Posts tagged lawyer
How can estate planning help reduce costs and taxes?

Without proper estate planning, your eventual incapacity or death can result in a number of expenses and possible taxes that could otherwise be minimized. Here's a rundown of some of the common ones that come up:


One of the primary reasons that California residents create an estate plan is to avoid the time and expense of probate. Often through a simple vehicle such as a revocable living trust, you can develop a uniform plan that can eliminate the cost, publicity, time, and intrusiveness of a probate proceeding.

Real Property Taxes

California residents enjoy the benefit of "Proposition 58" which is a law that relates to transfers of real property from parent(s) to child(ren). Under this law parents are able to transfer their personal residence and up to $1,000,000 in assessed real property (during life or at death) to their children without having the transferred real estate be reassessed for real property tax purposes. In simple terms, children are able to pay the same low property taxes that their parents paid. Without proper planning, however, parents may be unwittingly giving up this benefit.

Estate Taxes

As of the date of this writing, the estate tax exemption amount (in simple terms, the amount of assets you can transfer to others without incurring estate tax) is just north of $11 million dollars. As a result, few people currently face this issue. However, this exemption amount is scheduled to go back down to approximately $5.5 million on January 1, 2026, which could bring many more people into taxable territory. Certain estate planning techniques can be used to defer the payment of estate taxes.

Income Taxes

Where appropriate, a competent estate planning lawyer will undoubtedly explain possible income tax consequences as well. For example, use of retirement assets to fund charitable gifts or an explanation of the "cost-basis" adjustment of your assets at the time of death, are both important considerations that you should know about. In addition, some types of trust structures may require ongoing income tax filings (and the expenses associated with tax preparation) that you should know about.

Generation Skipping Transfer Tax

A different type of tax exists for special types of transfers that "skip" a generation. For clients with large estates (generally those that will face estate tax) this is often an important topic to visit.

Legal Fees

Although not a "tax" in the traditional sense, it bears noting that when an individual dies without an estate plan, it can often throw families into disarray and cause them to engage a lawyer who then must sift through all of the decedent's information to figure out who gets what and what types of liabilities existed. Proper estate planning can allow families to minimize the legal process after your death since there will be a set of instructions on how exactly your estate is to be managed and/or distributed. Moreover, if you've worked with a lawyer, he or she most likely has a sense for the types of assets that you own and can often be a guide in the post-death administration process.

Many people fear the cost of establishing an estate plan, but when faced with the multitude of possible expenses of not having an estate plan, generally, the question is "can you afford not to have an estate plan?"

Why is Estate Planning Important?

I field questions from clients with all sorts of backgrounds--elderly, young, lifetime employee, entrepreneur, married with kids, single with pets, etc., but I get the "why do I need estate planning" question frequently, so I thought I'd address it here.

Being Prepared

Most people never take the time to consolidate their personal and financial information in an organized or meaningful way, much less think through things such as who will take care of their children or how their assets will get distributed after they pass away. One of the great benefits of estate planning is that it allows you (and your family) to not only get a holistic view of your financial situation, but also how that ties into your family situation. Having a game plan for when the eventual (death or incapacity) happens can bring a sense of calm and allow you to focus on living your day to day life knowing that your loved ones will be taken care of. More tactically, estate planning can help to minimize the taxes and other costs that are incurred as a result of death, which leaves more for your family.

But it doesn't end there. There are other benefits as well.

In addition to having a plan, you will develop a relationship with the estate planning lawyer who will serve as a confidant and adviser that helps you navigate the myriad of legal and personal issues you may encounter over the course of your life. Remember that an estate planning lawyer has probably seen the situations you are facing hundreds, if not thousands of times. Moreover, he or she will be there to help you and your family through the administration of your estate. 

A tertiary benefit of estate planning is that it can serve as a reminder of your financial situation and goals. Because a major component of estate planning is determining how your assets are going to be distributed, it's only natural that you would consider how you are saving for things such as retirement or caring for your children. Estate planning is often a big wake-up call for those who've let long-term financial planning fall by the wayside. I strongly believe in diligent personal financial management and try to bring that perspective into my consultations where it's appropriate.

Start Today

Thinking about estate planning can be daunting, especially if you feel like there's simply too much information to compile. My answer is to start with something basic. Having an estate plan, though it might not be perfect, is much better than having no plan at all. Estate planning documents are also amendable, so if things in your life change, the documents can be updated to reflect those changes. Often cost can be a major hurdle to engaging an estate planning lawyer, but there are many solutions that can be tailored to how much you can afford to do. I encourage you to contact an estate planning lawyer to get an assessment of your situation.