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.

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Don’t overlook these important estate planning concerns in divorce

When you get a divorce in California (and everywhere else!), there are important estate planning considerations to take into account.  In fact, these are so critical that you could end up leaving your estate to your ex spouse (ouch!), having your ex make important medical decisions for you, or – if you act hastily and without the proper information – you could get into trouble with the court system.

During Divorce:  First, when you file for divorce in California, regardless of whether it’s Alameda County, Contra Costa County, or any other county, once the other party is served, both of you become restrained from doing certain things.  One of these restraining order involves your will or trust, and prohibits you from making any changes to your will or trust once you’ve filed for divorce and served the other party.  One of the others prohibits either of you from changing or cancelling any insurance, such as life, health, auto/property, etc., or changing the beneficiaries on any insurance or other account where a beneficiary is named.  Do not make the mistake of cancelling your ex’s health insurance or changing your will after you have filed for divorce!

You may make these changes with permission from the other party or with a court order, and you may want to seek this.  Particularly if you have separate property, the last thing you want is for your ex to get it all if something happens to you. You may also want to get permission to change the beneficiary of your life insurance into a trust for your children, but you need permission for both of these actions.

One of the changes that you should make as soon as you can, and there is no court prohibition on this, is your powers of attorney.  For both health and finances, you want to make sure you designate someone other than your ex who will make decisions for you and manage your affairs should you become incapacitated.  If you’re lying in a hospital bed unconscious, do you really want your ex deciding whether to get surgery or wait to see if the medication improves your condition?

After Divorce:  Once your divorce is final, you want to make sure you change your will or trust, your powers of attorney (if you’ve not done so already), the beneficiaries on your life insurance, retirement and other accounts, and make sure you have enough life insurance for your children and long-term care insurance to care for yourself as you get older.

Need more help?  Click here for our FREE Divorce e-Course.

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.

Estate planning and California divorce: a checklist to avoid disaster

Often, after the time, expense, and emotional upheaval of California divorce (as well as moving, adjusting to life as a single person/parent, dealing with tightening finances…etc. etc.), the last thing on anyone’s mind is estate planning.  Yes, it’s one of the things on the list of things to do…later, when you have time.  When you’re emotionally ready to think about it.  Right?  Well, the reality is that just post-divorce IS the best time to do estate planning.  Why?

1. Because it’s on your mind since you’re working to get the rest of your life in order.
2. It’s critical to get your ex-spouse off of your accounts and as your beneficiary.  You really don’t want him/her inheriting from you, do you?
3. It’s really not that hard, and in fact rather than being draining or difficult, can not only be empowering but help you to really feel like your life has restarted.

Here are the key estate planning items you need to take care of post-divorce (and note you probably can’t do these during your divorce due to the ATROs):

1. Create a new (or initial) living trust and will to protect your assets and your beneficiaries.
2. Cancel any old estate plans.
3. Sign a new power of attorney for asset management.
4. Sign a new health care advance directive power of attorney.
5. Designate the guardian for your children should you pass away.
6. Get new life insurance to meet your (and your children’s) needs.
7. Update the beneficiary on your life insurance, retirement accounts (401Ks, IRAs, etc.) and other payable on death (POD) accounts.
8. Make sure your assets are retitled in your name only.
9. Let people know you’re no longer divorced, like banks, health care providers, and other trusted advisors so no one gives out personal or confidential information inadvertently.
10. Talk to your parents about estate planning, the importance, and how it will help everyone if they create an estate plan (it helps them to leave a legacy and saves you the additional intense difficulty of probate).

Doing these simple tasks will help you to feel stronger, in control, and empowered to take on life’s next challenge.  What are you waiting for? Make an online appointment by clicking here.

Estate planning, the Forbes Guide

Don’t believe me when I talk about the importance of estate planning, for everyone?  Here is the Forbes Guide to Estate Planning, which echoes much of what I have said in my various posts, and even includes a guide to estate planning “on the cheap”!

Avoid these shortcuts in estate planning and save your assets, protect your family, and leave a legacy

We’re all looking to save money and get our to do list done as quickly and easily as possible.  But when it comes to estate planning, quick and cheap shortcuts can end up not only costing you in the long run, but can hurt both your family and your legacy.

For example, if you decide to forego an estate plan for your real property, and instead opt for joint tenancy, then you are at best just delaying the probate process, and at worst exposing your home to complete loss in your lifetime. With joint tenancy, there may not be any need for probate or transfer proceedings at the death of the first spouse (just some simple) paperwork, at the death of the survivor, the property goes into probate, which can take years and cost up to 10% of the gross estate value, which can be in the tens of thousands of dollars even for estates with just a house – even one with substantial debt.  Putting a child on title to the property does not solve this problem, and can lead to your child’s creditors seizing the house, the inability to undo the transfer at a later date when needed, a loss of control over the disposition of the house, more complications in transfer at the survivor’s death, and more.

Another shortcut is either being incomplete or too vague in your estate plan documentation.  If you have a living trust, it must be funded completely.  It does not serve you or anyone else to leave “just that one account” outside the trust since it ‘has so little in it.’  Why leave a small account – or a large one – outside the trust and make it more difficult for your family to transfer it? It’s possible then that the bank will just get your money since it will be too much trouble to transfer the account outside the trust.  In addition, if you have provisions for the distribution of your estate, make sure you have alternate provisions in case your beneficiaries do not outlive you.  For example, if you are leaving everything to your children, make sure you have a provision for who gets your estate if the airplane goes down and you all pass at the same time.

There are a lot of aspects of estate planning that can easily be completed improperly, costing you, your family, and the estate you worked your life to build. Estate planning is not the place to look for a quick or cheap solution, but rather to take the time to ensure that all you’ve worked for is left just the way you want it.

Powers of Attorney: Why do you need them, particularly in a California divorce case?

There are two kinds of powers of attorney: one for health care, and one for assets. They both allow you to choose the person who will make decisions for you in the event you cannot, either due to mental or physical incapacitation. If you are in a car accident and unconscious for several days or weeks, someone will have to make decisions for you regarding your care and treatment (this hospital or that one, this medication or that one, etc.) as well as your finances. Someone will need access to your bank account to pay your mortgage, utilities, etc. so they do not fall behind.

If you do not choose who this person will be, then the state decides for you. If you are married, then your spouse decides. This is still the case if you have filed for divorce but not yet come to a Judgment. If you have filed for divorce, then it is likely that you do NOT want your estranged spouse making medical and financial decisions for you. In that case, you need to create powers of attorney naming someone else.

Everyone who is 18 or over should have these documents prepared to ensure that their medical wishes are followed and that they have someone who can make both financial and medical decisions for them if they are injured or ill, and unable to do so.  Many parents believe that they are the automatic decision-makers for their adult children, but this is not the case.  If you have an adult child, too, they should have a power of attorney naming you as agent so that you can make decisions on their behalf, examine medical records, and handle finances should they be injured or in an accident.

Estate planning for the digital age: what critical item most estate plans fail to include

I read a great article this morning about the failure of most estate plans to include information about computer account passwords and all of the transactions we do online on a daily basis (Estate planning for iTunes, passwords, and other digital assets). This is a great article because it highlights a problem in ‘modern’ estate planning.  A lawyer may be preparing your legal documents: your will and trust, and powers of attorney.  Your financial advisor is working with you to ensure that you have enough wealth to live out your life, and resources should you become disabled.  But who is assembling the information about your Amazon.com account (and perhaps an auto-ship of vitamins or other health care items)?  Who is ensuring that successor trustees or executors have access to online banking accounts to manage automatic payments. When you use a power of attorney (POA) to handle the finances of another, a copy of the POA goes into your file, but when you’re operating online, who is checking?

These are financial concerns, but there are also personal concerns here, too.  If a loved one of yours passed away suddenly, would you know everyone to contact? It’s likely that they have a contacts list on their computer or smartphone, but is the computer, smartphone, or even the contacts application locked? The same goes for email addresses and even Facebook. Your mom may have really taken to Facebook and rediscovered old friends from all aspects of her life.  When she passes, what do you do with that account?

In my estate plans, I always include a fillable book that can be used to record all of these kinds of information, and more.  I consider it to be my job to ensure that your whole estate and all of your affairs are taken care of when you’re finished with me. Sometimes I refer to other experts in other professions, and obviously I can’t force you to record your passwords and security codes anywhere, but I can let you know that this is a critical aspect of your estate plan, and encourage you to complete as much information as you can for your family, since the more you have available and accessible to your family when you pass, the easier it is for them. Who doesn’t want to do everything they can to make it easier for their family?

Did your estate planning attorney talk to you about estate planning for digital media?