IN STATE OF CALIFORNIA
Fundamentals of Estate Planning
When you hear the phrase “estate planning,” the first thought that comes to mind may be taxes. But estate planning is about more than just reducing taxes. It’s about ensuring your assets are distributed according to your wishes. If you haven’t prepared an estate plan, this guide will help you get started. And if you already have a plan in place, the guide may offer strategies that you currently may not be employing — including strategies that will help you lock in the benefits of higher exemptions and lower rates while they’re available.
And if you already have a plan in place, the guide may offer strategies that you currently may not be employing — including strategies that will help you lock in the benefits of higher exemptions and lower rates while they’re available.
Certainly this guide is no replacement for professional financial, tax and legal advice. So work with a qualified estate planning advisor before implementing any estate planning strategies or making any changes to your current plan.
Because estate planning isn’t just about reducing taxes but also about making sure your assets are distributed as you wish both now and after you’re gone, you need to consider three questions before you begin estate planning — or reconsider them if you’re reviewing your estate plan.
If you live in a community property state, like California, or your estate includes community property, you will need to consider the impact on your estate planning.
Community property usually includes assets you and your spouse acquire under two conditions:
- During your marriage.
- While domiciled in a community property state.
Each spouse is deemed to own a one-half interest in the community property, regardless of who acquired it. For example, wages and other forms of earned income are treated as community property, even though earned by only one spouse.
Separate property usually includes property you and your spouse owned separately before marriage and property you each acquire during marriage as a gift or inheritance that you keep separate. In California and most community property states, spouses may enter into agreements between themselves to convert separate property into community property or vice versa. This can be an important part of your estate plan.
Once you have considered your spouse’s rights, ask yourself these questions:
- Should your children share equally in your estate?
- Do you wish to include grandchildren or others as beneficiaries?
- Would you like to leave any assets to charity?