Not rich? Why You Still Need a Financial Plan – Press Enterprise

Financial planning isn’t just for the rich, especially if you live in California.

Many people think that this is only for the wealthy and their families, and that because their estate is not complicated or very large, financial planning would not benefit them. Most likely, this mindset is incorrect.

A financial planner will discuss many topics with their client, such as monthly cash flow and budgeting, short and long term financial goals, risk minimization, investment strategies and estate planning, while confirming that the client’s assets are properly titled to avoid probate.

Many may think they are not rich because their only asset is their house. If you are lucky enough to own a home in California, the value of your home has most likely gone up. According to the California Association of Realtors, the median single-family home price statewide in April was $813,980, up 7.2% from March and 34.2% from April. 2020.

If your home is not held in a trust, your financial advisor should sort this out and refer you to an estate planning lawyer. If you are the sole owner of your home, chances are you will need probate to transfer or sell your home after your death.

Probate may not be necessary if the assets are attached to a surviving beneficiary or owner. And simplified procedures can be used if the value of the estate is less than $166,250. But if you are the sole owner of a home worth more than $166,250 and titled in your name, that asset will go through probate court to determine how it will be distributed. If you die without a will in California, your estate will pass to your next of kin under the state’s intestacy laws.

Probate is the process of administering an estate, and it is expensive. All probate fees in California are predetermined by the state. Based on ordinary services provided by the executor, they would receive 4% of the first $100,000, 3% of the next $100,000, 2% of the next $800,000, and 1% of the next $9 million. Above that amount, they would receive 0.5% of the next $15 million, and anything above that amount would be determined by the court to be a reasonable amount.

The cost of probating a home is based on fair market value supported by an appraisal at the date of death. It is not based on home equity, as it may seem. For a home with the median price of $800,000 in California, probate fees would be between $19,000 and $38,000. If the lawyer and a personal representative choose to receive fees, the $19,000 compensation doubles to $38,000.

The length of probate varies widely in California.

Creditors have four months to make a claim against the estate, which means it must remain open for at least that long. The state probate code requires final distribution orders to be filed within one year or 18 months if federal tax returns are required. However, this period can be much longer if the will is contested or other litigation is pending.

Financial planning is the process of comprehensively examining your individual financial situation. An advisor will review your assets and liabilities, your ability to save, the timing of withdrawals, and your goals and objectives to help you come up with a reasonable plan. Therefore, your adviser should also identify areas that could potentially pose problems for you or your heirs. This review should always include title to your assets, including your home.

Meeting with an estate planning attorney to prepare a trust, will, health care directive, and power of attorney will cost you between $2,000 and $4,000 for basic planning. It seems expensive until you compare it to the cost of probate and, on top of that, the lack of control you will have after you die.

Financial planning allows you to plan now and control the results. Wouldn’t you rather make choices that fit your personal goals and objections than let the intestate laws of the State of California make those decisions for you?

Teri Parker CFP® is Vice President of CAPTRUST Financial Advisors. She has practiced in the area of ​​financial planning and investment management since 2000. Contact her by email at [email protected]