Many Californians mistakenly believe that they don’t need an estate plan. After all, with the federal estate tax exemption at $11.6 million per person as of late 2021, a will should suffice, shouldn’t it? Even a will may not suffice, as the courts may determine who will get your assets after your passing.
U.S. government may lower estate tax exemption
The current estate tax exemption level will expire in 2025, with the Biden administration favoring lowering it to $3.5 million per person, affecting more people. Although California does not have a state estate tax, it has other taxes that can affect those who inherit your property.
Reasons to establish an estate plan
Estate planning is essential as it can solidify who will get your assets after your death. If you don’t have one, the state will designate who will get your assets. Having an estate plan will also require you to develop a master list of your assets and liabilities, so relatives won’t have to search for them. An estate plan also requires you to designate a personal representative, sometimes known as an executor, to ensure that your wishes are carried out. If you have minor children, you should also designate a guardian if you die before they reach age 18.
No two estates are alike
The higher your assets, the more you need an estate plan. However, even small estates should have one, as a will does not prevent probate. Many Californians also utilize different types of trusts when creating their plans.
The different types of trusts can be confusing when starting estate planning. Taking time to understand the various components and their advantages will help you create the plan that best fits your needs and ensure your wishes are met.
