Who needs an estate plan? Top 7 reasons why you need one even if you think you don’t. Part II:

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.

1. Your children’s guardian.  Have children?  Have you named their guardian?  Is this document posted prominently in your house in case it’s needed?  If you don’t decide on your guardian, the court will.  The court doesn’t know you, your children, your family, or who you think would be most appropriate (or, conversely, who would NOT be appropriate).  You may not have decided on someone, but you’ve probably eliminated some candidates.  When you name no one, no one knows who you have eliminated, as the job is up for grabs to anyone.  Name your preferences or your very last choice could very well raise your children.
2. Your child’s guardian, part two.  What happens if you’re in an accident and you and your spouse go to the hospital?  Will the police leave your children with the underage babysitter?  No, of course not. If you have not chosen a guardian, and posted that prominently (and told the babysitter), then the police are going to take your children to the police station.  They may very well put your children into foster care while you recover.  While the chance this would happen may be slim, why take the chance?
3. Other documents necessary.  If you don’t have an estate plan, you’re less likely to have powers of attorney, a living will/advance directive, and other necessary estate planning documents.  These documents generally help you when you become incapacitated and cannot make decisions on your own behalf.  Often a spouse is your first choice, but what happens if your spouse is also incapacitated?  You need to prepare these documents to protect yourself and your wishes from being honored if you can’t speak for yourself.

Convinced?

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Talking to your parents about estate planning: how to do it and when to do it

Many of my clients ask me how they can talk to their parents about estate planning. Either they are doing their estate plan and want to make sure their parents are properly protected, or they are learning about the importance of estate planning, and just want to make sure their parents know what they need to do. I’ve talked about this before in a similar article, but I wanted to provide a new perspective to go along with the older article.

First, you are coming from a place of concern rather than a place of greed (“Hey Mom, what am I going to get?!”). You know that they don’t want to put themselves into a situation where they are not taken care of in the way that they want to (for example, if they don’t have proper powers of attorney in place). You know that they want to do all they can to help you and your siblings and/or their grandchildren. You know that they are probably concerned about leaving a legacy to their family and to the world. While we don’t think about this much when we are younger, nearly all older adults worry about leaving a legacy. Part of my estate plans with all of my clients, from San Jose to Novato, includes a place to record not just where the finances go, but how the important personal items are distributed, passing down important genealogical, medical, military and personal histories. You know your parents want to do this, so you want to make sure they know how.

Second, parents will always be parents to their children, so you can bet that they want to continue to take care of you as much as possible, even after they are gone. The probate process, which is what will happen if an estate (in California is worth $100,000 – not taking debt into account) passes without a living trust, is a burden on you and your siblings. It’s time-consuming, expensive, and adds an incredible additional burden to you at their death, which will be hard enough as it is. By encouraging your parents to create an estate plan, you are helping them to continue to take care of you after they are gone, which is what all parents want.

A great time to discuss estate planning is (1) now, since you’ve read this article (send them the link! Isn’t your mom always sending you newspaper clippings? I know mine is…), or (2) when you do your own estate plan. Talking about your experience can be a great conversation starter.

It doesn’t have to be a tough conversation, but it is a necessary one.

Divorce and the sleepover with the new boy-/girlfriend: When is it ok when there are children in the house?

The divorce process can take years, literally. In addition, in many cases, the relationship is long over by the time the couple pulls the trigger on the divorce paperwork. In the Bay Area – in California – the waiting period is six months, which means that a couple cannot be divorced earlier than six months after the divorce Petition is filed. But some divorce cases – I had one recently out of San Ramon – can be resolved in a matter of weeks, and the paperwork is just a little slower. Other divorces – like one client I have from Oakland – can go on for years and years.

So, with those varying timetables, in many cases it seems inevitable that one or both parties will move on into other relationships. Also inevitable is what the parent is to do when faced with the dilemma of when to allow the significant other to sleepover or, perhaps more difficult, when to allow the ex’s significant other to sleep over. Here are some tips to consider:

1. Just because it’s too soon for you may not mean it’s too soon for your ex or your child(ren).
2. Making it a big deal makes it a big deal.
3. Try to understand your child’s point of view, and then determine how to react. Children can be very adaptable, so the change from dates to overnights may not make much difference to the child.
4. If you can, get to know the significant other. And don’t interrogate your child to do so. Simple, non-threatening questions about whether your child likes the significant other, and why, what they do together, how much time they spend together, and what they talk about will be sufficient. Don’t make it an agenda about your ex! Make sure you’re asking to determine the relationship the significant other has with your child, because this is the important part.
5. Take into consideration the age of the child, as well as the child’s maturity, always bearing in mind that it is likely to be much more traumatic for you than your child.

It’s inevitable that it will happen sometime, so you might as well make it an easy transition now. Plus, the better you react, the more likely your ex will react well when it comes time for you to have a sleepover.

The probate process in California

Many people know that it is wise to create an estate plan that allows your estate to avoid probate when you pass away.  But few know or understand why probate it something to be avoided. One of the ways to understand it is to take you through the process of what happens when someone passes away.

For our purposes here, imagine for a moment that it’s not you that is passing away, but rather your closest family member – except for this discussion let’s choose someone other than our spouse.  Take a quick moment to think of how difficult that would be to lose someone you love so dearly.  And now, imagine all that there is to do when someone passes away:

1. There’s the funeral, which generally happens pretty quickly and plans are made within hours of the death.  There are decisions to be made about clothing, caskets, scheduling day and time, who will read, what will they read, will there be a gathering afterwards, will there be food, where will it come from, who will be invited…it’s overwhelming.
2. Then there’s the will – is there one?  The life insurance, the retirement accounts, the bank accounts.  You go to the house: do you know where your loved one keeps the important documents?  Would you be tearing apart the desk, the file cabinet, the drawers?  What would you find?  How would you feel about having to search?

REMEMBER:  This is all in the first few hours and days after the death, at a time when the loss is most shocking, most raw, and most difficult to deal with.

1. Once you find the documents – did you find them? – you have to figure out how to transfer the property, and generally – without a plan – this means the probate process, which we’ll talk about in a minute.
2. In come the lawyers, the lawyer’s fees, the appraisers – the strangers, in your home, in your life.
3. To transfer the property, the pay the debts, to sell the house – or even transfer it – to get access to the bank accounts…all of these things can take weeks, months and years.
4. The probate process, which is the court procedure for transferring your property when you don’t have an estate plan or have just a will, is a long, arduous process.  It involves:
   1. Multiple court hearings and appearances, lawyers, accountants, appraisers…
   2. A timeline of 2-3-5 years…or more
   3. Cost:  A huge cost.  Probate fees and costs can take up to 8-10% of your gross estate – that’s your assets not including your debt, so if you have a house worth $300,000 and nothing else, probate fees can be up to $30,000
   4. You have – your family has – worked your entire LIFE to create and build your estate.  Why give it to lawyers and courts?

In the probate process, while the cost is a big consideration, the time is also key because you and your family need and want to move on from the death and the grief, and when the probate process continues on for years and years – and you can’t sell the house, and you can’t get access to the accounts, then it drags out the normal emotional process way beyond what is healthy.

Does this sound like something you want to go through?  Something you want to put your family through?

Now, what if I were to tell you that there is a BETTER WAY?  A way to avoid ALL of this trouble?  We’ll go through this again in the next blog post…stay tuned!

Estate planning is more than legal documents: Ethical Wills

When I work with clients on their estate plans, I work with them on the legal aspects, such as their living trust, will, and powers of attorney.  But I also work on other aspects of their estate plan and getting their affairs in order.  For example, I work with them to talk to their family about their estate plan.  I work with them to pre-plan and pre-pay for their funeral needs.  Happy stuff, right?  Well, it may not be the most desired of conversations, but –

• It’s necessary.  If you don’t want to talk about it now, you will at some point.  And if you wait too long, you may not get the chance.
• Once you talk about it once, especially with someone uninvolved like me, talking to the family becomes much easier.
• If you knew what you were doing to your family but not having the conversations, and making them guess at what you want, then you would never leave anything unsaid.

Another thing that I talk to my clients about is an “ethical will.”  An ethical will is a document where you share your life lessons, hopes, dreams, values, history, faith, love and forgiveness with your family, friends, and community.  Gaining in popularity in the last several years, there are several online websites where you can record your ethical will and keep it, or there are forms you can download and/or purchase.  For my clients, I ensure that they have the document then need to record everything they would ever want to, such as the items noted above, in addition to genealogical, medical, military, and other histories as well as other pertinent information.

As we get older, the desire and need to leave a legacy becomes stronger and stronger.  We want to be remembered, for our lives, for our contributions and for our love.  As long as we are remembered, we stay alive.  Creating an ethical will is a way to leave that legacy that is so important.

Thinking about filing for divorce? What you need to do first:

Are you thinking of filing for divorce?  Had it with your spouse?  Before you pull the trigger, so to speak, and file for divorce, do some investigating and some collecting.  You’ll be glad you did.  Specifically:

1. Gather copies of financial documents, such as tax returns (at least the past three years), bank statements (go back several months to a year), investment accounts, and business records.  Print them out in case you lose access.
2. Keep the copies in a secure location away from your home.  Try a friend or relative’s home or your workplace.
3. Secure and possessions you’d be heartbroken to lose, especially anything breakable or very valuable. If your spouse “loses” your father’s antique watch, it’ll be up to you to prove it was your spouse’s fault.
4. Learn your rights.  Listening to your friends, relatives and neighbors about what happened in their divorce will not help you one little bit as each divorce is individual to the circumstances of the couple.  Consult with a licensed lawyer or Family Law Coach in your area, and don’t feel pressured to hire someone at this point.  Do some fact-finding.  Read some books on divorce in your area.
5. Learn your responsibilities.  Just as critical as rights, what you have to do as a member of a divorcing couple, and perhaps a parent, is as critical.  You don’t want to damage your children, your future, or your credit by not understanding what’s best for you to do.
6. Consider counseling, like now.  Divorce is so difficult that it’s considered one of the five major life events/traumas.  The legal process is not designed to help you through the emotional aspects, and it won’t.  It will likely make them worse.  Find a counselor, find a divorce support group, talk to your church, or discover some way to deal with the emotional aspects.
7. Learn the process.  Divorce, as I have mentioned before, takes far longer and is far more expensive then you ever anticipate.  If you’re not aware of this at the outset, then the delays, disappointments and cost can become quickly and repeatedly overwhelming.
8. Open your own bank account, without your spouse’s name on it.  Just before you file, if you have money in a savings account, consider transferring HALF of the money – just half – into that account.  Check with a lawyer in your area first, however, to make sure you don’t get in trouble later for doing this, as every state has different rules.

The more prepared you are in advance, the easier the process will be.  Divorce is so difficult that it’s well worth your time and effort to make it easier, because when you’re going through it, you’ll appreciate each and every break you can manage.  And you could end up like this couple, whose divorce “rehearsal” actually saved their marriage.

Estate planning for same sex couples in California

California has made some strides toward equality for same sex couples, but it cannot be said that there isn’t still a long way to go.  As unfair as it is, same sex couple have to do more: prepare more documents, plan for more contingencies/eventualities, update more frequently – than their heterosexual counterparts.  The worst thing that a same sex couple can do is bury their heads in the sand, hoping or assuming it’s ok not to put anything in place – that somehow, some way, it’ll all be taken care of should something go wrong.

Uh, no.

Even in the best of circumstances, what you effectively do when you don’t plan is place an enormous burden on your loved ones; the ones who have loved you and cared about you the most, and the ones you have loved and cared about the most, are going to be put in a horrific situation should something happen to you and you haven’t planned for it.  And this horrific situation, not only does it come at a time of grief for your loved ones, but it is entirely avoidable.

Some tips to get you started:

1. With no estate plan (will, trust), you die intestate (i.e. the government decides your estate plan) and the government’s plan discriminates against same sex couples.
2. Without powers of attorney in place, the parents who threw you out of the house when you came out could be making medical and financial decisions for you if you’re incapacitated.
3. Being a Registered Domestic Partner in California, or married, does not change these points in their entirety.
4. Holding your property in joint tenancy with your property will not avoid the problems here, plus they could work to DIS-inherit your children and/or cause additional problems down the line.
5. Not choosing a guardian for your child(ren) could mean they end up in foster care should something happen to you.
6. Without a living trust, probate fees could take up to 10% of your gross estate (your estate not taking debt into account) and take 2-3 years – if not more – to resolve.

The best way to take care of your family when you are a same sex couple is to put an estate plan in place.

Putting your affairs in order: what documents to collect to save your family

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:

1. Your estate plan, with trust and will.
2. Your powers of attorney.
3. Your life/long-term care insurance information.
4. Your retirement information.
5. Bank account information.
6. Pre-need funeral planning documents.
7. Investment account documents.
8. Deeds of property, such as homes, vehicles and boats.
9. Health, disability, auto and property insurance documents.
10. Income source documents (social security, employment, investments, child/spousal support).
11. Credit card statements and evidence of other debt.
12. Important papers, such as marriage/birth/death certificates, passports, tax returns, military or genealogical records.
13. Names/contact information of trusted professionals, such as accountants, lawyers, financial advisors, gardeners, house cleaners or caregivers, home repair professionals (electrician, plumber, roofer, chimney sweep, etc.).

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.

Have step-children or a step-parent? Are you one? How to avoid disinheriting your family

Estate planning presents unique issues for blended families.  Blended families are families in which one or both parents have children from a previous relationship.  The problem comes when one spouse dies without an estate plan, or an old or outdated one.  Generally, when spouses hold property in California (or anywhere in the US), they hold it in joint tenancy.  When one joint tenant dies, the other one gets the entire property.

Can you see where we’re going with this?

When one spouse of a blended family dies, then the other spouse generally gets all the property of the couple, often by default.  When it comes time to distribute the assets at the death of the second spouse, the second spouse can essentially disinherit the first spouse’s children.  The second spouse, with all the property in his/her name, has control over the ultimate disposition of the property.  If there is a family rift between the second spouse and the step-children, if the second spouse is negligent in creating an estate plan providing for the step-children, or in other cases, then the children of the first spouse to die can be left out in the cold.

Don’t leave your children out in the cold by failing to provide for them with an estate plan.

Estate planning for new parents

Your bundle of joy has arrived, and now you’re trying to figure out the new schedule and when you’ll ever get any sleep again.  Also, in the back of your mind, you know that you should probably “do something” about your will or figure out what will happen should you pass away.  Now there’s another life to worry about!  But time passes, you don’t know what to do or how to do it, or who to ask, so it gets placed on the back burner.  Suddenly Junior is 14 and you’re dealing with the death of your parents.  What are the things you wish you had known when Junior was a baby?

1. The time to do your estate planning is NOW.  Should both parents be in an accident and hospitalized for a period of time (or, obviously, if you die), Junior could end up in the court system and/or in foster care.  If you do not choose who will care for your child if you cannot, then the court will decide.
2. Having the court decide who will be the guardian for your child is NOT what you want.  When the court decides, the court does not have the time or ability to distinguish between your crazy Aunt Rose, who you have not seen in years, who lives in a small town in Arkansas (not that there’s anything wrong with Arkansas) and can’t seem to keep a steady job, and your sister and brother-in-law who are close to the entire family and would be the perfect guardians.  If YOU don’t decide who is going to raise your child, a stranger will.
3. Not being able to decide on who your guardian will be it not a good excuse for delaying your estate plan.  A good estate planner will help you decide.  In addition, while you may not have decided definitively, you have probably narrowed the field among the options.  Remember, the court won’t know who you have ruled out.  I can help you to know what to think about, what to consider in making the decision, how to make the decision, and how and when to change it.

Don’t wait.  Once you have a child, it’s time to put your affairs in order.  You love your family and you love your child: it’s them, not you, who will suffer if you neglect these very important tasks.