Not wealthy? Why you still need a financial plan – Daily News

on Aug9
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Financial planning isn’t just for the wealthy, especially if you live in California.

Many people believe this is only for the rich and their families, and that because their estate is not complicated or significantly large, financial planning would not be beneficial to them. Most likely this mindset is incorrect.

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

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

If your home is not held in a trust, your financial adviser should address this and refer you to an estate planning attorney. If you are the sole owner of your home, it is highly likely that probate would be necessary to transfer or sell your home following your death.

Probate may not be necessary if assets are attached to a beneficiary or surviving owner. And simplified procedures may be used if the value of the estate is under $166,250. But if you are the sole owner of a home valued over $166,250 and titled in your name, this asset will pass through probate court to determine how it will be distributed. If you die without a will in California, your assets will go to your closest relatives under state intestate succession laws.

Probate is the process of administrating 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. Over this amount, they would receive 0.5% of the next $15 million, and anything over that would be determined by the court at a reasonable amount.

The cost of probate for a home is based on the fair market value supported by an appraisal at the date of death. It is not based on the equity in the home, as it may seem. For an $800,000 median-priced home in California, the probate fee would range between $19,000 and $38,000. If both the attorney and a personal representative choose to receive a fee, then the $19,000 compensation doubles to $38,000.

The length of time for probate to be completed varies widely in California.

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

Financial planning is the process of taking a comprehensive look at your individual financial situation. An adviser will review your assets and liabilities, ability to save, timeline for withdrawals and goals and objectives to help establish a reasonable plan. As a result, your adviser should also be identifying areas that potentially could be problems for you or your heirs. This review should always include the titling of 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. This sounds expensive until you compare it with the cost of probate and, additionally, the lack of control that you will have following your death.

Financial planning allows you to plan now and control the outcome. Wouldn’t you rather make choices that align with your personal goals and objections than letting the state of California’s intestate laws make those decisions for you?

Teri Parker CFP® is a vice president for CAPTRUST Financial Advisors. She has practiced in the field of financial planning and investment management since 2000. Reach her via email at

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