Avoid these shortcuts in estate planning & save your assets, protect your family, & 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.

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Your pending California divorce case: What to do with your will/trust or estate plan

I have been thinking more about my posting about your will, and I felt it needed more to make it complete. Specifically, IF you have a divorce case currently, what can you do NOW to protect yourself and your children? Divorce cases can last for years. Yes, unfortunately this is true, so we have to hope for the best (a speedy and as-painless-as-possible case) and plan for the worst (an endless case). So if you have a case and the ATROs (automatic restraining orders in California divorce) prevent you from changing your will (or estate plan), here are some things you can do.

First, take advantage of the ability to sever joint tenancy (JT). The ATROs allow you to sever joint tenancy with simply NOTICE to the other party. Sever this JT and should something happen to you, you have the ability to give your half of any real property (a house, for example) to someone other than your estranged spouse.

Second, have a conversation. If you have a lawyer, your lawyer might be telling you never to talk to your estranged spouse. I disagree with this family law case philosophy because (as one of our local judges used to say) YOU are in the best position to come to a resolution of your case. If you stop talking to each other, then hostility can grow and you may be likely to fight more. Now, this approach works well for the lawyer, who gets to funnel ALL of your issues at $450 an hour! It’s better on you, your relationship, your pocketbook, and your case if you’re able to talk to each other. Talk about changing your will so each of you can make an estate plan that provides for your own property to go to the individuals you choose instead of each other.

Third, if you can’t have an informal conversation, bring it up in a formal setting. Whether it’s a meeting with your lawyers, a court conference, or if you add it to the issues to be raised at a hearing, make time to discuss these issues so they’re at least out in the open.

Post-death process with a living trust and estate plan

Yesterday we talked about the probate process, and what happens after a loved ones dies. Today, let’s go through that same process, but this time, our loved one has an estate plan and has put all of their affairs in order before they passes.  Remembering what we went over yesterday, here is how it would go with an estate plan:

In the hours following the death, you go to the funeral home, and the director tells you that your loved one came in years ago and chose their own service, with music, readings, flowers, and everything all picked out and paid for.  You don’ t have to decide a THING except what day to do it.  Oh, and your loved one already planned – and paid for – the life celebration party afterwards.  There are no decisions to make – the director tells you to go home, grieve, and take care of your family.

You get to the house, and you already know where the estate plan binder is.  Because you’ve already been over it, you know there’s a letter right inside that’s intended to be instructions for you on what you need to do.  You go to it, and feeling overwhelmed by everything, with the letters swimming on the page in front of you, you decide to just call the lawyer – me.  What do I tell you?  I say – there’s nothing you have to do right now.  You, take care of your family, grieve, and get back to me in a couple weeks – if you still need me – when you’re ready to move forward.

Those early hours, days and weeks are precious – precious time to be with your loved ones, to remember and celebrate to one who has died, and to work on our own processing of what’s happened and what it means to us.  An estate plan gives you that time.

When it comes time to assess the assets, pay the debts and transfer the property, the process:

1. Involves no lawyers and no court;
2. The fees are overall generally less than $100 in total; and
3. Takes a few days to a month, depending on how quickly YOU work

Because you have all of the instructions, you don’t need to call a lawyer. The process is simple and quick, and costs almost nothing.

Does that sound like something you’d prefer to have from your loved one than the probate example?

Then, I ask, WHY are YOU not doing this for YOUR loved ones?  How could you not, knowing now what you do? What are you waiting for?

When to update your estate plan

I am often asked when an estate plan should be updated, and in fact I have written on it before.  But it is important to revisit from time to time, particularly when there are new estate laws as there are now.  In general terms, an estate plan should be reviewed in two instances:

1. Each time there has been a birth, death, marriage, divorce, acquisition or disposition of property or a business in the family, and
2. Every 1-2 years.

By “review” I don’t mean we need to dig up the binder (you do have a binder, right?), and pore over it, page by page.  No.  What I mean is that we need to think about what is in our estate plan.  You should know it in detail because your lawyer explained it so well to you during the process!  So, you want to review who your beneficiaries are, and whether the property distribution you’ve selected still is appropriate.  You want to review who is your successor trustee/executor, as well as who acts as your agent on your powers of attorney.  Have you changed your mind about your advance directive?  These are the questions you should ask yourself, and it really should not take more than 20-30 minutes.  Go through any changes in your family, and see if those changes, or anything else that has happened in the last year or two, make you want to change your estate plan.

In addition, if you have created your estate plan in the last five years, you may want to contact an estate planning attorney now to make sure your estate plan is still the most appropriate for you given the new laws and tax exemption.

In any event, if you have an estate plan that was created before 2008, or powers of attorney created before 2003, you really need to get an update, or at least an opinion on whether an update is necessary.  I don’t know about other estate planning attorneys, but I don’t charge for an estate plan review, even for those estate plans I’ve not created myself.  So what do you have to lose?

Protecting your finances in a separation or divorce

One of the most difficult aspects of divorce is the financial aspect.  Suddenly, two households need to be maintained with the same income as what maintained one household before the separation.  In addition, there are court filing fees, attorney fees, expenses for getting a new home and new ‘stuff,’ and many hidden expenses, such as the expense for taking time off work for court hearings, expenses in increased insurance, for example, and the list goes on.

One of the ways to protect yourself is to talk to both an attorney and a financial advisor.  Both should be qualified and be working to help you and not trying to get more money out of you.  If you educate yourself on the legal process and financial planning, you can make better decisions throughout the process. This will help you in the long run.

In addition, make sure you change the beneficiaries on your life insurance, retirements, and other payable-on-death accounts.  Do you really want your ex getting your money? Similarly, update your estate plan to reflect your new circumstances. Note, however, that in California, once the Petition has been filed and served, you may not change your estate plan during the divorce/separation action without permission from your spouse or a court order.

Finally, do an assessment of what you have.  Assemble your life insurance, bank/stock account documents, retirement accounts, debts, etc., and put them all in one place.  Knowing what you have can be the first step in determining where you’re going and how to get there.

What happens to your will when you’re getting a divorce in California?

Getting a divorce?  Have a will?  Ever wonder what happens to your will in the divorce?  Here’s your answer!

Holiday trip planned? Put your mind at rest with an estate plan

Frequently I have clients who come to me for an estate plan in the weeks and months before going on a trip.  Because they are going into unfamiliar territory, they want all of their affairs in order prior to their departure.  While I will be pleased with any reason that gets someone in to prepare their estate plan, it seems to me that the dangers of every day life are high enough that we don’t have to wait until we go on a trip to be worried about our affairs.

I used to hear that most accidents occur close to home, and I would guess that this is still the norm.  With car accidents (please stop texting and driving!) as well as holiday mishaps, there is plenty of reason to be nervous about accidents at home.  So why wait?

One of the reasons I hear about why folks wait to do their estate plan is that they think it’s going to be difficult and time-consuming.  They don’t know what decisions to make or who to turn to.  With my clients, just about everyone says, without prompting from me, that the process is extremely easy, far simpler than they expected, and that I helped them throughout the process.  What many of my clients don’t understand is that it is part of my job to walk you through the process, ensure you understand all the options available to you, and help you to make the right decisions for your family.  Now, I don’t make your decisions – of course not! – but I can go over the advantages and disadvantages of the various options, or help give you things to think about in making critical decisions.

And because of those things, it’s far easier than you may think it is.  So don’t wait until you have to go on a trip.  Do something to put your mind at ease this holiday season – get an estate plan and put your affairs in order.

What happens when you die with an estate plan?

Yesterday we looked at what happens when you die without an estate plan, and the terrible position you put your family in at an already difficult time.  Now, let’s look at the flip side.  What happens when you die WITH an estate plan.  I think you’ll be surprised at the stark difference between the two.  Think of it this way: what would you like YOUR loved ones to do for YOU?

What happens when you die without an estate plan?

Often, we think that we don’t care or it doesn’t/won’t matter what happens to our estate once we’re gone because, well, we’ll be gone.  But this is an attitude that can cost your estate tens or hundreds of thousands of dollars as well as cost your family a lot more grief than they already will be experiencing.  Don’t do this to your family: make a comprehensive estate plan so your family doesn’t go through what I describe below:

Estate planning for smaller estates

Many of my clients do not realize that their property and their family are at risk if they do not create an estate plan.  Many think that they do not have a large enough estate to need an estate plan at all.  The reality is that anyone with $100,000 or more in property – gross, which does not take any debt (mortgage, for example) into account – should have a comprehensive estate plan.  Probate fees alone can cost up to 10% of your total estate, but there are other fees as well.  If your family needs to go to court to obtain a conservatorship for you because you don’ t have a power of attorney, then that can cost thousands of dollars.  If you do not name a guardian for your children, your children could be the subject of a lengthy and expensive custody battle among your family members.  In fact, much of your estate can be taken with the cost and length of the probate process.  Don’t do this to your family: protect them.  This video gives you more information on the importance of comprehensive estate planning for estates with $500,000 or less.