By Stephanie Bezner, Attorney
In December, Congress passed significant tax legislation. The federal estate tax exemption was increased to $10,000,000 per person, adjusted for inflation. For 2018, the federal estate tax exemption is now $11,200,000. This means estate taxes will impact less than 0.5% of the people in the United States! As a result, some people are thinking estate planning is not necessary because their net worth is so much lower.
But, estate plans are about more than tax planning. They are about making a plan to protect yourself in the event of your incapacity and to provide for disposition of your assets without unnecessary expense after your passing.
An estate plan with a properly funded revocable trust will allow your beneficiaries to avoid the expense and delay of probate after you’re gone. Any California resident with any real property OR other assets over $100,000 is potentially subject to probate. Trusts are a way for the first spouse to protect such spouse’s residuary gifts after the death of the surviving spouse. Trusts are also a way to provide responsibly for younger or irresponsible beneficiaries by creating a vehicle through which assets can be managed for such beneficiary.
If you are unable to manage your trust, you pick someone you trust to do so. If you also designate this person to make financial decisions on your behalf through a power of attorney, you can also avoid the need for conservatorship.
Beyond financial matters, powers of attorney give you the power to designate who will make health care decisions for you when you are unable to make decisions for yourself. If you don’t exercise that power, a court will decide for you, and it may not be the choice you would make.
With the federal estate tax exemption at its highest level, avoiding estate taxes is not a concern for very many people. However, this is not a reason to avoid planning. It just simplifies the process because you do not have to jump through hoops to avoid federal estate taxes. Instead, you can focus on who should help you if you are incapable of acting on your own behalf and who you want to receive your hard-earned assets after you’re gone.
Stephanie Bezner, Esq. is a partner with Doan-Bezner in Rancho Palos Verdes. She is a member of Torrance Memorial’s Professional Advisory Council. www.doan-bezner.com. (310) 541-4076.
