INSIGHT

What is estate planning?

Tony Gales • March 24, 2025

Services: Estates, Gifts & Trusts

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Estate planning is a crucial process that ensures your assets are protected and distributed according to your wishes, both during your lifetime and after your passing. While many assume estate planning is primarily for the wealthy or elderly, the reality is that everyone can benefit from having a comprehensive estate plan in place. 

Understanding your estate 

Your estate encompasses everything you own: real estate, vehicles, bank accounts, investments, life insurance policies, personal possessions, and business interests. Regardless of the size of your estate, proper planning helps ensure these assets are managed and distributed effectively while minimizing taxes and legal complications for your beneficiaries. 

What are the benefits of estate planning? 

Having a solid estate plan provides several key advantages. Here are some of them.  

1. Protects your loved ones 

The primary benefit of estate planning is ensuring that your family is taken care of after you’re gone. By naming beneficiaries, appointing guardians for minor children, and specifying how your assets should be distributed, you can provide financial security and peace of mind for your loved ones. 

2. Avoids probate 

Probate is the legal process of validating a will and distributing assets after someone passes away. In California, probate can be time-consuming, expensive, and public. A well-crafted estate plan, including tools like revocable living trusts, can help your heirs avoid probate and access assets more quickly. 

3. Minimizes tax implications 

Estate planning can significantly reduce your tax burden. Strategies like gifting, creating irrevocable trusts, and leveraging the federal estate tax exemption ($13.99 million per individual in 2025) can help you preserve more of your wealth for future generations. 

4. Provides for incapacity 

Estate planning isn’t just about what happens after you die. It also includes provisions for incapacity, such as durable powers of attorney and healthcare directives. These documents ensure that someone you trust can manage your finances and make medical decisions on your behalf if you become unable to do so. 

5. Protects your business 

If you own a business, estate planning is critical to ensuring its continuity after your death or retirement. Tools like buy-sell agreements, succession plans, and business trusts can help you transfer ownership smoothly and avoid disputes among heirs or partners. 

6. Preserves family harmony 

A clear and comprehensive estate plan can prevent misunderstandings and conflicts among family members. By specifying your wishes and addressing potential issues in advance, you can reduce the likelihood of disputes and litigation. 

Key components of a comprehensive estate plan 

Last will and testament 

A will serves as the foundation of your estate plan, providing instructions for the distribution of your assets. However, it’s important to understand that a will alone must go through probate—a court-supervised process that can be time-consuming and potentially expensive. Your will should also name guardians for minor children and specify an executor to manage your estate. 

Revocable living trust 

Many estate planning professionals recommend establishing a revocable living trust alongside a pour-over will. This powerful combination offers several advantages: 

• Helps avoid the probate process 
• Maintains privacy for your estate 
• Provides flexibility during your lifetime
• Allows for immediate access to assets by beneficiaries 
• Creates opportunities for tax planning 
• Enables continued asset management if you become incapacitated 

Essential legal documents for healthcare and finance 

Durable power of attorney 

This crucial document allows you to designate someone to manage your financial affairs if you become unable to do so. Your appointed agent can: 

• Pay bills and manage ongoing expenses 
• Handle investment decisions 
• File tax returns 
• Access and manage accounts 
• Apply for government benefits 
• Make financial decisions on your behalf 

Advance healthcare directives 

These documents ensure your medical wishes are honored and typically include: 

• Healthcare Proxy (Medical Power of Attorney): Designates someone to make medical decisions on your behalf 
• Living Will: Specifies your preferences for end-of-life care 
• HIPAA Authorization: Allows healthcare providers to share medical information with designated individuals 

Estate planning strategies for tax efficiency 

Strategic estate planning can help minimize tax burdens on your beneficiaries. As of 2025, you can give up to $19,000 per person annually without incurring gift tax through annual gift exclusions.  

Educational planning through 529 college savings plans offers tax-advantaged funding options for future generations. You can also consider making lifetime charitable donations for immediate tax benefits and explore various trust arrangements to optimize tax efficiency for your specific situation. 

When to review your estate plan 

Estate planning is not a one-time event. Your plan should be reviewed regularly, particularly after significant life changes. These include marriage, divorce, or remarriage; the birth or adoption of children or grandchildren; and the death of a spouse or beneficiary.  

Additionally, review your plan when you experience significant changes in financial circumstances, relocate to another state, or when tax laws change. Major financial events such as the purchase or sale of significant assets or changes in business ownership should also trigger a review of your estate plan. 

Common estate planning mistakes to avoid 

Being aware of potential pitfalls can help ensure your estate plan effectively serves its purpose. Many people fail to plan for incapacity or overlook important beneficiary designations on retirement accounts and life insurance policies.  

Another common mistake is not updating the plan after major life changes or maintaining improper asset ownership structures. Estate plans often fall short when they neglect to address potential long-term care needs or fail to consider state-specific requirements.  

Finally, failing to communicate your plans with family members can lead to confusion and complications later. 

The importance of professional guidance 

Estate planning involves complex legal, financial, and tax considerations. Working with experienced professionals helps to ensure your plan is legally sound and properly executed while being optimized for tax efficiency. 

Professional guidance helps align your plan with your specific goals and circumstances while maintaining compliance with current state and federal laws. 

Experienced advisors will also help make certain that your plan is regularly reviewed and updated as needed to reflect changing circumstances and regulations. 

Take action to protect your legacy 

At BPM, our estate planning professionals understand the complexities of creating and maintaining an effective estate plan. We work closely with you to develop strategies that protect your assets and provide for your loved ones according to your wishes. 

Don’t leave your family’s future to chance. Contact BPM’s Estate Planning team to schedule a consultation. Our experienced professionals will help you create a comprehensive estate plan tailored to your unique needs and objectives.