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?

Thinking about estate planning? Don’t wait until it’s too late and make this (potentially) costly estate planning mistake

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?

Blended family? Children from a prior relationship? How to avoid making a critical estate planning mistake

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?

1. Like my clients last weekend, many couples think they have “nothing” and therefore do not need estate planning.  The reality is that if you have $150,000 in gross property (that is, assets – a house, investments, etc. – without regard to any debt, so you can be upside down on your house and still have $150,000 in property for these purposes) in California, then when you pass, your estate will go to probate, which is a lengthy, complex, and expensive court process to resolve your estate. My belief is that anyone with a home in California needs an estate plan – and this is doubly true if you also have children. I do not charge for initial consultations, and one of the many reasons is that I believe that you must make informed decisions about what is best for your family. I don’t want to put any hurdles up in front of you getting the information you need.
2. If you don’t choose a guardian for your children, if you cannot care for them, then the court (and a stranger in a black robe) will decide for you. In a blended family, in most cases, this will mean the other parent will get custody.  In many cases, this is not a problem because custody is shared.  In cases where it isn’t, or perhaps where the other parent lives far away, or there are other circumstances, you may want to designate someone else. For example, say you live in San Ramon and your ex lives in Montana. Your two teenagers have a good relationship with your ex but see him/her for holidays and some time in the summer.  Should something happen to  you, it might make more sense for the teens to stay with your current spouse until they reach 18, and keep some stability in home, school, friends, activities, and time with your ex.  If you don’t have a conversation about this ahead of time, however, it could turn into a mess where your children are not only grieving the loss of a parent, but also are the subject of a custody battle.  If you don’t decide? Someone else will.
3. Do you really want to disinherit your children? Many of us somehow think we know how our lives will play out.  Many couples assume they both will live long, fruitful and healthy lives, and then the man will die first, followed not too long by the woman. In the case of a blended family where the wife is the one with children from a prior relationship, this may work well.  When the husband dies, everything goes to wife and she distributes her estate as she wishes, to her children.  But what if it doesn’t happen that way? What if something happens to wife early in life – say in her 50s – and the husband goes on to live another 30 years, remarries, and has a ‘second’ life with his new wife and family? Without estate planning, everything of the couple’s goes to the husband when the wife dies, and then 30 years later when the husband dies, there may be nothing to go to wife’s children, or husband may be estranged from them of merely closer to his wife and the family he built with his wife over 30 years.  ONLY estate planning with a living trust (i.e. not a simple will) can avoid this very real potential situation.

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?

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

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:

1. Probate fees.  If you have $150,000 in property in California – so anyone from Oakland to Livermore to San Jose to Walnut Creek with a house meets this requirement – will be headed to probate.  Probate fees cost 8-10% of your gross estate.  So if your total estate, not considering debt, comes to about $800,000, your estate could be paying up to $80,000 in probate fees.  Wouldn’t you rather that money go to your family?
2. Probate time.  The probate process in California can take 6 years or more to complete.  During this time, your family has to deal with lawyers, court, judges, appraisers, and other strangers in their lives.  Plus, the property cannot be transferred during this time, so your family waits all these years to get access to the estate you left them.  With an estate plan, there is no delay at all.
3. Ease of transfer.  The probate process is difficult, frustrating, time-consuming and very expensive.  Without an estate plan, you force your family to go through it at a time when they should be taking care of themselves and each other in the wake of the tremendous loss.  Generally we pick our closest family member to administer our estate.  Why wouldn’t we make that administration as easy as possible for them?
4. Emotional difficulty of probate.  In addition to the fees, the time and the difficulty, the length of probate doesn’t allow our family members to move on after a death.  We all have our own processes for dealing with grief and death, and some take longer than others.  But the seemingly-endless probate process means that your family can’t get past the loss until the court says they can.  This allows for more time to get angry, to fight with other family members, and be held back in their own personal growth.  In life we support the growth of our families; why would we want to hold them back in death?

Come back later this week for the final three critical reasons you need an estate plan, even if you think you don’t!

Estate planning questions to answer to avoid (sometimes) 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?

Estate planning when you don’t have children or other heirs

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?

Is estate planning – creating a living trust or will – still necessary? Yes!

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:

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?

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.

Estate Planning 101: 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.

Need more information? Contact us today to schedule your free estate planning consultation.

Thinking of filing for divorce? Don’t do it before you read this!

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).

Ready to get some real, professional, personalized, compassionate & caring information & advice? Contact us.

Estate Planning for Blended families: Have step-children or a step-parent? Are you one? How to avoid (unintentionally) 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. Contact us today to schedule your FREE estate planning consultation.