Estate Planning is Not Just for the Rich

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David Schneider - Estate Planning is Not Just For the Rich

Given the ever-increasing values of our properties, people are likely worth much more today than they realize, even much more than a few years ago!

When this value is measured against the very low statutory limits to require a probate proceeding, it is imperative to act now to set up an estate plan. Property values in California have gone up every decade in the last 100 years. It is the single largest contributor to household wealth. For people who purchased their homes when having babies, if their kids are grown, their homes may have doubled in value. If their kids have kids, their houses may be worth three to four times the purchase value, particularly in hot real estate markets like the California Coast.

With easily accessible tools on the internet like Zillow, etc., many people have “peeked” and seen what their homes are worth. Or they have looked at real estate flyers when a home down the street is on the market. However, how many of these individuals have acted when they realized that their home value had skyrocketed? Hopefully, serious appreciation would encourage you to take steps to plan your financial future and start your estate plan.

You Don’t Need a Mansion to Plan Your Estate

Whether you belong in the house-rich category is almost irrelevant. Modest holdings deserve planning, and in fact, will often grow faster as a result of an estate plan. Aside from the obvious benefits of risk management, the added attention will almost guarantee growth. If you own any real estate, even if it’s complicated, you owe it to yourself and your loved ones to make sure that your wishes are carried out through a trust. That way the assets that you own are distributed to the right people.

Most people I speak with about estate planning are stunned when I explain just how low the statutory limit is to trigger a probate proceeding in California. If you own any real estate, from the smallest one-bedroom apartment to the mansion on the hill, all are valued higher than the statutory level to trigger a probate proceeding – $184,500.00 GROSS VALUE, not net equity.

Protecting your assets through estate planning often includes setting up legal instruments such as a trust, a pour-over will, durable power of attorney, an advanced health care directive, and nomination of guardian and/or special needs trusts

How Can I Gauge My Financial Worth? 

You can gauge your worth in many ways. The simplest way is to add up the total value of your assets and subtract your liabilities. Your assets include cash, personal property, and real estate. Your liabilities include credit card debt, loans, etc. However, this number will get you your net worth. Probate proceeding statutory limits are based on the gross value – this means the liability (the mortgage owed) does not count.

You may not need to get that detailed to make a simple decision like whether to engage in estate planning or not. As long as your net worth is positive, you should take preliminary steps to set up your estate plan. Some people compare themselves with their neighbors or family members. While that may not help your relationships, if it provides you motivation to get started with an estate plan, we are not going to judge!

Do You Know What You Have?

For people who have many assets or many illiquid assets, it may actually be difficult to know what you have. It may be important for you to inventory your assets, though if you’re in this situation, it is likely you have enough net worth to start planning your estate. It would still be important to know what you have through an inventory because it would provide a snapshot of your overall financial health. Further, it would allow you to set goals and use metrics to manage your financial situation with informed decisions, savings, and debt management. If you have real estate holdings that you have held for more than a decade, and they are not heavily encumbered, it is almost ensured that your property values carry you into the category of people who need an estate plan.

It’s Not All About the Money

While money is essential to a healthy quality of life, it is not everything. Proper estate planning also deals with the unfortunate situation of not being able to manage your money and property should you become incapacitated. One in three persons aged 68 or older will have a significant period of incapacity before the end of their life. During this time, the incapacitated cannot make financial decisions or healthcare decisions. If the home were owned by the incapacitated person (not the trust) and it was expected to be able to tap into the equity of the home for those later stages of life, this would now become an impossibility. Estate planning can not only help you make sure that you have enough relative to your needs, but also ensures you have a trusted and respected person there to help make decisions when you can no longer make those decisions.

Too many people have the false sense that their spouse, their child will be able to tap into the equity of the home, simply because they are married/related to the incapacitated person. Additionally, estate planning can help those around you achieve their objectives by making it easier and more routine to set goals, create plans, and make intentional choices about your time, energy, and resources. The more assets you have, the more complex – and necessary – estate planning is. It also makes it more important to work with an experienced, specialized attorney, rather than a newly-minted lawyer who is running a general practice. If they make mistakes, it is up to the court to sort it out and your wishes may not be executed as you arranged and expected.

Prepare Your Posterity

Your posterity includes providing for and protecting your family, future generations, and your community. Preparing for posterity includes estate planning. This can entail having conversations with your beneficiaries and setting up the legal instruments mentioned above. Beneficiaries can include friends and family, and even non-profit organizations or other charities, such as environmental stewards. By taking steps to create an estate plan, you are taking steps to prepare for the future and help ensure that your posterity has the resources it needs to thrive.


David R. Schneider specializes in estate planning, bankruptcy, probate work, and business services. David is known for his personal and client-oriented services. Visit DRS Law.