Skip to main content

Commentary & Insights

Insight, Financial Planning

Estate Planning – The Importance of the Uncomfortable Conversation Part 1

20 October 2021

By: Jeremy Runnels

“Our new Constitution is now established, everything seems to promise it will be durable; but, in this world, nothing is certain except death and taxes,” private correspondence of Benjamin Franklin, 1789.

I don’t believe Benjamin Franklin was thinking about estate planning when he wrote this, but he was spot on that these two issues would never fade in significance. Death and taxes are two daunting subjects, but even Franklin might have been surprised to see how complicated things could get when combining these topics hundreds of years later. 

Anyone who has amassed assets or savings has an estate. One of the most important things you can do for those who you care about and to whom you want to eventually give your hard-earned life savings, is plan for that inevitable time when your assets are transferred to your heirs. Because we frequently discuss such topics with our clients, we would be the first to observe that no one really enjoys thinking about or discussing what happens to their belongings when they pass. It brings fear and a myriad of other emotions to the forefront. However uncomfortable the conversation might be, there are significant advantages to planning for that transfer while you can. 

An estate plan is a set of documents that lays out how you want your assets to be dispersed, and who will make decisions around the administration of your estate. This can also include decisions around healthcare should you become incapacitated. If applicable, it will most certainly include who will care for your children before they are of legal age. 

Most commonly in California and many other states, this process is executed by setting up a revocable living trust, health care directives planning (in case you become incapacitated), financial powers of attorney, and a pour-over will. A pour-over will ensures things which aren’t in the trust will be included in the trust, so they are dispersed per the trust document. 

The primary advantage of setting up these documents is control: control over how your assets are dispersed and who will receive what from your estate. A thoughtfully produced estate plan can dramatically minimize unintended or unnecessary arguments among your surviving family members. Who gets the family home? Who gets the mountain cabin? What happens to the family business? You can decide now so that your kids don’t have to. 

Another significant advantage of having an estate plan in place in California and other states is you avoid probate. Probate is the process by which, in the event that a valid will is not submitted to the court, the court decides how your assets should be transferred and even who they should be transferred to. Per the State of California, for example, it can take 9 months to 1.5 years to complete probate. The court assigns an administrator, and they charge the estate for the time spent working through the process. It is a long and expensive affair, frequently costing tens of thousands of dollars. It is also completely public, and any of your creditors can make a claim on your estate. A proper estate plan completely eliminates the need for probate. 

As you can see, there are significant advantages to spending a few thousand dollars to preemptively get your affairs in order. Your family will thank you and you can have peace of mind knowing they will have a firm understanding of how you want to allocate your resources. 

This is the first part of a series. We will continue the conversation and get into further complexities in a follow-up article.