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!

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.

Part two: So, imagine you’re going to die tonight. What would happen?

Here is part two of the depressing series about what happens when you die.  I read this fantastic article, What Would Happen if you Died Tonight, and thought I would put my own spin on it, though it does a great job of laying out the issues.

We all know that we need to do some kind of estate planning, but many of us don’t know what, or how, or even how to find help.  We also know that we don’t really want to think about it, so all of these obstacles can add up to just not doing anything.  Are you one of those who has no plan in place?  Well, then this is the article for you.

What would happen if you died tonight?  What would happen to your children?  Who would care for them?  Would you have several family members fighting for that right and responsibility?  Does your estate have enough money in it to care for your children’s financial upbringing, or will your children be a financial burden on their new caregivers, too?

How about your assets?  Would they be tied up in probate for years because you did not create an estate plan?  Would you put your loved ones through that time, money, hassle and stress because you couldn’t find time to put a trust into place?  Who would get your stuff?  Is there an heirloom ring that your children will fight over because they don’t know who should have it?  Will your family be torn apart by the stress and grief of your passing, and all of the responsibilities and burdens you left for them?

These may seem like drastic and overly-dramatic questions, but if you have ever experienced the death of a loved one, or known someone who has, you know that these are very real considerations.  What would it really be like if you died tonight?  Would you have put your affairs in order to protect your loved ones?  Or will you make them figure it out on their own?

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 ($5.25 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 tomorrow for the final three critical reasons you need an estate plan, even if you think you don’t!

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?

The probate process in California

Many people know that it is wise to create an estate plan that allows your estate to avoid probate when you pass away.  But few know or understand why probate it something to be avoided. One of the ways to understand it is to take you through the process of what happens when someone passes away.

For our purposes here, imagine for a moment that it’s not you that is passing away, but rather your closest family member – except for this discussion let’s choose someone other than our spouse.  Take a quick moment to think of how difficult that would be to lose someone you love so dearly.  And now, imagine all that there is to do when someone passes away:

  1. There’s the funeral, which generally happens pretty quickly and plans are made within hours of the death.  There are decisions to be made about clothing, caskets, scheduling day and time, who will read, what will they read, will there be a gathering afterwards, will there be food, where will it come from, who will be invited…it’s overwhelming.
  2. Then there’s the will – is there one?  The life insurance, the retirement accounts, the bank accounts.  You go to the house: do you know where your loved one keeps the important documents?  Would you be tearing apart the desk, the file cabinet, the drawers?  What would you find?  How would you feel about having to search?

REMEMBER:  This is all in the first few hours and days after the death, at a time when the loss is most shocking, most raw, and most difficult to deal with.

  1. Once you find the documents – did you find them? – you have to figure out how to transfer the property, and generally – without a plan – this means the probate process, which we’ll talk about in a minute.
  2. In come the lawyers, the lawyer’s fees, the appraisers – the strangers, in your home, in your life.
  3. To transfer the property, the pay the debts, to sell the house – or even transfer it – to get access to the bank accounts…all of these things can take weeks, months and years.
  4. The probate process, which is the court procedure for transferring your property when you don’t have an estate plan or have just a will, is a long, arduous process.  It involves:
    1. Multiple court hearings and appearances, lawyers, accountants, appraisers…
    2. A timeline of 2-3-5 years…or more
    3. Cost:  A huge cost.  Probate fees and costs can take up to 8-10% of your gross estate – that’s your assets not including your debt, so if you have a house worth $300,000 and nothing else, probate fees can be up to $30,000
    4. You have – your family has – worked your entire LIFE to create and build your estate.  Why give it to lawyers and courts?

In the probate process, while the cost is a big consideration, the time is also key because you and your family need and want to move on from the death and the grief, and when the probate process continues on for years and years – and you can’t sell the house, and you can’t get access to the accounts, then it drags out the normal emotional process way beyond what is healthy.

Does this sound like something you want to go through?  Something you want to put your family through?

Now, what if I were to tell you that there is a BETTER WAY?  A way to avoid ALL of this trouble?  We’ll go through this again in the next blog post…stay tuned!

Estate planning for unmarried individuals in California

If you’re not married, you may think that you don’t need an estate plan. Not true! Generally, you need to get yourself an estate plan once you buy a house or have a child – or both! When you own real estate, your estate will (particularly in California) go above the $150,000 exemption for probate. This means that, once you own property in California, your estate will go through probate. Probate is what you want to avoid like it’s a disease: it will take 18-24 months to settle your estate and also take about 10% of your gross estate in fees – and that fee is not taking any indebtedness into consideration. And that’s just to start.

So once you buy a house, you need an estate plan. In addition, once you have a child, you need to have an estate plan because you will need to decide who is going to take care of your child should you be unable to. This can only be done in your will. In addition, if you don’t have handy who is responsible for your child if you become injured or incapacitated, then the police could TAKE your children if something happens to you. Just think: you’re out to a nice dinner, the babysitter’s with little Suzy, and you get into an accident on the way home. The police won’t be leaving little Suzy with the 17 year-old babysitter, and if you don’t have clearly posted who is to be responsible for Suzy, then the police could TAKE your child. You don’t want that to happen.

Both of these circumstances – buying a house and having a child – necessitate an estate plan, regardless of whether you are married or not. In fact, it becomes more important to have an estate plan when you’re single because you don’t have the potential benefit of joint tenancy.

What are you waiting for?

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?

Ready to make your FREE appointment online?  Or you can call us at 925.307.6543.

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.

Your 2012 estate plan guide: when, how and why to update your existing plan

One of the most common estate planning questions I get is when and why you would need to update your estate plan. For 2012, here is your custom guide to ensuring that your estate plan is current:

  1. Has the value of your estate increased substantially since your last update?  Do you have more than $5 million if you’re single, or $10 million if you’re married?  Is this a change from before?  If so, then you may want to consider a review of your estate plan.
  2. Did you complete your powers of attorney before 2003?  In California the forms changed at that time, so now would be a good time to take another look.
  3. Are your beneficiaries on your retirement and life insurance accounts updated?
  4. Does your estate plan reflect your current family and desires for distribution to them?  Or has there been a birth, death, marriage or divorce since your last estate check up?  If so, you may need a review.
  5. Are you protected for a time (the time) when you are unable to think or care for yourself? Do you have your powers of attorney? Long-term care?  Advances in medical care mean we will live longer, but at the same time we will more likely experience a diminishing of capacity before we pass on.  Without these basic planning tools, we leave our family with these burdens.  Are you approaching 50?  If you don’t have long-term care yet, now is the time to get it.  You can’t wait until you need it or you won’t qualify.
  6. Have you chosen a guardian for your minor children?  If you don’t, then your children could become the subject of a custody battle if something happens to you, or they could be place in foster care while the decision is being made.  Don’t take this risk!

If it has been a while since you created your estate plan, or you don’t have one at all, now is the time to put the tools in place to protect your family and your assets.  Schedule a FREE appointment online, or call us at 925.307.6543.