What is a Power of Attorney? Why is it critical that you have and up-to-date one at all times, once you turn 18?

In California, there are two kinds of powers of attorney: one for finances and one for medical decisions, also called an advance directive or living will.  A power of attorney for finances gives another individual the power to handle your financial affairs if you become incapacitated and cannot manage them on your own, like when you are hospitalized.  While you are unable to manage your own affairs, someone else can ensure that your bills are paid and utilities stay on for when you return.  The power of attorney is necessary because banks generally will not allow access to your accounts without a formal document giving specific permission to someone else, even if you are the spouse, parent, or sibling of the person who is incapacitated.

Similarly, a power of attorney for medical decisions gives the power to another person to make medical decisions on your behalf if you are incapable of doing so due to illness, accident, or other problem.  It specifies what kind of medical treatment you do or do not want, and in the absence of one, the doctors will do all that they can to keep you alive as long as they can, even if you are in a persistent vegetative state.  In addition, in California there is the HIPAA authorization for medical records so that the person who is making your medical decisions can also look at your medical records.

Every individual 18 or over needs to have these three documents.  Sometimes, parents assume that their college-age children do not need these documents because they will be listened to as parents.  This is not always the case, so any child going off to college, or just turning 18 needs to have these documents.  Similarly, aging parents need to have one as well to avoid the difficult conservator process if they become incapacitated without proper powers of attorney.

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.

So you have a living trust! Congratulations…now here’s some tips on what to do with it

Where to keep it, when to update it, and what to do with it:

o Keep your estate plan in your house, accessible to your family. If it’s in a safe deposit box when something happens to you, your family may not be able to get to it.
o Tell your family, and particularly your successor trustee, where your estate planning documents are located.
o Keep a copy (it does not have to be executed; I give my clients a blank copy) in a safe place, such as a safe deposit box in case your original is destroyed or lost.
o Review your estate plan each time there is a major life event in your family, such as a birth, death, marriage, or divorce. Also review it if you’ve bought or disposed of real property.
o Barring major life events, review your estate plan every two-to-three years to make sure it still reflects what you want. You can spend 15 minutes skimming through the summary sections to ensure you don’t want to change anything.
o Give your power of attorney for health care decisions and living will to your agent (the one who will be making decisions for you), and if it’s your spouse, also give one to the successor agent.
o Give your power of attorney for health care decisions and living will to your doctor(s) for your file, to the hospital if you have one you would go to in an emergency, and to your pharmacist.
o Give your power of attorney for your property to your agent or successor agent as well as to the institutions they will likely be dealing with, such as your bank, your financial advisor, or other account managers.
o Give your named guardian and conservator the nomination documents and make sure all caregivers know about them and how to find the documents in an emergency.
o TALK to your family about your wishes, your plans, and who you have designated as agent, conservator, and guardian.

What is a conservatorship?

I have been asked recently by a number of different sources to help them with a conservatorship, so it occurred to me that I should write a little bit about it.  A conservatorship occurs when you or your loved one is no longer able to manage their affairs, both the decisions about their financial affairs and the decisions regarding their personal affairs.  A conservator, often a family member, takes over these many decisions.

The problem with conservatorships is that they are court proceedings, can be lengthy, are public, can be expensive if you need an attorney (and many family members do), require filing, investigator and court fees (in addition to legal fees), require approval for certain transactions, and can require accountings of finances.  Conservatorships can be avoided altogether if the family member puts powers of attorney in place before there is an issue with capacity.  Unfortunately, not enough individuals do this in time.

There are two different kinds of conservatorships: conservatorships of the person, and conservatorship of the estate.  For a conservator of the person, decisions about food, clothing and residence are made.  For conservator of the estate, decisions regarding the financial affairs of the individual, such as paying bills, collecting income, and making investments.  Often, the conservator is the same person, though they can be two separate individuals or can be institutions.

Your best bet if you are worried that you or a loved one will become incapacitated is to execute powers of attorney for assets and health care.  These are simple documents that any estate planning attorney can prepare quickly and easily.  If it looks like it’s already too late, then you’re going to have to go down the conservatorship route.  You may want to start the proceedings before you think you need to, because the process can be lengthy.

A Family Law Coach can help to cut costs because I can walk you through the process, help you with documents, and make sure you are prepared for every step of the way…plus keep costs way down compared to traditional legal representation.

Painful estate planning questions you must answer to avoid disastrous estate planning mistakes

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:

  1. The guardian for your children. This is probably the most important decision you will make.  In case the unthinkable happens – you and your spouse are out together on date night and get into an accident and are both hospitalized or worse. What do you think will happen to your children, who are at home with the 19-year old neighbor babysitting? The police will likely take your children into protective custody – foster care – until a proper guardian is named.  If you have a formally-named guardian in your estate planning documents (and not some hastily-written page), then you can avoid this awful experience for your children.
  2. Who will get your stuff. If you don’t decide who gets your stuff, the state will. And perhaps more importantly than the couch and the jewelry is the estate itself.  Do you have minor children? Do you want them to inherit hundreds of thousands of dollars when they reach 18? Do you perhaps want to hold back some of the estate to pay for college, or at least to let them mature a little before coming into (and losing) a great deal of money right at 18? The only want to do this is through trusts.
  3. What do you want the doctors to do if you are in an irreversible coma? If you don’t decide how you want the doctors to treat you and what extraordinary measures will be taken to save your life, then the doctors will endeavor to keep you alive as long as they can.  Do you want to survive by machine alone? If not, then you need to tell someone!  Tell your parents and your children, and create a power of attorney that legally records your wishes.  If you don’t do this, you could cause your family to scramble to determine what YOU would have wanted.
  4. Who will help you to manage your assets and estate if you can’t? Most of us are more likely to experience a slow decline than go out with a bang.  Because of the advances in medical and health care, we are living longer and with better-quality lives. But as we slow down, there is a chance that we will start to lose our ability to pay our bills and manage our finances.  To avoid the painful, time-consuming and expensive process of conservatorship, each of us needs to designate someone to make decisions on our behalf if we become unable to.  This is relevant to individuals of all ages, as surviving traumatic brain injuries is getting more and more common.
  5. Where are your documents? Part of creating your estate plan in making sure everything is in one place: your will, trust(s), powers of attorney, bank/investment/life insurance/retirement statements, pre-need funeral planning documents, and passwords/keys/online account information.  There is nothing worse than making your grieving family rummage through your stuff to find what they need.

Estate planning is the last thing that you can do for your family to make your passing easier. Isn’t your family worth it?

Is estate planning obsolete? Think again!

I have heard rumblings that estate planning is no longer necessary because the estate tax exemption is at $5 million, so only those with more than that need to do any estate planning.  Here are the reasons why they are dead wrong:

  1. Probate costs. When you don’t have an estate plan and you have $150,000 in property in California, your estate goes through the process of probate, which can cost your estate tens of thousands of dollars in unnecessary fees.  Creating a living trust avoids probate.
  2. Probate time/length.  The probate process can also take several years to complete, leaving your heirs in a state of limbo when you’re gone.
  3. Powers of attorney.  Even if your estate does not reach the $150,000, everyone 18 and over needs to have powers of attorney to determine who will make medical decisions on their behalf, have access to their medical records, and handle their finances should they become incapacitated.  Parents do not automatically have this right, which is why anyone 18 or over needs to have these documents.
  4. Distributing your estate to whom you want.  If you do not create an estate plan outlining who gets your estate, the government has an estate plan for you, and it may not be to your liking.  YOU have the choice and responsibility to determine who gets your estate, but if you don’t make the decision, then someone else will.
  5. Disinheriting heirs in a blended family.  If you have a family with step-children, you could easily dis-inherit them by leaving all of your property to your spouse (a common non-plan estate plan).  If your spouse inherits everything you have when you pass away, because you hold title to your property in joint tenancy, then your spouse will have control over how to distribute the estate at the second spouse’s death, which could very likely end up with your biological children getting nothing.
  6. Naming a guardian for your children.  Once you have children, it is imperative to name a guardian for them.  If you don’t, then a judge who has never met you, your children, or your family will get to decide.  In this case, anyone can petition to become your children’s guardian, and without naming someone, you open up the very real possibility of your children becoming the subject of a lengthy and nasty custody battle when you’re gone.
  7. Planning for your elder years and death.  Medical advances have led to longer lives, but this has also meant that we spend a longer period of time in decline, where we may need care.  We need to plan for that time and for that care while we are still healthy, and by getting our affairs in order, we can accomplish this.
  8. Having dignity in your last years.  When we don’t plan for our decline, then we can find ourselves caught off-guard and without the means or ability to take care of ourselves.  In that case, we may become dependent – or worse, burdensome – on others, generally our family.  Many of us would rather decide in advance how we want to handle our aging: where we want to live, who we want to care for us, how we want to be cared for.  If we don’t plan, then we get stuck with whatever is available.
  9. Saving your family untold grief.  Anyone who has experienced the decline of a loved one understands the difficulty in making caregiving decisions and end of life decisions, not to mention the passing of the estate.  By creating a comprehensive estate plan, we save our families from having to make impossible decisions at every turn.  At a time when family should be able to take the time to grieve and band together, too often there are many decisions to be made and fighting over what’s “best” or what you would have wanted.  These are YOUR decisions to make.  Shouldn’t YOU make them?

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Celebrities and estate planning

There are frequent examples of famous names and faces that pass away, leaving us with reminders of the importance of estate planning at all ages.  In recent weeks:

  1. The importance of planning young: Sarah Burke.  We all think that we’re going to live forever.  I think this is part of human nature.  We also think that, if we’re healthy, then we will be healthy forever.  Unfortunately, accidents and illnesses happen to the young and to the healthy, as the death of 29-year old Olympic skier Sarah Burke tells us. If you don’t have a medical power of attorney in place, you don’t choose who will be making the decisions on your behalf.  If you don’t have a living will (part of the power of attorney for medical decisions in California), then your family doesn’t know what your wishes are.
  2. The importance of a power of attorney: Etta James.  When Etta James died, her family was in the midst of a conservatorship battle.  A conservatorship is the formal title of the person given legal rights to make decisions on behalf of your estate/assets and of your medical decisions.  If you have a power of attorney, in most cases a conservatorship is not necessary.  Etta James’ husband had conservatorship over the singer, and in just late December, asked the court to release $500,000 for her monthly medical care, the cost of which was $30,000.  The court released $350,000.  Because of concern over her medical care and the cost, her two sons petitioned the court to change the conservatorship over to them.  The last thing you want your family to have to contend with when you are gravely ill is an issue such as this.  If you make plans ahead of time, you and your family will both be protected.
  3. The importance of planning, period: Steig Larsson. The author of the widely successful “The Girl with the Dragon Tattoo” trilogy died suddenly of a heart attack at age 50. He had no will.  While his estate went to his family members, his girlfriend of 32 years has possession of a fourth unpublished manuscript, and the legal battle rages on.

Whatever you age, size of estate, or health status, you need an estate plan to protect yourself and your loved ones.  Why wait?  Make a FREE appointment online now.