Friday, February 26, 2010 Do I Need a Will?
I've written often about the need for young individuals to make sure they have an estate plan in place, but since this topic is so important, I wanted to also post this on my blog.
I often find that many people mistakenly believe that only wealthy individuals need to create Wills. The truth is that everyone can benefit from a Will. While Wills are used to determine how, when and to whom assets pass to at death, they perform other vital functions as well. Most importantly, Wills allow parents to appoint guardians to surviving minor children. Although it can be unpleasant to think about, it is necessary to plan for the care of your children in the event of your death. Directions regarding the rearing of your children can be specified in your Will, including the management of any assets left to minor children. The awful truth is that if you die without a Will, the state has its own plan for you, and you are powerless over decisions made by a judge regarding the future of your loved ones.
Creating a Will can not only give you peace of mind during your life but can also be beneficial to your family after you are gone. Making your wishes known can help to avoid unpleasant and unnecessary disputes between well-meaning family members over guardianship of children and distribution of assets. If you would like to further discuss the benefits of creating your Will, our office would be pleased to help. Monday, January 25, 2010 Is Spot Named In Your Will?According to a 2009 National Pet Owner Survey, over 62% of American households contain pets. Many of these households consider their pets to be bona fide family members. Adoring pet owners have been known to purchase Christmas presents for their furry companions and celebrate their pet’s birthdays. Traditional estate planning allows individuals to determine how personal assets will be distributed and who will care for surviving minor children upon death or incapacity. But who will care for surviving pets if their owners become unable to?
Responsible owners would never leave on a vacation without making detailed arrangements for their pet’s care; caring for them when you are gone should be no different. Make sure you tell your attorney that you want to make provisions for your pet in your estate plan. Even though pets cannot inherit property or money, there are planning techniques that will allow you to provide for your pet.
Consider:
o Include pets in durable powers of attorney to allow payments for pet care if you are unable to care for your pet.
o If using a will as your primary after death estate planning tool, designate a caregiver and at least one alternate caregiver. Include detailed instructions and sufficient funds to provide for your pet’s care. Additionally, make sure your will is updated regularly.
o Currently 39 states, including California, have enacted “pet trust” laws. These statutes enable a person to create a trust for the care of a designated pet for the life of the animal.
o Consider a pet care organization that offers pet care or placement programs, as an alternative to giving your pet to an individual caregiver. These organizations generally offer services for a per-animal fee or in exchange for a gift stated in a will. It is important to thoroughly research any facility before entrusting your pet to their care.
Many pets will outlive their owners, and it is important to ensure their care after you are gone. If you need assistance, our office is happy to help. Monday, January 18, 2010 Should the Fox Guard the Henhouse?So now you have decided who to nominate as a guardian for your minor children should something happen to you. Now, let’s explore who should be the custodian (or person in charge) of the money you left them. Because your children are minors, you realize that you can’t leave money or property to them outright. If you do, that is a sure way to ask for court involvement.
Let’s call this custodian a trustee. The trustee’s job is to invest and manage the money for your children, and make distributions according to the terms of the trust or the will. Commonly distributions can be made for the child’s health, education, maintenance and support. Deciding who should be the trustee can be a difficult job. Many people automatically assume that the trustee should be the same person who is going to be the guardian of the children. While this may seem simpler, this is something that should only be done with careful consideration. You want a trustee that can be objective and realize that the money needs to last through college, or last to carry out your goals. You do not want someone who will give in to the child’s demands for that fancy new car, a pony, or whatever they may want. You also don't want to end up with someone who might not use the money just for the children, the old fox guarding the henhouse example. Since the trustee will have some discretion in deciding if certain expenses are necessary and fall under the category of support, for example, you want someone who can use that discretion wisely. Look outside the family if necessary. There are many people that do this for a living, and can take an objective view. Make sure you think this decision through with your attorney to ensure that you make the best decision for your circumstances, and for your children. Thursday, October 08, 2009 Common Mistakes When Naming Guardians for Your ChildrenMistake #1 – Not doing it. If something happens to you, the court will need to name a guardian for your minor children. The best person to make that nomination is you. You know your child’s needs and who would best raise them. Don’t leave this decision up to a judge who doesn’t know all the details.
Mistake #2 – Your parents may be the best people to care for your children in your absence, but it is more likely that they will pass away before you do. If you name a parent, make sure to name a back-up (or two) or else you may be making Mistake #1.
Mistake #3 – Your brother and his wife may both feel like family, but the reality is that 50% of marriages in California end in divorce. Decide who you want to name as a guardian and just name that person. If that person becomes the guardian and is married, then bonus – the spouse can help too.
We see these mistakes in our office all the time, and counsel our clients how to avoid these mistakes, and many more. Tuesday, August 25, 2009 How is a Premarital Agreement Similar to an Estate Plan?A premarital agreement, or a “prenup,” is an important document that allows a couple to define how they want the assets that they acquire during marriage to be treated. The default rules in California dictate that if a couple gets a divorce, all assets acquired during marriage will be split equally among the spouses. If a couple contemplating marriage doesn’t like those default rules, however, they can opt-out and draft their own rules through a premarital agreement or even a post-marital agreement.
An estate plan is very similar. There are default rules in place in California to deal with the inheritance of assets at someone’s death. If someone doesn’t particularly like the default rules, which involve costly court and probate fees, they can opt-out and create an estate plan that defines what happens to their assets in the event of their death.
So, as a responsible couple may define what happens in the event of divorce through a premarital agreement, a responsible couple will also define what happens in the event of death. In California, 50% of marriages end in divorce, but 100% of lives end in death. Take charge of the way your assets are distributed at your death and create your own estate plan. If you don’t, the state has a plan for you. Wednesday, August 05, 2009 Estate Planning Considerations in the LGBT Community
Estate planning allows you to pass your assets to who you want, when you want and how you want. Estate Planning often consists of living or revocable trusts, wills, powers of attorney and advance directives. It provides planning in the event of incapacity, and allows you to customize the way your estate will be passed on after your death.
The most common danger in planning for the LGBT community is failing to plan altogether. Many people pass away without having any type of plan in place, but California has made provisions for this, and has a default set of rules in place. If you pass away without a will or a living trust, the probate courts will pass your assets according to the intestacy rules in California that define your heirs for you. If the people you want to inherit your assets do not follow this traditional line, you need to document your alternate wishes in writing. Without this, you could end up leaving assets to someone that you have had no contact with in years, and excluding someone because you did not have a legal relationship with them.
Another danger is planning for a same sex couple in the same way that one would plan for an opposite sex married couple. Even if you and your partner are registered as a domestic partnership in California, this does not afford you the marital deduction tax planning by the IRS, since the IRS only defines a spouse as someone of the opposite sex. While this may be unfair, we need to ensure that we plan according to the current rules, while we work to amend them.
There are many more considerations that need to be discussed when planning your estate. We are aware of the special circumstances surrounding planning for same-sex couples and will ensure that your plan achieves your goals.
Monday, June 15, 2009 You Get What You Pay ForWe have all heard the expression “You get what you pay for”. This is often heard when some item that was purchased breaks before it should. It stands for the reason that it broke, and leaves us wishing that we had purchased the higher quality product from the beginning. In the end, you end up paying more than even the higher priced item, as you have also bought the lower priced item that just failed.
I believe that this concept is alive and well in many aspects of life, but especially in the area of estate planning. Clients go to attorneys to discuss their estate planning needs, and many people think that all attorneys are the same. They all passed the same bar exam, right? Well, just like a car, while all cars have four wheels, they don’t all go the distance.
In my practice, I often see estate plans that are not comprehensive plans, and are not the result of in-depth consultations and discussions with clients. Make sure that all of your needs are addressed, and your plan is personalized for you. As no two families are alike, no two estate plans should be alike either. You must demand a comprehensive estate plan, so that it will go the distance. Remember, you may not be here to fix it by the time it fails. Wednesday, May 20, 2009 Agenda for Parent-Child Estate Planning CoversationI have recently been talking with families that do not know very many details about the Estate Planning that may or may not have been completed by their parent(s). When I hear this, I am often asked how to bring up such a difficult topic, or what types of questions should be asked. We have put together an agenda to guide you through this conversation. If they do not have an estate plan, we are happy to discuss how we can implement one for them today.
1. Do you have an estate plan, and if so, what type of plan?
Finding out whether your parents have an estate plan, and the type of plan they have is beneficial because you will be able to anticipate what will happen upon their death or incapacity. For example, if they don’t have an estate plan, you can anticipate that their assets may need to go through probate.
2. If your parents have a trust based plan, does the trust contain the appropriate property?
One of the main benefits of a trust is that trust assets avoid probate. However, the trust must own the assets in order to receive the protection of the trust. Many attorneys rely on their clients to fund their own trusts, but don’t instruct their clients on the disastrous results that could occur if they fail to do so. In order to take full advantage of your estate plan, it is important to know which assets should be put into the trust, which should not, and the appropriate means of holding title to all of these assets.
3. Who has been designated to take care of the financial decisions in the event that your parents cannot, and what financial decisions need to be taken care of?
It’s important to know who is responsible for taking care of your parents’ financial decisions upon incapacity or death. Identifying and notifying that person ahead of time will allow that person to step into your parents’ shoes quickly, should it be necessary. You may also suggest that your parents make a list of things that need to be taken care of, such as: paying the mortgage, paying medical bills, accessing bank accounts, picking up the mail, etc. It is easy to over look financial responsibilities when a loved one is incapacitated, and this will provide the Power of Attorney or Personal Representative with clear directions and ensure that nothing is overlooked.
4. Does the plan include health care documents? If yes, who has been selected to make the healthcare decisions for your parents upon incapacity and/or death, and what are their wishes?
Not all estate plans incorporate healthcare documents. Some of the documents you should be looking for are a HIPAA Authorization, Healthcare Power of Attorney or Advance Health Care Directive, and a Living Will. Combined these three should indicate who is to make the medical decisions upon incapacity or death, provide them with the power to make those decisions, allow disclosure of confidential medical records, and dictate the person’s wishes at incapacity or death.
5. Where is your estate plan located?
Having an estate plan is great, but if you don’t know where it’s located, then you will not be able to carry out your parents’ wishes. Also, you may want to recommend that your parents keep it in a place that is accessible, and confirm that the estate plan contains their attorney’s information in the event that there are questions or concerns. Many of the decisions need to happen quickly, and this will make the transition simpler.
Wednesday, March 25, 2009 Am I Too Young for an Estate Plan?While speaking with potential clients, I often hear young families tell me, “I’m too young for an estate plan”. I believe this statement comes from a misconception of what an estate plan is, and what benefits one provides.
An estate plan is a customized plan for dealing with minor children and assets upon someone’s death or incapacity. It includes instruments that will describe how, and by whom, your children will be provided for if you are unable to. Think about the preparation that goes into hiring a sitter for the evening so you and your spouse can enjoy a well deserved date night. You check their references, make sure that the sitter knows where the first aid kit is, has the name and number of the pediatrician, knows if your child has any allergies, and even where a favorite toy is located. You wouldn't leave your babysitter without a set of instructions telling them what to do in case of an emergency, yet without an estate plan in place, you are doing just that. The decision of who will be a guardian for your minor child until they are eighteen years old could be out of your hands.
An estate plan also addresses how assets are to be managed and distributed upon your death. Another important aspect of an estate plan is incapacity planning. You can avoid lengthy and expensive conservatorships by taking the time to put a comprehensive estate plan in place. So next time you are preparing your babysitter for a night out, make sure that there are instructions in place for more than just that night.
Monday, January 26, 2009 How Should I Hold Title?I often have a client come see me who tells me “I just want to add my son to my house now,” or “My daughter is going to get my home when I die, so I’ll just give it to her now.” I know when they ask this question that they are looking to avoid probate on their home.
Probate is the process where a judge will determine who gets your assets upon your death. In California, probate on a home that has a fair market value of $500,000 is approximately $26,000. This process also has an average turnaround time of 18 months. That is time and money that is taken out of their children’s inheritance, and it seems like a great idea to avoid that, right?
Not so fast. This is actually a very dangerous strategy that can have some serious complications down the line. Adding someone to the title of a house, is essentially giving them a part of your home. This can subject you to gift taxes, open your home up to the creditors of your child, and prevent you from taking out a loan on your home in the future. There are also some negative tax consequences down the line, which can prevent your child from receiving a step-up in basis.
Before you decide to change the title to a home, it is important to obtain legal and tax advice on this transaction. There are other ways to accomplish your goals, and an estate planning attorney can help you decide the best route for you. |