Planning your estate involves identifying and addressing a number of concerns, chief among which is designating what happens to your money and other assets when you pass away. You may have drafted an estate plan years ago and forgotten about it, or you are just now considering creating these legal documents for the first time.
Once your estate planning attorney understands your goals, they can structure your estate plan, including wills, trusts, and powers of attorney to enact your wishes. However, there are a range of common issues with estate planning in San Luis Obispo that you should understand. Our knowledgeable attorneys can help you make sense of and avoid these common roadblocks.
Keeping Estate Plans Up-To-Date
The first issue anyone faces when it comes to estate planning is procrastination. Putting off plans to prepare your estate plan can negatively impact an estate in the future. Without an estate plan, the default rules set forth in the California Probate Code determine who receives your assets. In the absence of adequate planning, family disputes over money are common.
Other times, clients may have drafted estate planning documents years ago and set them aside without review for years. You may have designated executors and trustees who can no longer serve these roles because they are in poor health, moved away, or become less trusted.
People should also periodically review and update beneficiaries for retirement accounts and life insurance policies as needed. It is common to find a previous spouse still listed when a grantor dies. Contingent beneficiaries on these types of transfer on death accounts, should also be chosen in case the current ones become incapable of performing their duties or estranged. A San Luis Obispo attorney certified as a specialist in Trusts, Estates and Probate can draft estate planning documents or update any issues that might exist with existing plans.
Income vs. Estate Tax Rates
Another issue many people in San Luis Obispo may be concerned with when planning their estate is taxes. During the administration process, a decedent’s estate must pay all taxes and debts before distributing assets to beneficiaries. Many people may have drafted their estate plans in the past based on laws that have now significantly changed.
Today, there is a 37 percent top federal income tax rate on ordinary income for individuals and a 20 percent top tax rate on long-term capital gains and qualified dividends. California income taxes begin at one percent but can escalate to 13.3 percent when factoring in a one percent surtax on all income exceeding $1 million.
Despite high tax rates, assets owned by a decedent may receive a step-up in basis upon their death.
However, not all assets will receive the benefit of a step-up in basis.
Retirement accounts and pensions are still taxable federally and in California, subject to specific distribution requirements, which shift based on the beneficiary’s relationship to the decedent.
Beneficiaries who inherit a portion of a business may also face significant changes in their personal income tax situation while they transition into ownership. These tax issues should be discussed with a lawyer who can work to create an estate plan that minimizes the amount an estate and its beneficiaries owe after a grantor’s death.
Deciding on Asset Distribution
Spouses often acquire large assets like a home jointly. Legally, this means that on the death of the first spouse, assets will avoid probate and pass directly to the surviving spouse. During a lifetime, it may be convenient to add a family member to a checking or savings account and assume that the person will disperse these assets to other family members. However, placing a joint tenant on an account grants them the legal right to receive all of the assets jointly owned! Rather than attempt to name joint tenants on your accounts – and hope a fight does not ensue after your death – it is best to prepare for the unexpected and create clear plans for how you desire your assets to be distributed.
Many people also forget that they have a range of options when determining where their assets will go. A skilled legal professional can help identify the benefits of naming charities as beneficiaries, establish charitable trusts, or use assets to set up a family foundation. A San Luis Obispo attorney works to identify issues that arise in the estate planning process and provide solutions that work in your best interests.
A San Luis Obispo Attorney Can Work To Resolve Issues with Estate Planning
Every document in your estate planning library should be specific to your situation and goals. To ensure you can efficiently navigate issues that might appear, such as problems with asset distribution or an out-of-date document, you should periodically review your estate plan with an experienced lawyer.
A seasoned attorney at Toews, Bio & Abram, Inc. can help you resolve common issues with estate planning in San Luis Obispo. Call today to schedule a consultation.
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