most people, that’s what’s called a living trust. A trust that you can change over time. So you definitely want those protections now. But as life changes over the next three years or five years or ten years, you want to be able to adjust to changes in your assets, changes in your heirs, changes in the law.

And that’s what a living trust will allow you to do. So maybe you don’t have land, maybe you rent an apartment, or you have a smaller amount sitting in the bank. You don’t have those scenarios that we talked about a minute ago. In my opinion, you still need a partial estate plan that will include what’s called a will.

It also includes an advanced health care directive and a financial power of attorney. So a will allows you to name a trusted executor to make specific gifts to specific people. If you don’t have a woman in place, those assets can easily end up in probate court where a judge who never met you decides who your ears are and what they get.

So with the will, you control the heirs and the assets that received them with the health care directive that allows you to give written directions to your doctors and hospital staff and then the agent that you choose and trust is the person who’s going to enforce those directions. And finally, with the power of attorney that allows you to name a trusted agent to handle your finances, either now or in the future, if you ever become ill or injured.

So there are a lot of options available depending on your asset level, who your heirs are, and also what the tax laws are, federal and state, based on your specific situation. So when you’re ready to avoid probate court, when you’re ready to avoid unnecessary taxes, when you’re ready to control your assets and help your loved ones, it’s a good time to write an estate plan.

Here at Herbert law office, we offer a free consultation to review your current situation, talk over all of your options, and then build a plan that’s customized to your needs and goals. If you’re interested in scheduling that appointment, just give us a call at 6612739007. We’ll talk to you soon.