When most people in California think about estate planning, they see it merely as a vehicle for providing assets to their children or other close family members after they are gone. It is true that estate plans serve very important functions such as:
- Appointing guardians for minor children
- Providing for grown children with special needs
- Heading off potential family disputes
- Donating to favorite charities
- Avoiding probate
- Reducing taxes
However, estate planning is not just about distributing one’s life savings; it is also about preserving family histories, passing along values and creating a legacy.
Giving more than money
According to an annual survey by U.S. Trust, about 60 percent of parents do not believe their grown children have the ability to successfully handle large inheritances. Pointing to historical data, which shows that family wealth given to the second generation is typically wiped out by the third generation, parents are looking into different giving options.
Many Californians of the baby boomer generation are focusing their end-of-life plans on charities and leaving their personal marks in this world. There are also those individuals or couples who do not have children, have no remaining family or simply do not want to pass their life savings to their families.
As a way to eliminate or reduce future tax liabilities, many people use lifetime gifts to individuals, such as children or special family members or friends. An annual $14,000 monetary or monetary valued gift to a donee – the person to whom you are giving the monetary gift – is exempt from gift tax liability. This is a per-donee option; individuals may give the same amount to a number of different donees.
If a married couple wishes to give a gift to the same donee, the amount is doubled. This means that each year, parents can give $28,000 to each of their chosen donees tax-free.
As Californians age, thoughts often turn to philanthropy and making donations of charitable significance. While many people use lifetime gifts to donate to their favorite charities, others create private foundations, charitable trusts or donate large one-time sums through their estate plans to help organizations they support after they are gone.
Trusts are an excellent option for many types of situations. Special needs trusts can provide a lifetime of care to a child with special needs. Revocable or irrevocable trusts offer tax and probate avoidance options. For parents who worry about a child’s ability to handle money, carefully crafted trusts can provide staggered payouts or establish a trustee to oversee disbursements.
A lawyer can help
No matter what your concerns or desires are, an experienced estate planning lawyer who is knowledgeable about tax law matters can help you set up a plan that will accomplish what you want. Consult a California attorney to find out what options are available to you and your family.