You Don't Need a Formal Estate Plan, but You Should Have a Plan.

Nobody actually needs any estate plan, but it can save a lot of time, money, and confusion down the line. The primary reasons for the vast majority of people to have an estate plan are:

  • To save a substantial amount of money if you become unable to manage your own affairs;
  • To prevent the loss of time and money when passing on assets after your death and to designate the recipients of your assets and on what terms; and
  • To avoid probate.

Different estate planning documents are necessary to accomplish each of these tasks. The biggest difficulty with an estate plan is that the value in an estate plan is best understood as a cost saving mechanism.

There are many situations where a formal estate plan may not make any sense. There are already default rules for how a person's assets are passed on if they die without any will (or trust) under the law.  There are also  mechanisms in place if you do not designate a third party to make decisions on your behalf through a Power of Attorney or an Advance Health Care Directive.

These default rules are generally more expensive, however, there are also options for setting up informal estate plans that do not involve a will or a trust. These informal options arise in a variety of situations and, while they do carry risks, can be effective if implemented properly.

For example, a married couple that owns everything jointly as spouses may not need  a formal estate plan to ensure all assets are passed to the surviving spouse, upon the death of the other. Though property titles should be examined in case there is a need for revision, it may not make sense for the spouses to establish a trust prior to the first death. While both spouses are living, they may only need an informal estate plan to ensure that the assets are passed on to the surviving spouse. Later, the survivor can always incur the expense of creating a formal estate plan when determining how to disperse their estate after their passing .

Alternatively, if a single person has only one bank account with less than $100,000 and only one child to inherit his or her assets, then it may not make sense to set up a trust or even a will. Under California law, the default heir at law would be the only child. There can be other risks or concerns here that would necessitate creating a will or a trust, but it may be unnecessary to incur the additional expense.

Another potential option would be for someone to simply rely on beneficiary designations. Currently the State of California allows Transfer-on-Death Deeds as a mechanism to pass on real property to one or more persons after death. There are, of course, risks associated with each estate planning option but our attorneys can explain the risks and benefits associated with our clients relevant options. 

Whether you have a formal or informal estate plan, you should always consider setting up a Power of Attorney and an Advance Health Care Directive because these can save you a substantial amount of frustration and money should you ever be unable to manage your own affairs.

If you are considering estate planning options but are hesitant about setting up a formal estate plan, there are options. A formal estate plan is not for everyone and there are always multiple ways to accomplish your goal. If you believe an estate plan may not be the best choice for you, you should consult with a licensed attorney to discuss your alternative options.

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