Be Prepared
Even CPAs Need to Consider Estate Planning
BY JANNETTE BROOKS , CPA
M any of us only think of estate planning for our time of death and wealth transfer . However , your estate planning documents may spring into action when a triggering event , such as disability , death or divorce occurs . Planning for these events along with preparing essential estate planning documents is a sign that shows love to those you leave behind or who may be impacted financially .
When creating a will or trust , you need to discern which assets you need to plan for . In California and many community property states , all assets acquired during marriage are considered to be owned by both spouses . Specifically , California law says those assets can be owned 50 percent of each item ( item theory ) or 50 percent of the total ( aggregate theory ). Title to assets doesn ’ t always reflect the true ownership , but should . Assets acquired before marriage are separate property along with assets received by gift or inheritance . If someone wants them to stay separate , they need to title them as separate . Assets titled jointly are often treated as community property in divorce and owned 50 percent each for estate purposes .
Probate is the process used to transfer the title of assets at death from the decedent to the beneficiaries . This is a court proceeding that can be relatively simple if all property is held as community property or are very low in value . People avoid probate by holding property in some form of joint ownership or transferring property to a trust . A probate proceeding could take one to two years and the administrator , attorney and appraiser are compensated based on the value of assets . As a result , many want to avoid the process .
Asset Listing & Considerations Create a complete list of assets and estimated values to include bank accounts ( checking / savings and money market , CDs , brokerage accounts and investments held outside of a brokerage account , such as stocks owned individually , private investments , real estate assets and business interest ). Estates are valued based on the Gross Market Value of all your assets without deducting your debts / liabilities ; having a complete list will support your executor and trustee in assessing what work needs to be done to settle your affairs and transition your wealth .
8 CALIFORNIA CPA MARCH / APRIL 2023 www . calcpa . org