Tustin Estate Planning Law Blog

A wealthy family in California may be considering moves that can be taken to preserve family wealth from taxes with the advent of the new tax laws. There are mechanisms that can be used when reducing estate taxes. The current exemption of $11.18 million went into effect in 2018. This means that an estate valued at less than that is not subject to the federal estate tax.

One mechanism that wealthy families employ to reduce estate taxes is called a Family Limited Partnership, (FLP). An FLP allows a family to establish a partnership with family members and then gift to them shares in the partnership. For example, if someone invests in a real estate venture valued at $4 million and gives the FLP 90 percent of the value, it reduces the principal's share by 90 percent, with the principal retaining a 10 percent interest. This also allows wealth to be transferred to another generation without incurring estate tax expenses.

The death of a spouse is perhaps one of the most difficult and trying times in a person's life in California. After the funeral, much of the focus may be on settling the late spouse's estate. While this is certainly very important and must be taken care of, an estate planning review on the part of the surviving spouse is also very important.

Documents that were drawn up previously may have designated each spouse as the other's beneficiary. This may be true of insurance policies, retirement accounts, bank accounts, and other accounts or assets. Powers of attorney may need to be revisited. Spouses will frequently name each other as powers of attorney in the event that one is unable to make financial or other decisions. The surviving spouse may also wish to review his or her existing will and trust documents to verify that final wishes will still be carried out as intended.

Estate planning is not just for the rich and famous. However, the rich and famous are not immune to estate planning mistakes. From failing to have an estate plan to being exploited by the people to whom they granted power of attorney, they have taken missteps that others can learn from in California.

Granting a power of attorney is very important, but even more important may be the matter of to whom a power of attorney is given. People frequently choose family members, and while this often works out just fine, it can also lead to abuse in certain circumstances. One of the earliest and worst examples of this was the case of Brooke Astor. In her later years she suffered from Alzheimer's. She had granted power of attorney to her son and suffered financial abuse because of it.

More and more people are becoming aware of the need to establish an estate plan in California and are taking steps to do so. Establishing an estate plan is very important once a family grows to include children. Having wills enables parents to ensure the continued care of their children should the parents become incapacitated or die prematurely.

While the eventualities set up will normally provide for long-term care of the children, there may be a more immediate need that perhaps should be addressed. A recent article brought up this point and called it "micro estate planning." When parents pass, a court will look at their will and at the designated guardian instructions for the long-term care of their offspring. But what about immediate care?