By Shannon A. Jung, Attorney
The global Covid-19 pandemic has forced many of us to confront that distressing “what if” question as we come face-to-face with mortality. Inevitably we think about what happens to our loved ones after we are gone. Although this process can be stressful in such uncertain times, one practical thing people can do right now is to channel that anxiety into estate planning. It can be extremely comforting to know that at least one thing is in your control. And, considering that most people are spending much more time at home, now is a good time to sit down and think about building your estate plan.
The following are common issues and questions that arise during that process:
What are the benefits of having an estate plan?
Most importantly, estate planning gives you control over your assets after your death. Additionally, proper estate planning can save your loved ones money and the headache of trying to figure out what assets you have and where they are located. There are often tax advantages for you during your lifetime and for your beneficiaries after your death. A common misconception to address is that assets do not simply “pass” to your heirs if you die without an estate plan. Generally, if your estate is over $166,250 (as of 2020), it must go through probate before it can be distributed to your heirs.
A Trust vs. a Will
Although both a trust and a will are legitimate estate planning tools, there are key differences to be aware of. Based on your specific needs and your estate, one may be preferred over the other. The basic difference is that a trust is designed to keep your estate out of the court system. A will, however, must generally be presented for probate, unless your estate is under a certain amount, as previously noted. Probate is generally a lengthy and expensive process. However, one upside of probate is that it is court-supervised, which may be a benefit if you anticipate disputes between beneficiaries.
I don’t own a lot of things. Why should I bother estate planning?
Contrary to popular belief, estate planning can benefit anyone, no matter the size of the estate. As noted above, it gives you a say in how your estate is distributed, even if that estate consists of a house, personal property, or money under your mattress. Having a choice in where your property ends up is not only empowering but necessary if you want it go to a specific person or organization. Additionally, estate planning doesn’t have to cost a lot. Many people do not realize they can quickly make a will from their own home, as long as certain requirements are met. Additionally, California offers numerous ways to designate beneficiaries on your home and bank accounts without ever drafting a will or trust.
I have an estate plan already. Should I update it?
If you already have an estate plan, first congratulate yourself on your forethought. Second, think about reviewing your plan every five years or so to make sure it is up to date with current state and federal laws. For instance, the gift and estate tax exemption is $11.8 million in 2020, meaning that your estate will only owe taxes if it is over that amount. However, that exemption is set to expire in 2025, and we do not know what the exemption amount will be after that. It is also advisable to revisit your plan in times of crisis and uncertainty, such as the current pandemic, to make sure it still reflects your priorities.
Herrig & Vogt understands that this time is fraught with uncertainty. Know that you are not alone. But also know that there is something in your control, even during a global pandemic. You may be feeling overwhelmed with the deluge of news, state and federal orders, relief bills, and medical advisories. Our professionals are here to help you sort through all the noise so you can identify what is most important to you. Moreover, our firm has the capabilities to allow you to do the majority of your estate planning from the comfort of your own home. Please reach out to us today to discuss your estate planning questions and needs in this unprecedented time.