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Sacramento Estate Planning Blog

Ways to deal with hard assets in your estate plan

Figuring out how to divide assets is one of the hardest parts of estate planning. Many Californians choose to split an estate equally amongst loved ones, but even this can become challenging. Whereas assets like cash, stocks and bonds are easy to value and then divide, other assets, like family heirlooms are much more difficult to address. Yet, there are certain steps to help work through this process and ensure that hard assets are distributed in accordance with one's wishes.

The first step is to know the true value of an asset. Items like jewelry and artwork can have fluctuating values depending on their respective markets though, so it is important to have a recent appraisal. Then, the recent value can utilize that figure in estate planning. When getting an asset appraised, also ensure that the person valuating it is experienced and, if appropriate, certified. This will help ensure accuracy and validity of the asset's estimated value.

Tips on how to talk to loved ones about estate planning

California estate planning can be a difficult topic to contemplate, let alone discuss with loved ones. Many think that looping beloved family members into the conversation about estate planning can further family transparency and leave everyone feeling better. But, sometimes, communications do not go as planned. When this happens, arguments can ensue and feelings can be hurt. In short, bad communication may throw estate planning off the tracks.

That being said, there are certain steps to help ease into a discussion about estate planning in a way that avoids confrontation. To start, it may help to gradually shift family discussion to include estate planning issues. Bringing this topic up seemingly out of nowhere can be a shock to family member, causing them to react to it rather than approaching it with thoughtful consideration.

What is a conservatorship in California?

Many people put off estate planning because they are afraid to confront the thought of their own mortality. Next to death, when it comes to aging, people usually fear declining health. Yet, the sad reality is that many Californians will see their health significantly deteriorate as they age. There may even come a point where their medical condition leaves them unable to make important financial and healthcare decisions on their own. Under these circumstances, an individual may be deemed incapacitated, and a guardianship may be created to protect him or her.

Adult guardianship, also known as conservatorship, is the process through which an individual is given the responsibility of caring for the financial matters of an incapacitated individual. Once a conservator is named, that individual will be required to post a bond. The purpose of this bond is to reimburse the incapacitated individual in the event that his or her assets are mismanaged. Then, within 90 days of the creation of the conservatorship, the appointed individual must submit to the court an inventory of the incapacitated individual's assets as well as a plan for how to manage the incapacitated individual's affairs.

When should I consider changing my will?

Life is full of changes. Some of them are planned for, but others are unexpected, as is often the case with the birth of a child. Other matters can also seemingly come out of the blue, such as spur-of-the-moment marriage or divorce. While these changes can certainly have a meaningful effect on one's day-to-day life, they can also have long-term consequences. This is especially true when it comes to estate planning. In this context, these changes can affect how assets will be distributed and to whom.

This is why it is critical to update one's California estate planning documents from time-to-time, including the will. There are many life events that can justify a will modification. If after the creation of a will, for example, one finds themselves committed to a long-term partner, then they may want to add him or her to the will since marriage protections will not be in place to ensure that he or she receives any assets. The same situation can play out after the birth of a child or a grandchild.

Attorneys utilizing trusts to meet estate planning goals

Last week on the blog we discussed the estate of famed movie star Burt Reynolds and how he utilized a trust to protect his assets for his son. Although it may seem a bit unconventional to write someone out of your will like Burt Reynolds did to his son, it can serve a purpose. In fact, there are a number of decisions you can make during the estate planning process to protect yourself, your assets, and your heirs and beneficiaries.

This customization is a true benefit of estate planning. While many people turn to the standard options such as creating a simple will, your planning doesn't have to end there. Instead, you can utilize trusts as a way to ensure that your assets provide a charitable benefit, provide long-term security for your loved ones, and/or avoid taxes and the reach of creditors. You can even set up a trust to ensure that your pet is well cared for after you are gone.

Burt Reynolds utilized a trust to protect estate

Many of you probably heard about the recent passing of acting superstar Burt Reynolds. While news stories are peppered with remembrances of his best film roles and his contributions to Hollywood, some reports are shining a light on another aspect of the actor's life: his estate planning.

According to those reports, Reynolds intentionally wrote his 30-year-old son out of his will. Why? Simply put, Reynolds placed his entire $5 million estate into a trust that will provide for his son. There are a number of reasons Reynolds may have done this. First, the late actor was known for having money woes late in life. By placing his estate in a trust, he protected many, if not all, of those assets from creditors. If they had been left to his son through a will, then creditors would have gotten the first stab at claiming those assets to settle any outstanding debt.

Losing a spouse and estate planning

Thinking about your own mortality can be frightening. None of us like to think about when our time will come to an end, but it's inevitable, meaning that we all need to have our affairs in order before that time comes. For many people, this means engaging in estate planning to deal with their own finances. Yet, estate planning can be just as powerful when considering the passing of a spouse.

Of course, thinking about the death of a spouse isn't any easier than thinking about your own death, yet many Californians find themselves in positions where they know that a significant other will pass before they will. In these situations, it is important to consider the steps you can take with your spouse to ensure that an estate is protected and your finances are secure for when you are left to live alone.

What is a charitable trust and how is it beneficial?

There are a number of legal vehicles that you can use to better position your estate for distribution upon your passing. One effective way to save money on taxes and increase an estate's income is to create a charitable trust. This type of trust isn't tax exempt and is meant to benefit one or more charities. However, the assets in a charitable trust can be subjected to a charitable contribution deduction, which can significantly decrease the size of a taxable estate.

So how does a charitable trust work? In many instances an asset like real estate is placed into the trust and income is paid to the trust creator over a period of years. Once that period of time expires, then the asset is distributed to the charity named in the trust, or it remains in the trust for the charity's benefit without additional payment.

Don't forget about "soft" estate planning

We spend a lot of time on this blog discussing what many consider to be the biggest parts of estate planning. This includes how to utilize wills, trusts and other legal vehicles to protect estate assets and ensure that they are distributed according to an individual's wishes upon his or her death. While these matters are extremely important to address and address correctly, they are not the only matters to consider when creating an estate plan.

Instead, Californians may find it important to consider what some consider "soft" estate planning. One part of soft estate planning is laying out instructions for how you want your funeral service to proceed. Do you want an open casket? Do you want to wear a particular outfit or certain clothes? Is there a certain song that you want played during your funeral? If you answered "yes" to any of these questions, then you may want to think about laying those instructions out in your will so that your sendoff can go according to your plans and ease the planning stresses that are often thrust upon family members.

Estate planning when a small business is involved

Californians who have minimal assets may find the estate planning process to be pretty straightforward and simple. Those who have significant assets, though, may find the matter much more complicated. This can be especially true for those who own a business. Deciding what to do with a small business can be difficult because an individual must consider not only financial ramifications of passing it down to one's heirs, but he or she also has to consider the emotional effect of his or her decision.

There are many ways to handle a business in an estate plan. One way is to simply sell it. By doing so, an individual can obtain cash that is more easily divisible amongst one's heirs. A similar option is to enter into a buy-sell agreement. Here, a business is transferred to another individual with the business owner retaining an interest. When a qualifying event occurs, such as death, the business owner's interest in the business is then purchased by the other party to the contract. The payment is made to the estate and dealt with accordingly.

My Sacramento law practice, Michael A. Sawamura, Attorney at Law, focuses on wills, trusts and estate planning law in addition to business law and corporate defense services. My clients include professionals, government employees, small businesses, blue-collar workers and national corporations.

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