The essential objectives of estate planning are:
“Probate fees” are the attorney’s and executor’s fees allowed by law in a court-supervised administration of an estate. One objective of estate planning is to eliminate or at least reduce probate fees by creating a revocable living trust. All titled assets held by the trust may be distributed to your desired beneficiaries without the need of a probate.
If you are married and have a substantial combined net worth, be sure to take advantage of “portability.” This is the addition of the first spouse to die’s unused lifetime exclusion amount to the surviving spouse’s lifetime exclusion amount. To obtain portability present law requires the filing of a federal estate tax return following the death of the first spouse to die.
In this connection, consider making annual $15,000 gifts of cash or property value to family members or your favorite charity in San Diego or elsewhere. This will not require your filing of any gift tax return, and will reduce the size of your estate, thereby enabling your estate to pay less in federal estate taxes.
Also, the purchase of life insurance on your life may help to pay any federal estate taxes owing on your death.
When a Medi-Cal recipient dies in California, the state may make an “estate recovery claim” for repayment of certain health care services received by the decedent and paid for by Medi-Cal. Proper estate planning can protect certain assets from a potential recovery claim. Since January 1, 2017, only certain assets are exempt from such a claim, including real property held by a trust, in a joint tenancy, or under a life estate. In addition, consider purchasing long-term health care insurance to reduce the potential of incurring Medi-Cal costs.
Estate planning may also help minimize the risk from a damage award against you (for example, from auto accident liability in excess of your coverage). One thing you can do here is purchase an umbrella liability insurance policy through the insurance company providing your home or auto insurance policies.
Most importantly, the objective of estate planning is to ensure your estate will pass to the beneficiaries you desire. You can do so by designating them in a trust and/or will or other appropriate beneficiary designation document(s).
The above statements are generalizations only and are not to be taken as legal advice for the reader’s particular situation.