Why Plan Now

The Family Vacation Home

Families with fond memories of a vacation home place significant value on that property, wanting to keep the vacation home "in the family." They envision their grandkids sharing the family vacation home and creating their own memories at the property.  Before you pass on the family vacation home to your descendants, make provisions designed to keep the peace.  Why?  Shared ownership of a vacation home can be challenging.  

Family members may disagree on who gets to use the property and when; on the extent that the property should be rented to third parties; on who pays for what expenses; on how to handle maintenance issues; and how the vacation home should be passed on to future generations.

Instead of leaving the vacation home to the family with an informal understanding of how these issues will be addressed, consider implementing a formal governance structure.  Descendants may receive the family vacation home outright and then agree on a formal governance arrangement amongst themselves, or the original owners of the family vacation home may create the formal governance structure first then transfer the property to descendants.  FORMAL GOVERNANCE OPTIONS include a trust, a written co-tenancy agreement, or a business entity such as a  limited liability company, limited partnership, or general partnership. 

Now you can go back to reminiscing about your family vacation home : - )

Blended Family Basics

Demographers predict that blended families (stepfamilies) will be the most common type of family by the year 2015.  Yet, very few resources focus on assisting this kind of family with life and estate planning.  What are some ways that you can protect yourself, your children from a former marriage and your current spouse and other children?

 

• Replace former spouse as the named beneficiary of ERISA retirement plans.    
• Replace former spouse as the named beneficiary of life insurance policies.
• Have you taken steps to protect your children’s inheritance from being controlled by your former spouse?
• Have you taken steps to protect your children’s inheritance from waste or creditors?   A trust with "spendthrift" provisions may help protect a beneficiary's inheritance.
• Consider a Qualified Terminable Interest Property Trust (QTIP Trust): provides income and even principal to your new spouse for life. Upon the death of your new spouse, the QTIP Trust assets may pass to the Trust you established for your own children upon your death.           
• A Credit Shelter (aka Bypass) Trust minimizes estate taxes by sheltering the maximum available exemption amount upon your death.  Often used in conjunction with the QTIP Trust for your new spouse, this Credit Shelter (aka Bypass) Trust can help you minimize estate taxes, preserving wealth for your loved ones. 
• Consult with qualified legal counsel.

With proper planning, spouses in blended families can provide for each other and for all of their children.  For additional estate planning basics for blended families, visit:

http://www.annlaw.com/practice-areas/blended-families

Missing or Lost Deed?

All is not lost.  To order a missing or lost grant deed, it helps if you have your property’s legal description.  You can find this online by conducting a property search on the county assessor’s website.  This also is a good way to locate your property’s Assessor ID number. 

 

In Los Angeles County visit  http://maps.assessor.lacounty.gov/mapping/viewer.asp  then enter your street address. Once your property pops up, click on the assessor id number (red link) then scroll down to the section labeled “Property Boundary Description.”

Next contact the Recorder's office. If you are paying by major credit card and are willing to pay an extra $6 handling fee, you can order by phone by calling the Real Estate Records Section at (562) 462-2133.  Or you can order the missing or lost deed FAX.  You'll need the Title of the document (GRANT DEED), names listed on the document and the legal description of the document or Assessor ID Number.

To order by FAX, you must provide the following additional information in your faxed request:

• The name on the credit card, the card number and expiration date.
• The address where you would like the record mailed, whether you would like it sent by regular mail or Express Mail delivery.
• A daytime phone number including area code, should it be necessary to contact you.

The FAX number is (562) 864-1250.

The fee for a certified copy of a Grant Deed is $6 for the first page and $3 for each additional page per document. Express Mail delivery costs an additional $16.50.

BY Mail:  In Los Angeles County visit  http://regrec.co.la.ca.us/  and click on the link for Recorder operations then Real Estate Records.  There you'll find the information you need to order a copy of your deed by mail. 

TIP: If you're submitting a blank check indicating "NOT TO EXCEED $15" you write that on the front side below the line where you would write out the amount in words (leave that line blank and write the words "NOT TO EXCEED $15" below the line.) Also leave the box where you would write the dollar amount blank. Online you can download application that you can use to provide the information on the record you are requesting.

 

I've ordered grant deeds for clients and they usually received their documents from the Recorder's office within 7 to 10 business days, with the regular mail service.  Hope this helps.

Conservator Clues

A "conservator" is a court-appointed individual assigned to handle the affairs of those who are unable to make financial or medical decisions for themselves (the "conservatee").  For example, a conservatee may suffering from a severe illness, injury or other physical or mental limitations.  Conservatorships are governed by state law, and depending on the type of conservatorship, may provide legal authority to manage an impaired person's medical care, personal affairs, finances and estate.

Conservatorship Classes

There are two types of conservatorships, depending upon the needs of the conservatee.  A "conservator of the person" makes decisions for the conservatee regarding medical care, food, clothing and residence. A "conservator of the estate" is responsible for the conservatee's financial affairs including collecting assets, paying bills and investing the conservatee's assets.  The same individual may be appointed to serve both functions.

Conservatorship Concluded

If the conservator resigns or can no longer handle the responsibilities, the conservatorship does not end.  Someone else will be appointed as conservator by the court.  A conservator is required by law to continue managing the affairs of the conservatee until the court orders otherwise.  The court will terminate the conservatorship when the conservatee no longer requires this level of assistance.

Conservatorship Pros and Cons

Privacy is compromised since information about the conservatee's assets, income and expenses is made part of public court records. Another disadvantage is that conservatorships are both expensive and time-consuming -- they require several court procedures and continuous attorney assistance. Finally, there is a risk that the conservator could behave recklessly in handling the assets. 

Conservators are often required to post a bond to protect the conservatee's estate and assets in the event of mismanagement by the conservator.  Conservators are supervised and held accountable to the court by which they were appointed. Failure to adequately and reasonably perform their assigned duties could subject conservators to liability.  The conservator is bound by the court and must keep detailed records and submit periodic reports and accountings to the court. The court's oversight offers a high degree of protection against the mishandling of the conservatee's property.

Passing the Torch with a Letter of Intent

A Letter of Intent or Memorandum of Intent (Memo) communicates useful information about the person for whom you have created a special needs trust, “your beneficiary.” 

 

Even if you have not created a special needs trust, a memo or letter of intent provides guidelines and practical information for caregivers, guardians and relatives in case you're not available.  Although it’s not legally binding, a memo of intent is a great way to express your preferences and goals for your beneficiary. 

 

As a starting point, your memo or letter of intent should include:

 

·        Your beneficiary’s identifying information (full name, date and place of birth, Social Security number and current photo).

·        Contact information for those persons and agencies who can provide advice and help (e.g., Regional Center, case manager, caregivers and health care providers, dentist, therapists, attorney, successor trustees, close friends and family).

·        Details about living arrangements, including any restrictions or preferences, as well as other arrangements you have made for your beneficiary's financial security.

 

·        List of Agencies from which your beneficiary receives or may be eligible to receive public benefits.

 

·        Your beneficiary’s employment history, including contact information for current employer or vocational rehabilitation.

 

·        Guidelines about your beneficiary’s past, present and anticipated medical, residential, therapeutic, recreational, spiritual and related needs and interests. 

 

·        Any other special instructions or important information.

 

Coordinate the letter or memo with your special needs trust, if you have one.  Invite family members and, where appropriate, your beneficiary, to contribute to the memo.  Give the memo to those who may be responsible for decisions about your beneficiary.  And don’t forget to update your memo as circumstances change.

 

A well-drafted memo of intent can alleviate concerns your relatives and successors have about how they can effectively carry on in your absence.

What's So Special About A Special Needs Trust

A special needs trust is not so special if the government programs your loved one qualifies for do not have restrictions on holding assets. For example, you don’t need a special needs trust to protect eligibility for entitlement based benefits such as Social Security, SSDI (Social Security Disability), and Medicare which are employment-related public insurance programs. 

 

A special needs trust protects eligibility for needs-based government benefits such as SSI (Supplement Security Income), Medi-Cal (California's version of the federal Medicaid program), Veteran’s benefits, Section 8, In-Home Supportive Services (IISS.)  If your loved one qualifies now or will need these benefits in the near future, if your loved one is going through a personal injury action and stands to gain a large award, or if there will be an inheritance of over $50,000, a special needs trust may be a great planning tool to preserve eligibility for needs-based benefits.  

A special needs trust allows a public benefits recipient to have resources available to pay for items and services to make his life better (“special needs” above and beyond the basics) - without counting the trust assets against him for program eligibility purposes.  This is why a special needs trust is a powerful planning tool. 

An outright gift or inheritance of more than $2,000 made directly to the individual would disqualify her for needs-based government benefits. Re-qualifying for these services can be difficult and time-consuming. For persons who require consistent medical care or services, a disruption in eligibility can be very serious.  With a special needs trust in place, relatives can make gifts directly to the trust, rather than to the individual.  The trust can even be named as the beneficiary in another person’s will, trust, retirement plan or life insurance policy.  The trust can even own a 529 college savings plan.

 

Besides preserving eligibility for needs-based government services, a special needs trust also provides for the long-term care of your child in your absence. You can appoint a successor trustee and even authorize that person to hire care managers to continue the work you have done to obtain necessary benefits for your child. You can even include a memorandum of intent expressing your preferences and providing useful information for successor caregivers and trustees to carry on effectively after you. 

A special needs trust is a very special planning tool.

Probate Is Not Always Bad

Although many people try to avoid probate, the probate process may be useful in certain situations.  For example, if you fail to transfer assets into a living trust, probate may be needed following the death of a married person to clear title and transfer the assets into the name of the successor trustee of the living trust.

Some families, due to feuding or other dynamics, may prefer the court supervision of the probate process. A young married couple with a modest estate may prefer a will that creates contingent trusts for minor children in the event both parents die (or in the case of a single parent.)  Finally, the probate process contains family protection such as probate homestead and family allowance provisions.

The family allowance, which is statutory in nature, places the welfare of the decedent's surviving family above that of the decedent's named beneficiaries or creditors. The statutory policy is to protect the decedent's spouse and minor children (and, in some cases, adult children and parents) when the decedent failed to do so or when the decedent's creditors might exhaust the estate to the disadvantage of the statutorily protected individuals.  A spouse or children of the deceased could open a probate in order to obtain the protection of the family allowance statute.  Beware - the decedent’s estate plan may provide some benefits to a spouse or minor children that would terminate if the spouse or children sought a family allowance under the family protection statutes.

The probate homestead protects the family home for the benefit of the decedent's spouse and certain other dependents of the decedent, including minor children. The probate homestead also protects the family home from decedent's general creditors, from non-family beneficiaries named in the decedent's will, and from the decedent's more distant intestate heirs. Probate homestead issues often come up when the decedent tries to leave the residence to someone other than a spouse or children. The probate homestead may trump a devise in favor of the current spouse and minor children.

Hopefully, this discussion has shed some light on the probate process.  Probate is not always a bad thing.

Probate De-Mystified

Probate is the process of passing title to property from the deceased person to his or her beneficiaries’ or creditors.  Probate, Latin for ‘to prove’ involves proving the validity of a will (if there is one) and protecting the beneficiaries and creditors of the deceased.  Some people mistakenly believe that probate is avoided through the use of a will.  In fact, anything distributed by will is required to go through the probate process.
 

Property that has a beneficiary designation (and where the beneficiary is surviving and of legal age and sound mind to take ownership of the property) will not be probated.  Those assets will be distributed to the surviving joint tenants, to the named beneficiaries, or according to the terms of whatever document made the asset a non-probate asset.  For example, life insurance, individual retirement accounts, pension plans, annuities and accounts with a P.O.D. (pay on death) designation may avoid probate using beneficiary designations.  However, if a joint tenant or beneficiary is listed but the beneficiary or joint tenant does not survive, then that asset will be an asset that has to go through probate.  Any property held in trust will be non-probate property.

To protect beneficiaries and creditors, the probate process has requirements including written notice to creditors with waiting periods during which time creditors can file claims, written notice to everyone named in the will and everyone who would inherit if the will was found to be invalid.  The national average time to complete the probate process is approximately 16 months. Also, probate fees are involved.  In California, probate fees are set by statute, starting at four percent (4%) on the first $100,000, three percent (3%) of the next $100,000, two percent (2%) of the next $800,000 and one percent (1%) of the next $9 million.

Between the probate fees and the delay caused by the waiting periods, many people try to avoid the probate process entirely.

Next Up: When Is Probate Right For You

A Good Intention Gone Wrong

You might think that naming your spouse as the primary beneficiary on your life insurance, followed by your kids as secondary beneficiaries, is a great idea. But what happens if you and your spouse “ride off into the sunset” together, so to speak, leaving the kids as the beneficiaries? Or maybe you’re paranoid about naming your spouse as primary beneficiary on that million dollar policy, lest your spouse feel tempted to do the unthinkable -- so you name your kids as the primary beneficiaries. Or maybe you’re a single parent and you name your kids as the primary beneficiaries (naming your parents or siblings with the "understanding" they'll take care of your kids is whole other can of worms, which I'll cover a different day.)

Naming your minor child as a beneficiary on your life insurance policy or retirement plan can result in major delays and court supervision? A guardian would have to be appointed by the court to receive the proceeds on behalf of and for the benefit of the minor. And when the guardianship ends (age 18 in California), your child will receive a lump sum payment of the life insurance proceeds – did you really want your child to get a large chunk of change at that age? This is just one example of how assets fail to pass on to loved ones in a smooth transition due to lack of information.

One solution, if you have a trust, is to designate the trust as the beneficiary on the life insurance policy. Then the insurance proceeds will pass on according to the instructions in your trust. If you don't have a trust, another solution is to have a paragraph in your will naming a guardian for your minor children and a guardian for their estate (aka, their property) - this can be the same person or not. This would only take effect in the event the children's parents are not available to care for them.

Roughly 137 probate cases are filed in California every day – this includes petitions to have guardians appointed for minors, conservatorship proceedings, will contests, petitions to start probate proceedings and other matters that arise under the probate code.

Next Up: Understanding probate

Why Plan Your Estate Now?

Planning your estate can seem intimidating.  Some people don't want to talk about the inevitable.  Other people feel confused and don't know what are their options.  Some people feel they don't have an "estate" worth planning.  These are just a few reasons people do not make the effort to come up with and put into place an estate plan that works for their situation. 

The purpose of this blog, "Why Plan Now" is to demystify the estate planning process, to make estate planning options understandable, and to encourage people (whether you think you have a sizeable "estate" or not), to take steps to make life simpler and better for those you will leave behind.