Last time, we talked a little bit about the top reasons why you may need an estate plan, even if you think you don’t. Here are the last three reasons.
As our Baby Boomers continue to age, the average age of our population is increasing. There are more older adults in the United States now than ever before. As a result, I am seeing a lot more clients come to me, generally spouses of someone who is having mobility and dementia issues as they age. Often, a decision has to be made regarding care and how to pay for the care. Care in an assisted living community in California can cost $10,000 – $20,000 monthly, or more. A couple may, for example, be considering a reverse mortgage to pay for care. But to sign paperwork, an individual must have “capacity,” meaning they must not have dementia or disorientation that prevents them from understanding the documents they are signing. Obviously, too, someone who is unconscious cannot sign documents either.
Too often, the couple waits until it is too late. When a person has capacity, they can sign a Power of Attorney document that allows someone else, usually their spouse, to act on their behalf for their finances, such as to sign documents. Once capacity is lost due to dementia or illness, then a Power of Attorney is no longer an option and to obtain the ability to act on an individual’s behalf requires a conservatorship.
A conservatorship is a court process that gives an individual, usually a family member/spouse, the ability to manage the care and finances of another who does not have capacity to do so on their own. The process can take several months, and the court fees alone are up to $1,200. Hiring an attorney can dramatically increase this cost. In contrast, obtaining a Power of Attorney takes very little time and even with an attorney preparing it for you, is not going to be more than a few hundred dollars.
Everyone should have a Power of Attorney for both finances and medical care once they turn 18. Have you created yours yet?
As is common, I spoke with a potential new client recently from Dublin, and he mentioned that he and his wife had been meaning to do estate planning “for a while” and just now were getting around to it. I don’t think anyone does it right when they think they should. I also met with a client in Pleasanton, and this couple had a common family set up: one spouse had children from a previous marriage and they were concerned about estate planning. Here are the reasons why estate planning when you have a blended family (one or both spouses have children from a prior relationship or marriage) is critical – do you really want to take the chance of dis-inheriting your children?
An estate planning attorney’s job is to make sure that you and your family, and what you want to happen with you, your family, and your estate, are protected regardless of what happens in the future. We all love our family more than anything, so what are you waiting for to protect yours?
When I am talking to friends, colleagues and potential clients, they often tell me that they don’t need an estate plan because they don’t have enough money to reach the estate tax exemption ($5+ million). What is distressing to me is that individuals with estates worth one million dollars or less (this is the gross estate not taking into account any debt) have so much more to lose when they don’t have an estate plan in place. Here are some reasons why:
Come back later this week for the final three critical reasons you need an estate plan, even if you think you don’t!
Many of my estate planning clients have put off their estate planning for months, and even years sometimes. Part of this is because death or disability is something we don’t want to think about, and part of it is because some of the questions are difficult to answer. What my clients do not always understand is that (1) it’s my job to help them to make the decisions, and (2) if they don’t decide, then someone else – a stranger – will decide for them. Here are some questions you need to consider when thinking about estate planning:
Estate planning is the last thing that you can do for your family to make your passing easier. Isn’t your family worth it?
Most of us first think about estate planning once we have a child. We know that having a child means we have to create something to secure our children’s future should something happen to us. But what about when there are no children? I have several clients who fit this profile in various areas in the Bay Area, and I have done estate plans – created living trusts – for single and married, childless, individuals and couples in Oakland, San Leandro, Lafayette, Fremont, and Hayward, among others.
There are a variety of different options for you if you don’t have children or other natural heirs. You can leave your estate to your siblings, parents, or other relatives, such as cousins. One client of mine set up an educational trust for her younger family members to help them to pay for college. You can use the opportunity to support a charity, as one client of mine is supporting a local animal rescue charity in her estate plan. In addition to animal charities, there are a wide variety of disease and disorder charities that are always seeking donations. Schools also will gladly accept donations in the form of bequests, so you can support a school that helped you to get where you are. One of my estate planning clients is leaving a substantial grant to UC Berkeley in their trust.
If you don’t create an estate plan and don’t have natural heirs, then your estate will go to the state. While you may not think this is too terrible, perhaps since you didn’t know exactly who to leave your money and assets to, I urge you to consider this:
1. What do you want your legacy to be? Leaving it to no one – the state – means there is no legacy at all.
2. There are so many deserving, hard-working, underfunded charities out there. Isn’t there at least one you would like to support?
3. You worked your entire life to create your estate and your legacy. Why not leave it to a cause important to you?
I have heard rumblings that estate planning is no longer necessary because the estate tax exemption is above $5 million, so only those with more than that need to do any estate planning. Here are the reasons why they are dead wrong:
WHY A POWER OF ATTORNEY IS NOT ENOUGH: DO YOU HAVE THIS CRITICAL DOCUMENT IN YOUR ESTATE PLAN?
If you created your estate plan more than a couple years ago, you may be missing a crucial piece to the puzzle. In the past, a power of attorney for health care decisions, which in California includes your advance directive (or living will), was sufficient to name another person (your “agent”) to make health care decisions on your behalf. But the enactment of HIPAA (Health Insurance Portability and Accountability Act), which was designed to limit the access to your medical records – and was focused on insurance companies – actually resulted in limiting the access to your medical records for everyone, including your agent on your health care power of attorney.
Worse, if you don’t have a health care power of attorney, you may think that your “next of kin” – your spouse, your children, or your parents – will have access to your medical information and to be able to make decisions on your behalf. Unfortunately, with HIPAA and the stricter privacy regulations on doctors and hospitals, this is not often the case. While you may be looked to for decision-making, if you want to see the medical records or tests results themselves, for example to get a second opinion, you won’t be able to, not even with a power of attorney.
What’s necessary now is called a “HIPAA Authorization,” which I have been using for a couple years now. It allows the individuals you designate to have access to your medical records and can save your loved ones from hassle and hardship should you be incapacitated. I use a separate form document, though my older health care powers of attorney included the HIPAA authorization in the body of the power of attorney.
I’ve talked already about the importance of everyone having a power of attorney once they turn 18, but what is also critically important is that you have all the correct documents in your estate plan as well, and a complete estate plan includes a HIPAA authorization.
Generally, we think of “putting our affairs in order” as something we do after we get the terminal illness diagnosis from the doctor. There are many reasons not to wait for that time to get your affairs situated, but I’ll leave that for another time. Today I want to talk about what it actually means to get your affairs in order. First, though, let’s see why it’s important:
Have you ever been the one “in charge” after someone has died? No? Imagine this: your nearest and dearest loved one has passed away. You’ve talked to the hospital and picked a mortuary, so that’s a process that’s been started. It’s really hard to talk about your loved ones “body” or “remains” while you’re still trying to process the loss in the first few minutes or hours. But then you feel like you have to DO something, so you head to the house to see if you can find the “important papers.” Two things can happen at this point:
Scenario one is that you arrive, and already know where the estate plan is, and head right for it. With it are all of the life insurance policies, retirement and bank accounts, instructions, pre-need funeral planning receipts and contact information, and smaller things like an address book to get in touch with all his/her friends, a locked box (which you have the key) with all of the computer passwords, safe combinations and the like. There seems to be a lot to do, so you contact the estate planning attorney, who, after asking you a couple questions, says, “there’s nothing to worry about and nothing to do. Take care of you, your family, and the final arrangements. Then call me back in a couple weeks if you have questions, but the instructions should all be there…just don’t worry about it now.” So this is what you do, as you start calling friends and family members and bracing for the days ahead.
Scenario two is that you arrive, and don’t know where anything is. Does s/he even have life insurance? Where are the bank accounts? Was there a will? Where is it? You start tearing apart the desk, closets, cupboards,…and find nothing. Now you’re grieving, in shock, have a million things to do, and now you can’t find anything. This adds to your stress, so you call in other family members, who are now tearing apart the boxes in the garage. Everything is chaos, and still no information. It’s overwhelming to the family.
Which would you prefer your loved ones experience?
The former? GREAT choice. Now, here’s what to put in the file:
And one final thought: make sure you have at least one trusted friend or family member who knows where it is and what’s in it.
Need more information? Contact us today to schedule your free estate planning consultation.
I always tell my clients that getting a divorce generally will take much longer than you anticipate and will be much more expensive than you’d like. In most cases, this is true, regardless of how hard we work to make it untrue. It is a complex process involving a great deal of information that must be disclosed, but when you add to that the emotional component that is almost always present, the process can seem unmanageable. One of the ways to make the process easier – from the very beginning to the very end – is to know and understand in advance what’s going to happen, what the options are, and how the general process can play out. Too many people run out and file for divorce without really understanding what that means in terms of procedure, process, timing, strategy, and so on. One of the best things you can do in your divorce is to become as educated as you can regarding the process. Do some internet research, read some articles, buy some books, and/or consult with an attorney or several. The more you understand about the process, the rules, and what you can do NOW to make the process easier later, the higher chance you have to maintain your sanity in the craziness that’s bound to come. Finally, consulting with a compassionate, experienced professional can help, too, because it’s part of their job to ensure you understand everything that’s coming your way in the divorce.
Also, and probably most importantly, knowledge is power. If you’re considering a divorce, you want to know what you’re getting into. You want to know your rights. You need to understand your responsibilities (not making a mistake in the first place is much better than trying to correct one made hastily!). Making informed decisions will make the process easier, smoother, faster, and less expensive on everyone.
You may also want to read why a free divorce consultation isn’t worth the money (click here).
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