Estate planning 101: Why creating your living trust isn’t enough

The centerpiece of any good estate plan is your living trust.  This is the document that allows your estate to pass without going through probate, paying 8-10% of your gross estate in fees and expenses, and forcing your family through 2-3 (or 5-6) years of court appearances, lawyers and judges making decisions about your property.  Proper estate planning can also help you to minimize or eliminate estate tax.  Having no estate plan or having just a will won’t do this.

But proper estate planning includes other consideration and critical documents as well, and should not be overlooked in your planning.

1. FUNDING your trust. All of your assets – yes, all of them – should be titled in the name of your trust. Hopefully, your estate planning attorney transferred your real property (house) into the trust, but generally, you are responsible for transferring the rest of your assets, such as bank accounts, stocks, and life insurance. At our firm, we even help you with this because it’s so important.
2. Pour-Over will.  You still need a will, even if you have a living trust, because anything that is not in your trust will need to go into probate.  There are a couple important things to know about your pour-over will.  First, it includes your nomination of guardian, so this in itself is a reason why it’s so important.  Second, while you will be funding your trust with all of your property (and thus will not likely need a will), things can happen where you are not able to put your property in your trust, such as when you are the subject of a wrongful death suit or if you don’t have possession yet of the property before you pass away.  Third and finally, the will is called a “pour-over” because pours over anything probated into your living trust.
3. Powers of attorney.  You need powers of attorney, one for your property/assets and one for health care. Powers of attorney go into effect when you are still alive but you are incapacitated due to illness or accident.  These determine who will be making medical and care decisions on your behalf (and paying your bills) when you are unable.  These are key because, if you wait until you are already incapacitated to get one, then your family must go through the court process of getting a conservatorship, which is lengthy and expensive.
4. Assignment/Distribution of Personal Property.  These documents first put all of your personal property (your furniture, cars, pets and other personal belongings) into your trust, and then list how they will be distributed upon your death.  These are important because often the biggest arguments after you are gone are about the smallest things, like the jewelry and china.  Don’t leave your family fighting because you didn’t leave instruction.
5. Certificate of Trust.  This is the four-page summary of your trust that you will use to transfer your property into your trust.  Instead of having to take the whole binder, or even the whole 30-page trust document into the bank – and share the detail of the contents – you use the four-page summary that maintains your privacy and makes it much easier to copy and share with your account holders.

In addition to these documents, I consider it part of my job to help you ensure that ALL of your affairs are in order.  This includes your pre-need funeral arrangements, ensuring you have enough life insurance, that you have long-term care insurance, and are doing what you need to do now to have the retirement that you want.  These additional services are not provided by me and I don’t get anything for referring someone to you.  But I have spent lots of time getting to know the best professionals in each of their respective businesses, because I want to refer you to only the best to be able to take care of all of your needs.

If your estate planning professional is not providing all of these services – and more (follow up, ongoing communications, updates on law, etc.) – then perhaps you should reconsider who you are talking to, or at least ask some questions.  Your family is worth it.

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An attorney versus online estate planning: Legal Zoom can and WILL hurt you

I see Legal Zoom is being sued for not preparing an estate plan that did what it said it would.  Banks and financial institutions would not accept the Legal Zoom documents to fund the individual’s trust.  As I always tell my clients, your estate plan is not worth the paper it’s printed on unless and until you fund your trust.  And the Legal Zoom documents?  Were seen to be unacceptable to the banks and financial institutions.  In addition, the information given by Legal Zoom on estate planning is supposedly designed to give users a “general understanding of the law” but “is not guaranteed to be correct, complete or up to date.“

Really?  Legal Zoom can’t even guarantee that the “general understanding” is correct?  Do you really want to trust everything you’ve worked for – your assets, your estate, and your family, to a company that can’t even get basic law correct?

Further, Legal Zoom tells you, on their website, that 80% of people who fill in blank forms do so incorrectly.  Legal Zoom is, in effect, saying to their users they they are very likely to do the forms wrong, but they should do so anyway.  Why would you do this?  I have seen it time and again, when I send out my intake forms to my estate planning consultations.  Nearly everyone marks something that ultimately is incorrect after we’ve had some time to talk about it.

Finally, a lawyer in Minnesota went through the process of getting a will using Legal Zoom.  You can see his video here.  What is enlightening is that the will was packaged well, and was better than the lawyer expected.  But the reality is that there were MANY provisions, standard, important provisions, that were left out of the will.  A will is a pretty basic document for an attorney to complete, and Legal Zoom couldn’t even get it right.  I won’t go into the detail  of the missing provisions, but suffice to say there were a number of critical paragraphs missing.

Haven’t you worked too hard to leave your estate plan to chance?  Why is it a better option to save $1,500 on an online estate plan, just to cost your family – your closest loved ones – tens if not hundreds of thousands of dollars in untangling your messed up estate plan?!  I know times are tough, and we’re all looking to save dollars where we can.  But this is about your entire life.  Do not work your entire life to screw it up in the end.

We have an automated estate planning process that allows clients to save up to 50% on their estate plans by inputting their information in an online format.  Their answers, and indeed their entire estate plan, is be personally examined, reviewed, and assembled personally by us, but because of the online aspect, it will be at a significantly lower cost.  This option helps to combine the needs of my clients who know they need an estate plan but want a lower cost, but aren’t willing to risk everything just to save a few dollars.

Click here to access our online estate planning portal.

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.

Have a child heading to college in California? A few legal documents they need before they leave the house

Once your child graduates from high school, they generally head off to college.  If not, they’re probably out in the job market and likely moving out of the house.  Regardless of their plans, they are turning 18 or are 18 already, which means in the eyes of the law, they’re an adult.  What this means is that, even though you’re still their parent, and you may be their next of kin, you may have trouble accessing their medical records or making medical decisions on their behalf should there be an accident or other emergency.

Even if you still cover your child on your health insurance, if your child is 18, you do not automatically have access to your child’s health care records.  There is no special exemption for children until the age of 21.  Here are the simple documents you need to have your child sign before they leave the house, or ideally once they’re 18:

1. Power of attorney for medical decisions and an advance directive.  In California, the power of attorney and advance directive (living will) is the same document.  Signing this simple document allows you to make decisions on your child’s behalf should this become necessary.
2. HIPAA release.  A HIPAA release will give you access to your child’s medical records and to discuss your child’s medical situation with the doctors and other caregivers.  Without this, you could find yourself in court to get the needed access, which is the last thing you want to deal with if your child is injured.
3. Power of attorney for finances.  In addition to the power of attorney for medical decisions, you will want to have a power of attorney for finances.  This document will allow you to access your child’s bank records and pay the necessary bills to, for example, keep the power on in your child’s apartment, or to pay the rent.  It can also become  important if you need to apply for social security on behalf of your child.

These are three simple documents that can help to protect you and your child once your child becomes a legal adult at 18.

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?

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 ($5.45 million per person in 2016).  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 tomorrow for the final three critical reasons you need an estate plan, even if you think you don’t!

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.

Don’t wait until it’s too late and make this 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 $6,000 – $10,000 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 these critical estate planning mistakes

As is common, I spoke with a potential new client today from San Ramon, 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 last week, 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?

Estate planning “musts” to take care of NOW

I often get asked what the most basic “must dos” or “must haves” are in estate planning.  Here is the answer:

1. Talk to an estate planning attorney.  Most, like me, offer free consultations, so you don’t have to spend anything but time, and then at least you’ll know and understand your need and risks, and be able to make informed decisions
2. Talk to a financial advisor.  See above – you only lose your time, and if you find a reputable one (your estate planning attorney should know several fantastic ones, as I do), then you can make sure that as  you grow older, you are working toward your financial goals.

Those two items will give you all the information you need.  But more specifically:

1. If you have children, decide on and formally nominate a guardian to care for them if you are unable to.  If you don’t decide?  A judge – a stranger – will make the decision for you.
2. Create a will or trust.  If you don’t decide who will get your stuff, someone else will.  You’ll also pay a lot of money for the privilege.  Again, talking to an estate planning attorney to find out your risks and options costs nothing.  Why remain uninformed?
3. Make sure you have enough life insurance.  What you think of as “enough” and what is really and truly “enough” should your spouse die may be entirely different amounts.  If one spouse doesn’t work, and the working spouse dies, wouldn’t you want to have enough life insurance to allow the survivor to take time to grieve, take care of the children, and then think about work, instead of having to worry about finding work right away?
4. Make sure your retirement and life insurance beneficiaries are always up to date.  If you’ve been married for 20 years and your life insurance names your girlfriend of 25 years ago when you pass away?  Then your girlfriend gets the money and your wife doesn’t.  Is that what you want?
5. Make sure you have long-term care insurance if you need it.  A financial advisor can help you to decide on this, and the earlier you get it, the cheaper it is.
6. Make sure both spouses know and understand the family finances, even if one spouse does the day-to-day management.  Do not get caught in a situation where one spouse dies and the survivor does not even know what accounts exist.
7. On that note, put your paperwork in order, or at least in one place.  Even if it’s disorganized in a drawer, make sure all the important paperwork, account statements, estate plan, life insurance, etc. is all in one place and easy to find.  Should you pass away, your family will be going through a rough enough time as it is – don’t make it worse by leaving a scattered financial life.

None of these items are difficult or even time-consuming, but they mean everything in the world to your family should something happen to you.  What are you waiting for?