Archive for February, 2011
Death is the final taboo. Even if a loved one has been ailing for a long time, death comes as a shock and releases a series of emotional responses we cannot be fully prepared for. Humans have always looked for ways to control the manner of their going into the unknown – from the Ancient Egyptians’ Books of the Dead through to calculations of good versus bad karma, we have quelled our fears about the unknown through rituals which provide real comfort in times of grief.
To borrow from a former Secretary of Defense, while there are many unknowns surrounding death, there are also a lot of knowns. By focusing on the knowns, we can achieve control over some aspects of our passing. Accentuating the knowns helps alleviate the stress of accepting that death is a part of life, as well as providing a substantial and practical help to our loved ones in their grief.
Here is one known - the State of California makes provision in its Probate Code for what will happen to your property if you die without having created an estate plan. A set formula for inheritance rights will pass your property, potentially to a spouse, children, parents and/or siblings, depending on your particular family structure. In its broad-brush approach to determining who will receive your property, the law imposes assumptions which may not fit every case – for example, that all marriages are lifelong institutions filled with unquestioning trust.
If you die without a will and your parents are alive, they may well inherit some of your property (depending upon whether you are married and/or have children.) Your parents may have been following a plan of giving money steadily over the years to one or more of their children. Those children may need a helping hand, or your parents wish to reduce the amount of money in their own estates so that less is owed in estate tax on their own deaths. In the event of your untimely passing without having created an estate plan, property may pass back into your parents’ estates, undermining their plans and potentially increasing the overall estate tax burden for your family.
So even if your estate is not currently large enough to be subject to estate tax, allowing your parents to inherit could lead to that property being subjected to estate tax in the long run.
Let’s chart the journey and count the number of opportunities the government will have to subject the same property to estate tax if your property passes to your parents because you did not create an estate plan in time.
1. Without estate planning, property, which your parents previously gave you in order to avoid estate tax, may be subject to tax on your death.
2. Some of your property may pass back to your parents. Without estate planning, that same property may then be subject to estate tax again on the passing of that generation.
3. When your parents pass on, the property may pass to your siblings and be subject to estate tax a further time on your siblings’ death.
4. Finally – if anything is left (!) - any remaining property may pass to the younger generation.
In many cases, it would be far better to create an estate plan which passes your property directly to the younger generation, so that estate tax is potentially payable fewer times.
Even if no estate tax is payable, this would save substantial administrative hassle and expense by preventing the property from passing through probate so many times.
Creating an estate plan allows you to make the right decisions for you and your loved ones. Please visit busywills.com for more information.
Busy Wills, Inc. is privileged to work with people who have earned the most respect -busy Californians taking the first step to fulfilling their responsibilities to loved ones. Providing a uniquely tailored strategy for each client’s individual and family circumstances, for an affordable fixed price.
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Attorney Advertising: This article has been prepared for general informational purposes only and is not intended as legal advice.