Planning of estates for newly married couples

One of the first things a newlywed couple in California should do is create or update their estate plans. Taking these steps early might ensure that if unexpected events occur, the remaining spouse will have access to assets in order to pay for final expenses, maintain the family home and care for minor children.

The simplest step to take is to update beneficiary information on financial accounts. Changing the designations to list the spouse on these forms will ensure the money in retirement accounts, life insurance policies and bank accounts is transferred directly to the surviving spouse. Newlyweds should also consider adding a secondary beneficiary in case both spouses perish in an accident.

In addition to updating beneficiaries, newly married couples also need to create or update their will. If the couple has children together or from previous relationships, it is important to designate a guardian for them in a will. A will can also give directions on how to handle other assets.

Couples may also need to change the titles on their financial accounts and real estate after the wedding. There are a few different options, and the one a couple chooses can have a significant effect on how the assets are handled if one of the owners dies or becomes incapacitated. Advanced medical directives and powers of attorney can give a person control over their own health care decisions and financial matters even if they unable to act for themselves.

An attorney who focuses on estate planning may work with a newlywed couple to help them update or create an estate plan. Doing so might help couples feel secure about their future and plan for the unexpected.

Source: The Motley Fool, “Estate Planning for Newlyweds“, Anna Wroblewska , December 29, 2014

Living wills and health care proxies

California residents may be interested in information about health care decisions as one of the more important aspects of estate planning. While many think of estate planning as dealing mostly with the disposition of a person’s assets upon death, making these health care determinations while still healthy can be vital.

The documents that govern medical care in an estate plan are the health care proxy and the living will. Both of these are important in cases where a person has become incapacitated and cannot make their own health care decisions. The health care proxy gives power of attorney to a third party with regard to these decisions. This generally applies when the person is unable to communicate or is not in the proper mental state to make these important decisions. Usually, one person is named, but successors can also be named in the document when that original person is not available to perform their duties.

A living will, on the other hand, is a document which gives medical care directives with regard to end-of-life decisions. The types of things covered are the use of life-saving machines and techniques, such as a heart-lung machine or tube feeding. Without these procedures, the person would die. Having this document will allow doctors to either make use of the procedures to prolong the person’s life or to prevent their use, if the person so chooses. The living will is important when the person is terminally ill and incapacitated.

Determining the appropriate estate planning documents can be difficult without the help of an attorney. The attorney can assess a client’s situation, both financial and personal, and determine and then prepare the specific documents that will be appropriate.

Source: American Bar Association , “Living Wills, Health Care Proxies, & Advance Health Care Directives“, December 15, 2014

The benefits of a trust in estate planning

As California residents address their estate planning options, the question of whether or not a trust is beneficial is common. The concept may seem extreme or inappropriate to those who don’t have a high net worth, but trusts may be equally beneficial to someone whose net worth is a minimum of $100,000 if certain additional conditions are true.

Real estate, businesses, and art collections may be best handled through trusts. A trust can also be beneficial for managing the manner in which payments are made after one’s death. For example, a trust might be structured to support a surviving spouse while leaving the majority of one’s estate to heirs after that individual dies. A trust might be structured to allow partial payments to heirs at various points in life such as reaching an age of majority or completing a college education. A trust is an excellent option for someone who wants to be able to support a surviving loved one who is disabled so that there isn’t an impact on that person’s eligibility for government assistance.

Tax implications associated with an inheritance can be significant, making a trust an option for limiting the tax consequences after an individual dies. Trusts can also minimize the cost and time that would otherwise be spent to deal with probate. Assets tend to be less vulnerable to creditors when included in a trust as well. It is important to note that in order to protect assets, they must be titled in the name of a trust.

Those who are unsure of whether trusts are appropriate may want to begin by formulating goals for the management and distribution of their estate upon their death. An estate planning attorney can be helpful in providing direction for the most appropriate options based on these goals.

Source: CNN Money, “Estate planning: Is a trust beneficial?“, December 02, 2014

Using powers of attorney in California

When people are engaged in estate planning, they often do not think about who will make important decisions on their behalf while they are still living but unable to make decisions due to illness, injury or being incapacitated. Setting up powers of attorney in the event an incapacitating event occurs can help individuals make certain their wishes are followed.

There are three important types of powers of attorney that people should consider having in place. A health care power of attorney give a designated agent the power to make decisions regarding treatment for a person. This is not the same as a living will as it can encompass treatment needs in the event a person becomes incapacitated due to illness or injury.

In addition, people should consider drafting a HIPAA power of attorney. Even when people have power under a health care power of attorney, medical professionals may be unwilling to provide important health information to a designated agent due to medical confidentiality laws. If an agent has a HIPAA power of attorney, this can be avoided.

Finally, a durable power of attorney that specifies who will make financial or business decisions on a person’s behalf can be very important. Durable powers of attorney are flexible and can be used for a single transaction or for a broad variety of financial and business needs.

Powers of attorney can help people ensure they have some control over their health care, financial and business needs in the event they become incapacitated. When people are planning how to handle their assets, they may wish to speak with their estate planning attorney about drafting powers of attorney documents.

Source: Forbes, “Three Powers of Attorney Everyone Needs“, Mark Eghrari, November 14, 2014

Contesting a California will

When a person dies, his or her will will be administered as written through the probate court in most cases. Courts generally presume that a written will is a valid statement of what the testator wished to happen. Judges will usually strictly follow wills unless an interested person is able to overcome the presumption of the will’s validity.

People may be able to successfully challenge a will in several situations. If they are able to prove to the court that the testator lacked testamentary capacity by being insane, senile or under the influence of substances at the time the will was executed, the contesting party may be successful. The same is true if the challenger is able to prove that the person was vulnerable and coerced into leaving his or her property to a manipulator.

The process is commenced by the challenger filing an objection with the court regarding the probate of the will. Upon filing, the court will schedule a hearing and issue a notice and summons. The challenger must then have copies of the objection, notice of the hearing and summons sent to all interested parties. Any party who wishes to answer the objection must file an answer prior to the hearing date. At the hearing, the court will hear evidence and issue its ruling regarding the validity of the contested will.

While it is often difficult to successfully challenge a will, it is possible to do so. People who wish to draft a will that will hopefully withstand a challenge may benefit by meeting with an estate planning attorney. Such an attorney can in some cases represent a client who is questioning the validity of such a document prepared by a family member.

Source: California Law, “Probate Code Section 8250-8254“, November 01, 2014

Special needs trusts are not just for wealthy families

A special needs trust or supplemental care trust can help families make sure their children are cared for both while they are alive and even after they are no longer there to look out of them. Although specifics vary from state to state, in general, it cannot be used to cover basic living expenses, such as food, utilities or housing. It can be used to cover important “extras,” such as transportation, computer equipment and home health aids. A special needs trust can be especially valuable to the family in pricey areas like California.

A special needs trust is a way to secure funds for a child without endangering their entitlement to government benefits. In general, having assets of $2000 or more in the name of the child will disqualify them for government benefits. Having a trust allows families to set aside funds for the child’s sole benefit without putting any of it in their name.

A trust is an instrument that can be hard to understand. This is part of why trust planning should be started at an early stage in the child’s life. Another reason to start early is to allow for time to accumulate adequate assets. Few people are wealthy enough to fund a trust adequately overnight.

However, even people of relatively modest means can accumulate trust property over time. Here are some means to finance a trust that many people may have available to then even if they are not wealthy: Life insurance; government benefits, such as Social Security survivor benefits; savings; and gifts from friends and family. Having a trust to help cover a child’s needs can protect both the child and the rest of the family. In spite of their reputation, trusts are not just for the rich.

Source:, “The Special Needs Trust“, October 18, 2014

Understanding power of attorney

In California, a legal platform that allows a person to act on an individual’s behalf is called a power of attorney. This authority may cover one specific area, such as health care, or have a much broader scope. The person who assumes this position is referred to as the agent or attorney-in-fact and is given their authority at the behest of the principal. The power of attorney may be considered durable, meaning that it remains intact even if the principal becomes incapacitated. Nondurable powers of attorney end if the principal becomes incapacitated.

Powers of attorney are created to handle many activities while an individual is not able to do so on their own. The agent may handle banking and securities, property rental or sales, tax filing, contracts, applications for state benefits, caretakers and paying bills for the principal. Those duties are outlined in the power of attorney agreement. The extent of the agent’s power is under the control of the principal and may be modified to suit the situation.

There are restrictions limiting an agent’s power. An agent may not change or draft the principal’s will or give themselves gifts from the principal’s assets. If the agent does attempt to take assets and the principal is over 65, they may be charged with elder abuse. Gifts from the principal to the agent are permitted. However, different rules may apply to gifts if the principal is incapacitated.

Having an attorney’s advice when setting up a power-of-attorney agreement may be helpful. The attorney may assist with drafting an agreement that accomplishes what the principal needs and wants, while assuring their safety.

Source: The Superior Court of California, “Power of Attorney“, October 06, 2014

Celebrity examples for those facing estate planning concerns

While successful celebrities may manage significant assets during their lives, they are just as prone to making bad decisions during the estate planning process as any other California resident. Understanding the implications of each type of estate plan is important, and it is wise to consider scenarios that might affect one’s wishes. Robin Williams’ irrevocable trust is an excellent example. While he may have desired to protect the privacy of his family by establishing an irrevocable trust, the documents became public due to the death of a trustee. The co-trustee was faced with the need to have a new trustee appointed, requiring a petition that involved making related documents public.

Casey Kasem’s health decline led to significant conflict between his adult children and his second wife. The spouse’s challenge over his health directives and Kasem’s designation of a daughter for decisions related to his care led to a long battle. Similar battles may be ahead as the deceased Kasem’s estate is addressed. Meanwhile, the estate of Philip Seymour Hoffman must go through probate due to the fact that he did not marry his children’s mother nor establish trusts. His lack of more appropriate estate planning may leave his partner with large tax bills.

Failing to update an estate plan resulted in Michael Crichton excluding his unborn child from inheriting from his estate at the time of his death. A review of Crichton’s estate plans might have prevented an unpleasant court battle. An individual who is not a celebrity might not need to worry about high-value assets, but family members could be just as negatively affected by a lack of planning.

An individual who is concerned about issues such as publicity, medical decisions, tax liabilities or an unborn child may want to review an existing estate plan with a lawyer practicing in a relevant field. Regularly revisiting a plan may ensure that new life issues may be addressed appropriately.

Source: Forbes, “Lessons Celebrities Can Teach Retirees About Estate Planning“, Thomas and Robert Fross , September 16, 2014

What are the responsibilities of an attorney-in-fact?

In California, it is possible for an attorney-in-fact to act on an individual’s behalf pursuant to a durable power of attorney form. An attorney-in-fact is often relied upon to make health care decisions on behalf of the person who executed that form. The person designated as the attorney-in-fact can be any trusted adult such as a friend or an adult child.

The agent designated on a DPA is allowed to engage in any activities stipulated in the agreement whether an individual is competent to do so or not. This means that an agent may invest, buy property or make other financial decisions if so authorized in the document. The terms of the power of attorney become effective when it is signed, but an exception is made for a springing power of attorney which becomes effective at a predetermined date in the future.

The health care power of attorney is only effective when the grantor becomes not competent to make those decisions on his or her own. The authority given to the attorney-in-fact can be as broad or specific as the grantor wants it to be, and often includes the right to consent to or refuse treatment, the right to refuse life-sustaining efforts and the right to obtain access to medical records.

Giving another person a power of attorney over an individual’s affairs may make it easier to ensure that his or her best interests are protected at all times. Prior to creating or executing such a document, it may be a good idea to obtain the advice of an estate planning attorney.

Source: Caregiver, “Durable Powers of Attorney and Revocable Living Trusts“, September 10, 2014

Discussing estate planning

Many individuals might find it difficult to discuss the eventual division and distribution of their estate with their family. However, recent research has suggested that putting off the conversation about wills and trusts can be detrimental. A goal of California estate planning is to remove any doubts about what is going to happen to a person’s assets after death as well as to cover unforeseen events, such as an accident or illness that inhibits one’s ability to make decisions. According to a report from UBS Investor Watch, approximately 50 percent of parents do not discuss.

Without telling heirs what to expect, there may be fights and disagreements, hurt feelings and unanswered questions after a benefactor passes away. Sometimes, parents and other benefactors have good reasons for why they might leave more money to one person than another, yet those reasons are not always clear. Going over a will or the terms of a trust gives heirs the opportunity to question decisions and get answers, limiting misunderstandings.

Talking openly about inheritances also gives parents the chance to voice concerns, such as anxiety about their children relying on their inheritance instead of working hard to support themselves. One way parents might prevent this is to instill a respect for money and self-reliance into their kids from a young age. Overall, although it may be difficult, families are typically happier when beneficiaries are involved in inheritance decisions, according to the UBS report.

A primary benefit of estate planning is to avoid the often stressful and public process of going through the probate courts. Families who feel uncomfortable discussing inheritances amongst themselves will certainly appreciate the privacy afforded to them by creating a solid estate plan. An attorney could assist by establishing trusts, drawing up wills and working to make sure all assets are included in a plan to avoid probate.

Source: NASDAQ, “Expensive Consequences of Not Having the Dreaded Inheritance Conversation Read more:“, Motley Fool, August 23, 2014

Source: NASDAQ, “Expensive Consequences of Not Having the Dreaded Inheritance Conversation Read more:“, Motley Fool, August 23, 2014