Coordinating Estate Plan Updates With Your Cpa And Financial Advisor?

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A well-coordinated estate plan isn’t just about having a will; it’s about integrating all your assets and anticipating potential tax implications. That’s where working with an experienced estate planning attorney becomes crucial. A comprehensive estate planning strategy requires a deep understanding of not only the legal framework but also the financial implications of each decision.

For example, a coordinated estate planning structure can help minimize capital gains taxes and maximize the benefit of the step-up in basis.

With over 35 years of experience as both an Estate Planning Attorney and a CPA, I’ve seen firsthand how a lack of coordination between legal and financial professionals can lead to significant, and often avoidable, costs. I’m uniquely positioned to understand the interplay between these disciplines, ensuring your estate plan is not only legally sound but also tax-efficient.

What are the key benefits of working with a CPA and an estate planning attorney?

The primary benefit is holistic planning. An attorney focuses on the legal aspects – wills, trusts, powers of attorney, healthcare directives – while a CPA understands the tax implications of those decisions. Without both perspectives, you risk overlooking crucial opportunities to minimize estate taxes, capital gains, and potential probate costs. For example, properly titling assets can significantly impact the tax burden for your beneficiaries.

Furthermore, a CPA can help with asset valuation, which is critical for estate tax purposes. Accurate valuation is essential to avoid disputes with the IRS and ensure your estate is properly reported.

How often should I review my estate plan with my CPA and financial advisor?

At a minimum, you should review your estate plan annually, or whenever there’s a significant life event – marriage, divorce, birth of a child, sale of a business, or a substantial change in your net worth. These events can trigger changes in tax laws or alter your financial circumstances, requiring adjustments to your plan.

Regular reviews also ensure your beneficiary designations are up-to-date and aligned with your current wishes.

What is the “step-up in basis,” and why is it important?

The “step-up in basis” is a significant tax benefit that allows your beneficiaries to inherit assets at their fair market value on the date of your death. This means they only pay capital gains taxes on any appreciation that occurs *after* your death, rather than on the entire value of the asset. For example, if you purchased stock for $10,000 and it’s worth $100,000 at the time of your death, your beneficiary’s basis will be $100,000, eliminating the $90,000 capital gain.

However, it’s crucial to understand that not all assets qualify for a step-up in basis, and proper planning is essential to maximize this benefit.

What role does asset titling play in estate planning?

Asset titling is a critical component of estate planning. How you own your assets – individually, jointly with right of survivorship, or through a trust – determines how they will be distributed and whether they will be subject to probate. For example, assets held in a revocable living trust bypass probate, while assets held solely in your name will likely go through the probate process.

Furthermore, asset titling can impact creditor protection and potential Medi-Cal recovery claims.

How can a trust help with estate planning?

A trust is a powerful estate planning tool that allows you to control how and when your assets are distributed to your beneficiaries. Trusts can also provide creditor protection, minimize estate taxes, and avoid probate. A coordinated estate planning structure can help ensure your trust is properly funded and aligned with your overall financial goals.

For example, a pour-over will ensures any assets not titled in the trust at the time of your death are transferred into the trust, preventing them from going through probate.

What are the implications of digital assets in estate planning?

Digital assets – online accounts, cryptocurrency, social media profiles – are often overlooked in estate planning, but they can represent a significant portion of your net worth. Without proper planning, your successor trustee may be unable to access these assets, leading to lost funds or valuable information.

Under California law, you need specific “RUFADAA disclosure” language in your Trust to grant your Successor Trustee access to your digital legacy.

What is the difference between a healthcare directive and a POLST form?

A healthcare directive (also known as an advance healthcare directive) is a legal document that outlines your wishes regarding medical treatment if you become incapacitated. A POLST (Physician Orders for Life-Sustaining Treatment) form is a medical order that specifies your preferences for life-sustaining treatment.

A healthcare directive is broader in scope, while a POLST form is more specific and requires a physician’s signature.

What happens when a successor trustee takes over due to incapacity versus death?

The process for a successor trustee taking over differs depending on whether the settlor is still alive but incapacitated or has passed away. If the settlor is incapacitated, the successor trustee must provide notice to beneficiaries and demonstrate the settlor’s incapacity. If the settlor has passed away, the successor trustee must validate the will (if applicable) and begin administering the estate.

Under AB 1079, once a settlor is established as incapacitated, the Successor Trustee must provide a copy of the trust and annual accountings to the remainder beneficiaries within 60 days.

What are spendthrift provisions and how can they protect my beneficiaries?

Spendthrift provisions are clauses in a trust that prevent beneficiaries from assigning or selling their inheritance and protect their assets from creditors. These provisions can be particularly useful if you’re concerned about a beneficiary’s financial irresponsibility or potential lawsuits.

Spendthrift provisions can also protect assets from Medi-Cal recovery claims.