Tustin Estate Planning Law Blog

Families in California with considerable assets have multiple options when creating an estate plan. One of these is how Individual Retirement accounts (IRA) allow one to distribute the asset to one's heirs after one's death. The heirs are required to take a minimum distribution from the asset that is based on their life expectancy. A new law being considered, known as the Secure Act, would require that the estate assets held in the retirement account be distributed over 10 years.

Typically, taxes are paid on an IRA when the funds are withdrawn and if the proposed law passes the tax bill of the recipient could increase. Under current law, a 22-year-old who inherited a $1 million account would be required to take a minimum disbursement (RMD) of $164,000, or 1.64% of the value, in the first year. Taxes would be due on the disbursed value. At 40 years of age, the recipient would be required to take an RMD of only 2.32%. If the new law passes, the account will need to be fully disbursed by the time the recipient is 32 and this will have a far more significant impact on the tax liability of the recipient.

People in California who die without an estate plan in place may not have their final wishes carried out as they intended. Aretha Franklin passed away almost a year ago from complications related to pancreatic cancer. At the time of her death in Detroit, it was believed that she had died without leaving a will. That situation would have made asset distribution of her Michigan estate, estimated at over $80 million, very difficult.

Three wills that were purportedly written by the singer were recently found in her home. The wills, known as holographic wills, were found by a representative of the estate. Aretha Franklin had four sons and they have not been able to agree on the validity of the wills. Two of the documents are dated 2010 and the third 2014.

Families are made up of people. People come in all shapes, sizes and personalities, and this can add to family drama and contribute to challenges when it comes to estate planning in California. Most people understand the importance of having a plan in place in this day and age, but they may be reluctant to engage in planning because of the conflicts that may arise. This can be particularly true when sizeable estates are involved.

As with so many family issues, communication is key. Communicating final wishes to one's family members can reduce conflict and hurt feelings that could arise following a person's passing. The right plan may include a will, trust and charitable bequest, among other items. Formulating a plan and explaining the reasoning behind the plan can help allay squabbles that may occur after one's passing.

For a variety of reasons, most people in California and elsewhere do not have a will. Estate planning is a personal and challenging task, so once a will is in place, it may seem like a victory. The testator -- the person who writes the will -- may be surprised to know that a will is a document that requires frequent reviews and revisions. In fact, there are specific times when updating one's will is critical.

No one's life remains stagnant. After writing a will, it is likely that things will change and the terms of the will may no longer be relevant. For example, a testator may name an heir who passes away after the will is signed. A testator who remarries after a spouse dies but fails to update the will may leave the new spouse with a frustrating and expensive legal battle to claim his or her fair share of the estate.