Is Estate Planning Only for the Wealthy?

A question our office comes across fairly often, whether it be from clients or out in popular media, is whether estate planning is something only really for wealthy people. The short answer is no, you do not have to be part of the 1% to take advantage of the various estate planning techniques out there. Anyone with an estate can and should plan their estates accordingly, otherwise they are leaving a mess for their family to untangle after they die and, at least in California, the probate code will force your estate down a predetermined path with no room for flexibility – something we call an estate plan by default.

To take a step back however, we think there are two reasons for the perception that estate planning is only for the wealthy: popular media and some misconceptions as to what estate planning actually entails.

Firstly, popular media such as films and tv shows, unless it is a documentary, often presents a distorted or “shorthand” for what it is talking about. An easy example is the “reading of the will” scene often showing up in moves and tv to create family strife. The lawyer for the decedent gathers the family in their office or the family home and reads the final wishes to the family and everyone finds out what they get right then and there. While a great framing device for a compelling story of family drama, this is often people’s only exposure to the world of estate planning at large. Also, if some has heard about trusts, they often hear of it in the context of “trust-busting” laws used to fight giant monopolies or with “trust-fund babies” living off mom and dad’s money. Both only provide a distorted lens into the estate planning world.

Secondly, likely due to popular media distortion, we have found that people often do not realize what estate planning entails. They often think you either create a will to set your distribution and a trust to create trust funds. However, the world of estate planning is actually quite broad and encompasses many other concepts such as who you want to take care of your minor children after your death; who can help manage your finances or medical care if you cannot; qualifying for public benefit or assistance; who is to receive a portion of your estate after your death and so much more.

For example, if you have an IRA or a 401(k) through your employer, then you are growing your estate and setting beneficiaries means you are exercising some control over your estate – you are estate planning. The same holds true for things like life insurance or even the lowly transfer on death deed – you are exerting control over your assets and thus planning your estate.

Our office emphasizes an estate plan centered around a revocable living trust since that is a document that is so powerful and flexible in what it can do for you during life and after death. Having a revocable living trust as the center point around which your estate is planned and structured allows you the flexibility to concentrate on accumulating assets and growing your estate while letting the trust set the framework for your estate. Please read some of our other posts to learn more about this in particular.

Finally, to circle back on something we reference earlier in this post, if you do absolutely no planning of your estate, then the state of California’s Probate Code will dictate who your heirs are and how much everyone is to receive. Many other states’ probate codes provide the same functionality. Additionally, if this becomes the case, then your heirs and family will need to go to the probate court in order to distribute your estate. Essentially, they need to go to a judge and ask “mother may I” distribute the estate and pay large fees out of pocket in order to do so.

Avoiding probate is the principle, but not only, reason we recommend our clients structure their estate plans around a revocable living trust. Doing so is how one avoids probate and ensures they can pass their estate on to their intended beneficiaries at the lowest cost to them at a fraction of the cost of probate, privately, and with the most flexibility meaning a smoother process. Probate is ridged, slow, expensive and something the overwhelming majority of estates, regardless of size, will be subject to absent a revocable living trust at the center.

BETHEL LAW CORPORATION
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