What is Estate Planning Anyway?
I am fairly certain my first lesson in estate planning came from Richard Pryor.
In 1985, the legendary comic starred in a movie called Brewster's Millions. Pryor played a poor minor league baseball player named Monty Brewster who learns that a great uncle left him his entire $300 million estate on the condition (explained in a video will by the crotchety great uncle between gulps of his oxygen tank) that Brewster spend $30 million in 30 days, with zero assets at end. Hilarity ensues.
The movie is absurd, but I loved it. I imagined what crazy antics I would force upon the recipient of my Atari 2600 if I died.
But that is all I thought estate planning was; deciding who gets your stuff when you die. So I believed for a very long time that estate planning was not something I needed to do, even as a married man. After all, my wife and I did not have much beyond massive student loan debt, bins full of music in obsolete formats, shelves full of movies in obsolete formats, and other items with little value beyond sentimental (photos, yearbooks, Cobi Jones bobblehead, high school cheerleading outfit, etc.)
In 2013, my wife gave birth to our first child. Thirteen short months later, our second. They are both ridiculously cute and brilliant, just like their mother. Parenting two toddlers is often exhausting and frustrating, but we are good parents. We are present, involved, encouraging, creative, and patient, and we give great thought to what is best for them.
With all of that effort, however, it is easy to forget about big-picture issues. Are we prepared if something goes very wrong? We, like most people, have known tragedy. Tragedy is possible.
What happens if I die? What happens if we both die? Who will take care of our kids? What happens if I am in an accident or get a disease and can no longer make financial or medical decisions? What would it be like for my loved ones if I did not leave them any direction?
Estate planning is making decisions on these types of questions and creating effective legal documents to implement those decisions. Yes, deciding who gets your stuff is a part of that, but, for many people including myself, not the most important part.
The components of an effective estate plan vary for each person. It may include plans for incapacity (health care directive, durable power of attorney), for distributing your property (will, trust, or both; other mechanisms to distribute property), for taking care of your children, spouse, and others (naming guardians, protecting their inheritance with a trust, getting adequate life insurance, establishing a special needs trust), for avoiding probate (a lengthy and costly court proceeding required for estates over $150,000 [pretty much anyone with real estate in California], unless effective probate-avoiding mechanisms are put in place), and for reducing estate tax (if the estate is significant).
Without estate planning, a judge will make most of these decisions for you. A judge will choose a guardian for your kids. A judge will choose who controls your kids’ inheritance. A judge will choose who gets your stuff. If you become incapacitated, a judge will choose who makes decisions for you.
An estate plan can be simple or relatively complex, but at the very least needs to avoid the awful consequence of no estate plan at all – a stranger making these important decisions for you.
Please contact me at firstname.lastname@example.org or (714) 937-2076 for a free consultation so you can make an informed choice on whether you need an estate plan and what that plan should include.