Estate Planning Practice Blog

Nice Post on Why You Need a Will...

Leanna Hamill, an estate planning and elder law attorney in Massachusetts, has a blog on the same topics as this one. Yesterday, she posted a nice, but stern, post on why everyone needs a Will even newlyweds without kids.  Read Leanna's post here.

Not Fond of Your Kids-in-Law?

I received an email today from a blog reader asking about a hypothetical situation:

Say you and your spouse die together. Your married child inherits your estate. A year later your child dies. The child's surviving spouse gets everything and enjoys the rest of their life with your money, spending it on God-only-knows-what... with a new lover, to boot. 

What can you do to avoid this? What if you do not want your children's spouse to inherit your estate in a situation described above?

One way would be to set up a Living Trust that says that your child can inherit your estate, but it must remain in trust for your child's lifetime or until your child reaches a certain age.

You can give the trustee discretion on how to allocate the funds for your child. It could be distributed to your child with complete discretion by the trustee. Or you could state that the trustee must distribute income and any principal is discretionary. Or you can say that the trustee must distribute both income and principal at certain intervals.

It's a bit complicated to understand, but try this:

Say you don't care for your daughter-in-law "Floozy." Floozy is married to your only child, your "Son." You can set up a Living Trust to give your entire estate to Son to be held in trust for Son's lifetime. The trustee can be a corporate trustee to ensure continuity and consistent management.
If Son dies then you state who the contingent beneficiaries are -- your Son's children, your nieces and nephews or maybe a charitable organization. This will prevent Floozy from getting the rest of your money if Son dies too soon.

This situation only works if you have a larger versus a smaller estate.

Another way would be if your estate consists of just a home, you could put your home into your Living Trust and allow your Son to have a life estate in the home for the remainder of his life and then upon his death the home would go to your alternate beneficiary.

Or you could state in your Living Trust that Son is to get 5% of the trust assets every year until he reaches age 50 (or whatever age you choose) and then he gets the remainder of your estate outright at that age. At which point there's not much left.

But if your Son inherits property in California, it is considered separate property and not an asset of the marriage so long as your Son keeps the property separate from Floozy and does not otherwise commingle the funds with community property funds.

And, lastly, if your Son were wise, he could set up his own Living Trust to catch his inheritance and devise it straight to his children or keep it in his family bypassing Floozy so long as it were not community property. In this instance, Son's estate may lose the benefit of the marital deduction for his entire estate if the separate property inheritance and the community property portion exceed the federal estate tax exemption amount.

Lots of issues. It depends on your situation, your assets and your wishes. And there are other options -- these are just a few.

Talk to an estate planning attorney to help you devise the best approach for your estate plan based on your wishes.

Thanks to the blog reader for emailing me this terrific hypothetical!

Do More Than Just a Trust -- Write a Family Love Letter.

An article posted in February in Seattle Post-Intelligencer newspaper caught my eye that I book-marked it a long time ago.

It's about writing a Family Love Letter to your family about various things affecting your estate, your affairs and other things you wish to leave behind in the form of notes, memories, computer passwords (an important thing actually) when you pass away.

Note that preparing a Family Love Letter is not legally binding, like a will or trust. 

"It is designed to help survivors work through someone's death."

Click here to read the entire article and start your own Family Love Letter.

Storing Your Documents.

Generally clients tend to store all of their estate planning documents in the same place. So when someone needs to access a power of attorney or advance health care directive, they will come across the will and trust at the same time.  And when people come across these documents, they will read it!

Just be warned that if your will or trust have special provisions in there that would upset someone, it might be wise to keep your will and trust separate from the other documents.

In other words, the last thing a loved one needs to be distracted with when you need care because of a sudden hospitalization is for them to also discover that they are disinherited or "differently-inherited" (a cool term that I picked up from estate planning attorney Leanna Hamill from Massachusetts) in your estate plan.

Reviewing Your Estate Plan.

Just a friendly reminder that your estate planning documents should be reviewed periodically.

You don't have to see an attorney every year for a review, but it is  good idea to arrange for a check up or review of your estate planning documents every few years or so with your attorney.

Also, if you have recently married, divorced or had children, you will want to update your beneficiaries and estate plan to reflect that fact.

When reviewing your estate planning documents, you should also contact the financial institutions where you have bank accounts, brokerage accounts or life insurance policies to ensure that the beneficiaries of your various accounts and life insurance policies are as you intended. This also means checking in with your employer and other institutions holding your retirement accounts as well.

Where Are They?

Estate planning documents need to be kept in a safe place. But not in a place too safe.

In other words, the safe place has to be such a place where you can locate them again should you need to review them and a place where your loved ones can also find your documents if they are needed.

Your assignment today is to make sure you can locate your estate planning documents. Be sure you have the originals in your possession. Then contact your trusted loved ones and tell them where you are keeping your documents.

Estate planning documents should not be kept secret. Just safe so that they don't get lost or destroyed inadvertently. Yet not too safe that they cannot be easily retrieved when needed.

Case in point: I am assisting an elderly lady with locating estate planning documents for her adult child. She needs to locate his documents because he was recently diagnosed with a terminal illness and no longer has capacity. The mother is the next of kin as her child has no children or a spouse. It makes it hard for her to handle her son's affairs if she has to spend time looking for estate planning documents or spend money to get a temporary conservatorship from the court. We know that documents exist because we found some correspondence with an attorney and have proof that some of his assets are held in a trust.

Whatever Your Wish: Estate Planning is the Answer.

I get questions all the time. Questions where the answer is really let's develop an estate plan.

Think of estate planning as putting down your wishes and wants on paper in a legally enforceable manner so that your loved ones get what you want them to get. And as a bonus, they also know what to do after you pass away.

The question I got today was this:

I have five children. One child currently lives with me. He is an adult now though. I want him to have the house so long as he is alive and when he dies I want the house to be divided among all of my children in equal shares. How do I do this?

First, set up an estate plan. A Living Trust would work well in this situation

Your Living Trust could contain a provision to give the child a life estate in the home so that he can live in the home so long as he lives. Upon his death, the life estate ends and the home then is divided into as many equal shares as are necessary for one share for your all of your children.

Second, realize that having nothing in place will mean that the state will decide what to do.

Done With Taxes? What's Next?

If you have already filed your 2006 tax returns, you might want to tackle estate planning next before putting away your financial records and thoughts for the year.

When you are in the middle of tax season and reviewing your financial records, it is always good idea to review your estate planning documents to see if they need to be changed, revised, restated or handled in some way.

Estate planning is not a static activity though a good lawyer will draft documents that are robust and carry out your wishes. But laws change. Your wishes change. And your family dynamic/structure changes.

To summarize, tax season may be over, but it is a good time to revisit your estate planning goals and see if you need to make some changes. I am pretty certain that your estate planning attorney will be happy to hear from you!

I Don't Know What To File This Under.

I got a call last week from a family in need of my services. The conversation went like this:

I think my family member has limited capacity. I need to do something.

How so? What makes you think that your family member has limited capacity?

He had a partial lobotomy not too long ago.

Oh, that would do it.

Don't you think that if you were going in for a partial lobotomy you'd get your estate planning and related affairs in order since your incapacity after the procedure might become an issue and cause problems for your family?

The lesson learned here: if you are undergoing a serious medical treatment or have been recently diagnosed with a life threatening illness, you should consider getting your affairs in order sooner than later. 

NEW SEMINAR! Estate Administration Procedures

Monica Goel is a featured speaker at the upcoming National Business Institute seminar on June 14, 2007, in Irvine.  For information about Monica's seminar, click here.

She will be speaking throughout the full day on Estate Administration Procedures: Why Each Step is Important.

Anyone can register and attend this seminar through the National Business Institute. If you hold a professional designation or license, you may be able to receive continuing education credits for attending.