Key Points:
- Estate planning is a proactive strategy for everyone, ensuring your assets are managed according to your wishes both during your life and after.
- Without a formal plan, your estate may be subject to a costly, public “default plan” through the state probate court.
- Certain state probate thresholds make professional planning essential for homeowners to avoid massive legal fees.
Legacy Wealth Planning: An Interview with the Co-Founder of Wood Legal Group
Too often, estate plans are assumed to be tools created exclusively for the rich. When you hear the word “estate,” what comes to mind?
Your favorite celebrity? Thirteen-bedroom mansions?
These assumptions could not be more wrong.
Portia Wood, Partner and attorney at Wood Legal Group, LLP, dispells these myths and breaks down the true purpose of legacy wealth planning.
Q: What is an estate plan?
Portia Wood: An estate plan is a tool available to you to protect and deploy your assets while you are alive, and ultimately to direct the dispersal of your assets after you die.
Working with an attorney, your plan is something you set out in writing to continue to guide critical aspects of your family’s financial well-being after you have passed.
The Little CPA Note: An estate plan typically includes the following –
- a Will directs asset distribution after death and is where you can name guardians for children,
- a Trust directs assets after death (and during life for certain trusts) to avoid probate,
- a Durable Power of Attorney to handle your legal, healthcare or financial decisions if you’re incapacitated, and
- an Advance Healthcare Directive (medical directive) to outline your end-of-life wishes.
Q: Who should create an estate plan?
Portia Wood: A professional estate plan is highly recommended for anyone who owns enough property to trigger probate, as well as for those who simply want to dictate exactly how and when their assets are distributed.
Assets include everything you own—real estate, autos, jewelry, art, intellectual property and more. Almost every adult has an estate. If we don’t create our own plan, we will be subject to the State’s default plan (probate), which is costly, time-consuming, and unlikely to provide for your family the way you would.
Q: What is the difference between a Will and a Living Trust?
Portia Wood: A Will and a Living Trust are each tools for dispersing your assets.
- Will: One key difference is that not all property can pass by Will. Additionally, if your net worth exceeds the state threshold, a Will likely has to be “probated” through the court.
- Trust: A properly crafted trust designates what happens with all property titled in the name of your trust. It allows you to disperse assets on your own timetable and normally avoid probate court entirely.
Q: Who is a Trustee?
Portia Wood: A trustee is the person or entity legally authorized to manage the assets inside of a trust. While you are alive, you can be the Trustee of your own trust.
Q: Do you need a living trust if you have life insurance?
Portia Wood: Generally speaking, the answer is yes. If you have a million-dollar policy and your beneficiary is a minor, you want a trust to control how those funds are dispersed. You likely don’t want an 18-year-old receiving a $1,000,000 life-insurance check. Your trust can specifically address this.
Q: Why do couples in Community Property states need a trust?
The Little CPA Note: A community property state is a state where all income, assets, and debts acquired during a marriage are legally considered to be owned equally (50/50) by both spouses. In the nine community property states, it doesn’t matter whose name is on the title or paycheck; any “fruit of labor” earned during the marriage belongs to the “marital community” as a whole.
Portia Wood: This is a perfect example of why legacy wealth planning is so important. It is unlikely both parties in a community property state will die at the same time. Without a trust, assets from the first marriage can become commingled if the surviving spouse remarries. Not having a trust can also open the door for children from the first marriage to be unintentionally disinherited.
A trust keeps the State out of your affairs and ensures assets reach your intended beneficiaries.
Q: What assets should be included in a living trust?
Portia Wood: Just about everything you own. If property is in your own name rather than the trust, the probate court has to “take it out” of your name to pass it on. Assets titled in the trust do not go through probate.
The Little CPA Note: High-net-worth individuals might not include all of their assets in their living trust. For estate or gift tax purposes, they might allocate assets to specific trusts that better align with their tax and legacy wealth planning strategies.
Q: What is the risk of leaving assets to the probate process?
Portia Wood: Probate is time-consuming, expensive, and can result in assets being transferred to unintended beneficiaries. Court, attorney, and executor fees can eat up much of the estate. A proper plan ensures you remain in control of how and when your assets are disbursed.
Q: When should families consider adding multiple trusts to the plan?
Portia Wood: No two families are the same. If you have a complex estate or high net worth, your estate might require a bypass trust, a charitable remainder trust, or a generation-skipping transfer (GST) trust.
If you have a child with special needs, you might need a special needs trust. The amount of trusts you should form depends on your goals and the value inside the estate. A capable attorney will discuss which types best serve your family’s needs.
Q: Why is it important for communities of color to engage in legacy wealth planning?
Portia Wood: To maintain control. Upwards of 40% of wealth in the U.S. is inherited. One of the greatest hindrances to Black wealth advancement has been the loss we experience at the generation transfer.
Between 1910 and 1997, African Americans lost an estimated $28 billion in land value through the heirship process in the American South alone.
We need to craft plans that contemplate non-traditional family structures and protect the gains we’ve made.
About the Expert
Portia Wood, Esq. is a founding partner of Wood Legal Group, LLP and a leading expert in legacy wealth planning. She specializes in helping families avoid probate, minimize taxes, and protect hard-earned savings. She holds a Juris Doctor from the University of Maryland and an LL.M. in Estate Planning from Pepperdine University. Portia was named a Top 40 Under 40 Attorney for California for three consecutive years and remains a passionate advocate for closing the generational wealth gap through education and strategic planning.
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