Estate Planning Practice Blog

Got Kids?

I was at MyGym today with my toddler. The staff was wearing Got Kids? t-shirts. Cute.

I say got kids? Get a Living Trust.

You will want to set up a Living Trust to name a successor trustee to privately manage your minor children's money in the event both mom and dad pass away before the kids are old enough to manage an inheritance. This is doubly important if you have a child from a previous relationship. I am almost positive that you would not want your former spouse/lover to handle your child's money until he or she turns of age and would rather choose someone closer to you to manage such an inheritance instead.

In a Living Trust, you control what happens to your children's inheritance.

You nominate individuals or corporations to serve as the money manager (successor trustee). You state the provisions important to you for monetary distributions. You select whether they should be mandatory or discretionary with respects to income and principal. You guide how the money should be distributed.

For instance, you can give very broad, discretionary powers for the successor trustee to make choices as if he or she were the child's parent. Or you could restrict it to say that your child can get an allowance each month, a car when he or she turns 17 and half (and a Toyota, not Ferrari), that college expenses can be paid for for only 5 years as to avoid a perpetual student.

You also state how long the funds are held in trust. You decide at what age your child must reach before the trust can be terminated and the remainder of the funds (corpus) can be distributed.

My recommendation if you have very young children is to keep your trust provisions very broad and tighten them as your children grow older once you have a sense of what kind of individuals they are. My personal philosophy is that it is easier to restrict a trust than to make it less restrictive as time goes on.

$400 For A Living Trust?

I met with a nice lady this morning. She wanted to meet me to see if I could add value to her business and her clients. It was more of a cross-marketing meeting. She interviewed me and one of her questions was what was my fee for estate planning. So I told her my range. Her initial response was, "oh" and then she followed up with what's the difference between your fee and a $400 fee?

I knew immediately what she was referring to. In our local newspaper, there is a lawyer who advertises estate planning for $390 for a single person and $450 for a married couple. She used him a few years ago.

Here's the difference:

1. You get more time with me. She said she felt rushed with him and that there were a few other people waiting in the reception area to meet with him while she was meeting with him.

2. I have malpractice insurance. (No clue if he has it. He might. It is not required in California.)

3. I offer a 60 day window to make changes, update or overhaul your documents if you really reviewed it at 3am after it is all said and done at no charge. (He didn't even return her calls.)

4. I tell my clients that if they email me, they will get a response when I am in the office. If I am out of the office, I will email them upon my return. (He didn't return her calls so can I surmise that he would not email her back either?)

5. I've customized my binder to make it easy to find the documents. It looks neater too. (She said her documents didn't look as good.)

6. I send out an annual letter to my clients reminding them of reasons to review their estate plan, changes in the current laws and other pertinent information.

7. If you have a minor change requiring an amendment to your documents, if you email me your wishes, I will draft the amendment and send it back at no charge. Now, it has to be a minor change like a change of trustees for instance.

After discussing these things and hearing her replies, she also said out loud that, "you know, you really get what you pay for." She also told me that after trying to reach him a few times after he completed her estate plan, she is no longer referring any clients to him.

Rant: Realtors and Living Trusts.

You know, it is interesting working with realtors in my practice. I work with a variety of realtors for my probate cases. In most of the probates I handle, we wind up selling the real estate to have some cash in the estate to pay for estate expenses and taxes.

I have a small team of realtors I prefer to work with, but I am always willing to work with realtors that my clients bring to the table. I understand that realtors make a tidy sum of money in commissions on probate sales. I also understand that just making one tidy sum on the sale of one property does not make one rich. Everyone gets a share of the tidy sum including the brokerage firm.

Despite liking every realtor I've worked with on a personal level, I find it amazing that realtors are not a good source of referrals for estate planning. I prefer to set up Living Trusts than to handle probate from a personal standpoint.

Sure, probate makes more sense for my practice from a financial standpoint.

I am, however, first and foremost an estate planning attorney that wants to help people avoid probate by putting their major assets into a Living Trust. I see this as my mission has someone who has lived the probate nightmare. I paid a probate attorney over $16,000 in attorney fees to handle my father's estate. I was still a law student at that time.

In California, a Living Trust is almost a requirement as our probate process is expensive, time consuming and emotionally taxing on everyone involved.

So, my rant is why don't more realtors emphasize how important Living Trusts are for California real estate? Don't say that the realtors want to make money doing probate sales. The heirs will still sell the properties if it is in a Living Trust. In fact, the realtors will make money faster as selling property inherited through a Living Trust is usually quicker and easier.

If you are a realtor, do you educate your clients after closing that they should put their home into a Living Trust? Post a comment as I would love to hear from you.

A Trust For My Daughter.

I have a toddler. [My life is hard. Getting in and out of Trader Joe's with my sanity is a major struggle.] But, of course, being a parent is a wonderful joy. It is also a time when a formerly carefree individual starts to worry. I worry often about everything related to raising a child and being a parent.

I also worry quite a bit about me dying too soon. It's a good worry for me -- keeps me on my toes with my diet, regular exercise and keeping my "being too busy to have time for my family" barometer in check. 

My family track record isn't so good so it adds fuel to my worries about me dying too soon. My mother was 46 when she died. My father was 54 when he died. Both suddenly died from untimely yet generic health related causes (one cancer and the other heart attack). So I worry with a good reason.

I finally decided to do something about it. I am in the process of obtaining a second term life insurance policy* on my life so that if I do die untimely, my child(ren) will have a small pot of money set aside for higher education and life expenses. I am also creating a separate revocable trust to hold this policy and naming a successor trustee outside of my immediate family to manage this trust if needed.

It was hard for me to create this trust. I wasn't sure who to nominate as successor trustee. I named a trusted friend first and a corporate fiduciary second. I also wasn't sure how to distribute the proceeds. I decided to make distributions before age 19 discretionary and distributions after age 19 mandatory. I also decided to distribute one half of the corpus (what's in the trust in terms of assets) at age 25 and the remainder at age 29.

Despite my internal struggles and a reminder of how my clients struggle as they go through this same process, I feel much better having this in place.

Sure, being a trust fund baby is a good thing. But it is also a large price to pay for losing a parent too soon. God forbid, it never happens.

Knock on wood with both knuckles.
_______________

*Yes, this policy was agreed to by my spouse. It will be confirmed as separate property asset and not part of my community property estate with my spouse having no right to make a surviving spouse election against the policy. Besides we have reciprocal policies for our community property revocable trust.

Identity Theft: A Terrible Plot Twist.

It was one of those calls I hate to receive from clients: A client’s husband had been a victim of identity theft. What’s more, the perpetrator was one of the client’s own children. She learned of the fraud thanks to a phone call from a collection agency, seeking payment.

As sad and frustrating as it is when a kid goes wrong, the worst of it was that the victim had died three years ago.

Identity theft against the dead? Yes. It’s more common than you may think. I’ve had clients experience this before, sometimes within a month of someone dying. And although it seems like the definition of a victimless crime, it can create endless problems for the remaining family.

With cases like this, I turn to the ID Theft Center. It was founded by Linda Foley, Executive Director, and her husband Jay, after Linda had been a victim of identify theft herself.

They’ve put together a great website, with lots of tips and guides for victims. Here’s the link to their guide for the theft of Social Security Numbers and fraud against the deceased; I used it to help this client. What’s more, the ID Theft Center has people available to speak to groups about identity fraud.

The guide explains that families can write each of the three credit bureaus to place an alert on the victim’s credit report explaining that they are deceased (you need to include a copy of the death certificate in your letter). They can also add a message requesting that the creditor call them before issuing credit to someone using that person’s information. But the ultimate solution (no pun intended) is to freeze the credit report completely. California is now one of 12 or more states that allow this.

If you’ve been a victim of identity fraud (and have a copy of the police report you filed) you can freeze your file for free. Otherwise, there’s a $10 fee. The bureaus will freeze your report and give you a password that you’ll have to use to unfreeze it when you want to apply for credit.

I worked for TRW’s credit reporting agency for 12 years, and occasionally we’d receive requests from consumers to freeze their credit report. We used to laugh, thinking what  an impossible inconvenience it would be for the consumer. But in today’s virulent fraud environment, I now think it’s a great idea.

So if you already have the credit you need – home equity line of credit, credit cards, etc. – consider freezing your credit file. That just leaves your existing credit vulnerable to theft. Here’s how to make this happen: California Department of Consumer Affairs’ instructions.

Delia Fernandez, MBA, PFP

Young, Single And Healthy?

Okay, and maybe broke, too? If so,  Kiplinger's personal finance website has a nice article about estate planning for young people.

"Even if you aren't rich and don't have children or a spouse, you still need to spell out your wishes in case you die or can't make medical decisions for yourself. Plus, we help you decide whether to write your will on your own or if you need to hire a lawyer."

Potential Divorce Client Tells The Truth.

As many of you know, part of my practice is family law. I have clients who want to get divorced, modify child custody or any other myraid family law issues. When potential clients first come into my office for the initial meeting, the conversation has to start somewhere and I start by offering an ice breaker. Usually I ask them to start the meeting by telling me about why they are seeing me.

Last week, I met with a younger woman who was in the process of divorcing her husband after only a few years of marriage. She didn't look too good (meaning not very healthy) when meeting with me. She was very thin with bulging muscles. So this young lady offered the quick ice breaker before I had a chance to ask her to explain why she made the appointment: "I look like this because I use heroin." Nice.

Excellent Caregiver Websites.

If you are caregiver for a loved one or have issues involving elder law, check out these excellent resources available on the web:

American Bar Association Commission on Law and Aging

National Family Caregivers Association

Family Caregiver Alliance

National Alliance for Caregiving

California Probate Is A Mess.

For most individuals, opening probate in California is not a delightful or even pleasant experience. It's time consuming. It's confusing. And it's very expensive on the back end for statutory fees.

Many other states, however, have more streamlined probate procedures. Meaning probate is easier, less time consuming and less costly. Yay.

Also, other states offer beneficiary deeds for real property. A beneficiary deed allows you to slap on a payable on death beneficiary for your real estate holdings.

California does not have neither a streamlined probate process for real estate valued more than $20,000 (which is nearly any home in this state) nor beneficiary deeds. This is why in California it is very important to have your real estate holdings placed into a Living Trust if you wish to avoid probate.

For many, the goal of estate planning is probate avoidance. This makes it easy for your loved ones. It also tells them who should get what. Nice.

WSJ: Adult Guardianship Cases Rise

The Wall Street Journal recently published some really good tips for avoiding or preventing conflict in adult guardianship proceedings. This came out in their Personal Journal section on August 17, 2006, for those of you who have online subscriptions to view the article on site.

Adult guardianship proceedings are called conservatorships in legal terminology.

Some of the WSJ tips, paraphrased below, include:

• Create a financial Durable Power of Attorney document to name a trusted loved one to manage your financial affairs if you are unable to make them.
• Create an Advance Health Care Directive designating an agent to make medical decisions for you and document your medical wishes in the same document or a living will.
• Create a Living Trust and transfer your assets into it and designate a trustee to manage trust property if you become incapacitated.
• Talk about your wishes with your agents and trustees as well as other family members.