I often get asked, “What is a power of attorney?” A power of attorney is a document that authorizes your chosen individual to act on your behalf when you cannot act for yourself. Generally, it’s affective at the time of your incapacity, or at a specific event of your choice. Your power of attorney can be revoked by you at any time, or it is automatically revoked at your death. Most importantly, you should select a power of attorney agent with great care and you must have a tremendous amount of confidence in that individual.

Yes. Portability must be elected on a timely-filed federal estate tax return. This is the case even though a federal estate tax return would not otherwise be required, such as if the estate of the deceased spouse is below the threshold for federal estate taxation.

Portability is where the surviving spouse can use the amount of federal estate tax exclusion that their deceased spouse left unused at their death. Portability has been part of the law since 2011, though it was temporary until 2013.

A state estate tax is a tax levied by a state government upon the estate of a deceased person. It is levied in much the same way as the federal estate tax. A state inheritance tax is a tax levied by a state government that varies depending upon the relationship of the inheritor to the deceased person. Many states have a separate state estate or inheritance tax which kicks in at a lower level than that of the federal government.

The federal estate tax is a tax levied by the federal government upon the estate of a deceased person. The federal government gives certain exclusions and deductions and then taxes everything above a set level.

YES, but you would be better off choosing an attorney whose practice is focused on estate planning. Members of the American Academy of Estate Planning Attorneys receive continuing legal education on the latest changes in laws affecting estate planning, allowing them to stay on top of the latest laws and techniques to help you meet your needs.

I’m often asked, “Is a revocable living trust only for the rich?”. The answer is no. Revocable living trusts are for anyone who wants to protect his or her family from probate court, probate fees, and estate taxes. If you own a home, or several pieces of property, you absolutely need a trust. More importantly, a trust protects your assets from Medi-Cal recovery. It also protects your children and your other beneficiaries from creditors and possibly divorced judgements.

NO. The Living Trust has been authorized by the law for centuries. The government really has no interest in making you or your family suffer a probate that will only further clog up the legal system. A Living Trust avoids probate so that your estate is settled exactly according to your wishes.

YES. In fact, all real estate should be transferred into your Living Trust. Otherwise, upon your death, depending on how you hold the title, there will be a death probate in every state in which you hold real property. When your real property is owned by your Living Trust, there is no probate anywhere.

NO. The purpose of creating a Living Trust is to avoid living probate, death probate, and reduce or even eliminate state and federal estate taxes. It’s not a vehicle for reducing income taxes. In fact, if you’re the trustee of your Living Trust, you will file your income tax returns exactly as you filed them before the trust existed. There are no new returns to file and no new liabilities are created.

YES. In fact, people who create most Living Trusts act as their own trustees. If you are married, you and your spouse can act as co-trustees. And you will have absolute and complete control over all of the assets in your Trust. In the event of a mentally disabling condition, your hand-picked successor trustee, not the court’s appointee, assumes control over your affairs.

Unfortunately, you would be subject to “living probate,” also known as a conservatorship or guardianship proceeding. If you become mentally disabled before you die, the probate court will appoint someone to take control of your assets and personal affairs. These “court-appointed agents” must file a strict accounting of your finances with the court. The process is often expensive, time-consuming and humiliating.

A Will is a legal document that describes how your assets should be distributed in the event of death. The actual distribution, however, is controlled by a legal process called probate, which is Latin for “prove the Will.” Upon your death, the Will becomes a public document available for inspection by all comers. And, once your Will enters the probate process, it’s no longer controlled by your family, but by the court and probate attorneys. Probate can be cumbersome, time-consuming, expensive, and emotionally traumatic during a family’s time of grief and vulnerability. Con artists and others with less-than-pure financial motives have been known to use their knowledge about the contents of a Will to prey on survivors. A Living Trust avoids probate because your property is owned by the Trust, so technically there’s nothing for the probate courts to administer. Whomever you name as your “successor trustee” gains control of your assets and distributes them exactly according to your instructions. There is one other crucial difference: A Will doesn’t take effect until your death, and is therefore no help to you during lifetime planning, an increasingly important consideration since Americans are now living longer. A Living Trust can help you preserve and increase your estate while you’re alive, and offers protection should you become mentally disabled.

YES. But your family may not like it. The government’s estate plan is called “Intestate Probate” and guarantees government interference in the disposition of your estate. Documents must be filed and approval must be received from a court to pay your bills, pay your spouse an allowance, and account for your property–and it all takes place in the public’s view. If you fail to plan your estate, you lose the opportunity to protect your family from an impersonal, complex, governmental process that can become a nightmare. Then there is the matter of the state and federal government’s death taxes. There is much you can do in planning your estate that will reduce and even eliminate death taxes, but you don’t suppose the government’s estate plan is designed to save your estate from taxes, do you? While some estate planners favor Wills and others prefer a Living Trust as the estate plan of choice, all estate planners agree that dying without an estate plan should be avoided at all costs.

Most of us spend a considerable amount of time and energy in our lives accumulating wealth. With this, there comes a time to preserve wealth both for enjoyment and future generations. A solid, effective estate plan ensures that your hard-earned wealth will remain intact as it passes to your beneficiaries, instead of being siphoned off to government processes and bureaucrats.

The probate process can be a lengthy, and complex, process that involves a number of legal and financial concepts with which the average person may not be familiar. For this reason alone, most Personal Representatives do retain an experienced estate planning attorney to help them during the probate process.

When the decedent’s Last Will and Testament is submitted to the court for probate, any interested party has the right to challenge the validity of the Will by filing a Will contest. Contrary to popular belief, a Will contest cannot be filed solely on the basis that the contestant is unhappy with his/her inheritance (or lack thereof). If a valid Will contest is filed, the Personal Representative of the estate must defend the Will throughout the ensuing litigation. Basically, the probate process comes to a halt while the contest is litigated. If the contest is successful, the Will is declared invalid and the court looks for another valid Will or the estate is probated as an intestate estate. If the contest is unsuccessful, probate resumes using the Will submitted to the court.

The amount of time it takes to get through the probate process can vary widely in California; however, it will take at least four months because creditors are given that long to file claims against the estate. As a general rule, the more valuable and/or complex the estate assets are, the longer it takes to probate an estate.

Although no two estates follow the exact same path through the probate process, there are some common steps, including:

• Identifying, locating, securing, and valuing estate assets
• Opening probate – usually in the county in which the decedent was a resident at the time of death.
• Notifying creditors that probate is underway.
• Reviewing creditor claims and approving or denying each claim.
• Calculating and paying any state and/or federal tax due.
• Transferring the remaining assets to the intended beneficiaries/heirs of the estate.

If the decedent left behind a Will, the individual named as the Executor in the Will is in charge of administering the estate during the probate process. If the decedent died intestate, any competent adult may volunteer to be the Personal Administrator if the estate. If no one volunteers, the court will appoint someone.

When someone dies without leaving behind a valid Last Will and Testament, the individual is said to have died “intestate.” Dying intestate does not avoid probate. Instead, the assets in an intestate estate are distributed according to the California intestate succession laws, meaning only close relatives will inherit from the estate in most cases.

No. One of the first things that must be done during the probate process is to determine which assets are probate assets and which assets are non-probate assets. Non-probate assets bypass the probate process and may be distributed to the intended beneficiary immediately. Common examples of non-probate assets include:

• Assets held in a trust
• Proceeds of a life insurance policy
• Certain types of jointly help property
• Assets held in an account with a “payable on death (POD)” or a “transfer on death (TOD)” designation
• Certain retirement, pension accounts

Formal probate is not always required. In the State of California, a simplified method of transferring estate assets may be available if the estate assets are valued at less than $150,000 and they do not include real property, such as a house. If you are legally entitled to inherit the property, and the estate qualified, you may be able to use an affidavit to transfer ownership of the assets to you.

When an individual dies, that person leaves behind an estate consisting of all assets owned by the decedent at the time of death. Probate is the legal process that ultimately leads to transferring those assets to the intended beneficiaries and/or heirs of the estate.

Medi-Cal planning utilizes legal tools and strategies within your larger estate plan to protect your assets and ensure that you qualify for Medi-Cal when the times comes that you need help paying for LTC. A common Medi-Cal strategy involves the use of an irrevocable Medicaid trust to shelter your assets. Your estate planning attorney can review your asset portfolio and help you decide the best tools and strategies for your situation.

Fortunately, the Medi-Cal spousal impoverishment rules prevent this from happening. If you need to enter a LTC facility, an allowance is made for your “community spouse” when calculating your eligibility to ensure that he/she is not left without any income and/or resources. Your spouse may be able to keep both resources and part of your monthly income, depending on your spouse’s income.

If your non-exempt assets exceed the program limit, Medi-Cal will impose a waiting period during which time you will be expected to “spend-down” your non-exempt assets. In simple terms, Medi-Cal wants you to sell your assets and use the proceeds to cover your LTC costs during the waiting period. The length of the waiting period is determined by taking the value of your assets that exceeds the limit and dividing by the average monthly cost of LTC in your area. For example, if you have $150,000 in non-exempt assets, the amount over the limit is $148,000. Assuming an average monthly cost for LTC of $9,500, you would divide $148,000/$9,500 = 15.6, resulting in a 16 month waiting period before Medi-Cal would consider you eligible for benefits.

Once upon a time this was possible; however, Medi-Cal closed that loophole by implementing a five-year “look-back” rule. The rule allows Medi-Cal to review an applicant’s finances for the five-year period leading up to application. Any asset transfers made for less than fair market value will be suspect and may be discounted, meaning the value of the asset will be imputed back into the applicant’s assets for purposes of determining eligibility.

When determining your eligibility, only non-exempt assets are considered. Examples of exempt assets include:

• Your primary residence
• Household goods and furnishings
• One vehicle
• Term life insurance
• Burial plot

Along with some basic requirements, such as U.S. citizenship (or legal status) and proof of California residency, you will need to meet Medi-Cal’s income and asset requirements to be eligible for Medi-Cal for the aged benefits. The income limit varies, depending on where you live, your household size, and the specific program within Medi-Cal for which you are applying. The asset limit is where most seniors run into problems if they failed to plan ahead. As a general rule, an applicant cannot have non-exempt, or “countable resources,” valued at more than $2000.

As you age, the likelihood that you will need long-term care (LTC) increases with each passing year. The cost of that care may cause you to turn to Medi-Cal for help. As of 2016, the average cost of a month of LTC in California was over $9,000 and the average length of stay about 2.5 years. Neither Medicare nor most basic health insurance plans will pay for LTC expenses. Unless you can afford to pay out of pocket, that leaves Medi-Cal as your only option because Medi-Cal does pay for LTC.

People often confuse the two or use the names interchangeably despite the fact that they are two very different programs. Both Medi-Cal and Medicare are federally funded healthcare programs; however, the similarities stop there. Medicare is an “entitlement” program, meaning that as long as you worked and paid into the program you are “entitled” to benefits when you turn 65 years old. You will automatically be enrolled in Medicare. Basic Medicare is free; however, there are four parts to Medicare and if you choose to participate in the additional parts you will pay a premium each month. Medi-Cal is a “needs” based program, meaning you must demonstrate a financial “need” for benefits to be eligible. If you qualify, participation in Medi-Cal is free.

Medi-Cal is the name for California’s Medicaid program. Medicaid is a healthcare program that provides coverage for low income individuals and families as well as the aged and disabled.

While you are alive, you can act as a trustee of your trust and you can manage your estate. You will need to designate a successor trustee, such as a trusted and responsible family member or a trusted friend, to administer your trust at your death. Your chosen successor trustee should have business sense, and be responsible with money management, because he or she will be responsible for carrying out the wishes and desires that you’ve set out in your trust agreement.

Another question that I get is, “Can out of state properties be put into my trust?”. The answer is yes. The Collins Law Group is a member of the American Academy of Estate Planning Attorneys, a national organization with attorney members coast to coast. So, if you have out of state properties, we do have a national network of attorneys who can assist us in making sure that your property is properly transferred into your trust.

My clients often ask me, “How long does it take to set up my living trust?”. Here at the Collins Law Group, we have a six-step planning process that generally involves three meetings taking place over the course of thirty days. Of course, we are sensitive to our clients needs, so if there’s a need to expedite the process, we can complete the trust work within the matter of days.

Here at the Collins Law Group, we are often asked, “Do I need an attorney to create my living trust?”. The answer is that it’s highly recommended that you get a licensed and qualified attorney who specializes in estate planning because estate planning is a complex area of the law. We do not recommend that you use any online resources to create your trust documents by yourself because what you want is a qualified and licensed attorney, or a law firm, to stand by your trust documents when you and you family need them the most.

I’ve also been asked, “What is a Conservatorship?”. Conservatorship is a court-supervised process that allows an individual to manage the affairs of an incapacitated person. I’d like to note again that any court-supervised process is a public process, a costly process and will most likely be a lengthy process.

My clients often ask me “Will my property taxes change if I create a trust?” In general in California the answer is no. When it comes to real property, like family homes or vacation homes, there is no change in who owns the property only how the property is owned, so this does not trigger a property tax change.

A trust can help achieve a wide range of estate planning goals, including:

• Avoiding probate
• Incapacity planning
• Asset protection
• Medicaid planning
• Planning for parents with minor children
• Special needs planning
• Pet planning

One of the most important decisions a Settlor must make when creating a trust is who to appoint as the Trustee. In fact, a common mistake people make is appointing a spouse or close friend as Trustee without taking the time to consider if that individual has the experienced and/or skills to successfully serve as the Trustee. Sometimes, appointing a professional Trustee is the better choice. The overall job of a Trustee is to manage and invest trust assets and to oversee the administration of the trust. Generally, the reason behind appointing the wrong person as Trustee is a lack of understanding of the numerous and varied duties and responsibilities of a Trustee, such as:

• Following all trust terms unless they are illegal or unconscionable.
• Communicating with beneficiaries.
• Resolving disputes among beneficiaries.
• Investing trust assets using the “prudent investor” standard.
• Managing trust assets.
• Distributing trust assets.
• Keeping trust records.
• Preparing and filing trust taxes.
• Defending the trust against legal challenges.

Trusts are broadly divided into two categories — living trusts and testamentary trusts with the former activating during the lifetime of the Settlor and the latter typically being activated at the time of the Settlor’s death by a provision in the Settlor’s Will. Living trusts can be further sub-divided into revocable and irrevocable living trusts while a testamentary trust is always revocable because a Will is always revocable. As the names imply, a revocable trust is one that can be modified or revoked by the Settlor at any time and for any reason whereas an irrevocable trust cannot be modified or revoked, once activated, by the Settlor.

A trust is formally created using a written legal document called a “trust agreement.” The trust agreement reflects the terms of the trust as created by the Settlor. Though you probably do not ever think about it, you likely enter into oral trust agreements all the time. For example, if you asked a co-worker to hold a package for you while you are on vacation and give it to your niece when she arrives from out of town, you have created a trust wherein you are the Settlor, your co-worker is the Trustee and your niece is the beneficiary of the trust.

Once upon a time, trusts were predominantly used by wealthy families to control the family fortune and to pass it down through the generations without incurring taxes. Those days are long gone. In fact, trusts are now found in the average estate plan given how user-friendly they are and how versatile they are. While high net worth individuals do still utilize trusts with great frequency, individual’s with a modest estate can also now benefit from incorporating a trust into their estate plan as well.

At its most basic, a trust is a relationship whereby property is held by one party for the benefit of another.  A trust is created by a Settlor, also referred to as a Grantor or Maker, who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries. The beneficiaries may be current and/or future beneficiaries and may be an individual, a charity or organization, or even the family pet.

I’ve also been asked, “What if I create a joint tenancy with my child?”. This is a very problematic option for estate planning. The problem is, you will avoid probate, but if your child has any personal drama, debts, lawsuits, or judgements against them, predators on the court will be able to reach the joint tenancy property. Also, making your child a joint tenant will give your child the ability to take out loans on the property or refinance.

Over half of all seniors in long-term care (LTC) rely on Medicaid (Medi-Cal in California) to cover the high cost of that care. Again, because you are statistically more likely to outlive your spouse, you need to plan ahead for the possibility that you will one day need LTC. Conversely, Medi-Cal planning is also important to ensure that your spouse does not deplete your entire nest egg with his LTC expenses, leaving you with nothing

This is often overlooked by couples. The way in which you title assets can determine whether the asset is required to go through the probate process or is automatically transferred to the surviving spouse upon the death of one spouse. Titling assets as joint owners with rights of survivorship means that the asset will bypass probate upon the death of one owner and that owner’s interest in the asset will transfer directly to the surviving owner (spouse).

The odds are good that you will outlive your spouse. This makes retirement planning even more important for you as a woman. You need to be certain that you will have sufficient assets and income to live comfortably if your spouse is the first to go. Because retirement planning and estate planning are so closely related, and a change in one plan almost always affects the other plan, it is always best to combine your retirement and estate planning into one cohesive plan.

Incapacity planning should be part of your estate plan from the beginning because incapacity can strike at any time and to anybody. Without an incapacity plan in place, you have no way of knowing who will make health care decisions for you, who will take over control of your assets, or who will make personal decisions if you cannot make them yourself.

Ultimately, this is a decision you must make after consulting with your estate planning attorney; however, as a general rule, it is usually better for spouses to create plans that work in harmony with one another but that remain separate. Because there is no way to know, with certainty, what the future will bring, you do not want to create an estate plan that is completely dependent on your spouse’s plan to function properly.

The most well-known benefit of executing a Will is knowing that you will not die intestate. If you fail to execute at least a basic Will prior to your death, the California intestate succession laws will decide how your estate assets are distributed. Typically, this means that only a spouse and/or very close relatives will inherit from your estate. Close friends, charities, and more distant relatives will receive nothing from your estate. In addition, executing a Will allows you the only official opportunity you will have to nominate a Guardian for your minor children in the event one is ever needed.

Statistically, women are more likely to outlive their spouse, ultimately leaving them to be the one to pass down the marital assets to children and other beneficiaries. Women also tend to me the caretakers of the family, making them more likely to be concerned with issues such as guardians for minor children and even plans for again parents. Finally, more and more women are becoming entrepreneurs, adding in another important estate planning consideration into an already lengthy list of estate planning components. For these reasons, and more, estate planning for women is important.

If you are single, only your Conservator would have that authority.

Again, if you haven’t planned, nobody can act for you until the court appoints a Guardian and/or Conservator for you. If bills, such as your son’s tuition, need to be paid in the interim, a friend or family member would have to use their savings or borrow to pay the bill.

A court would have to appoint a Conservator. Nobody but the Conservator would be able to act for you.

Your family or friends must go to your local court and have someone appointed your Conservator. Again, this judge probably does not know you and may not appoint the same person you would choose. In the appointment process, people must testify in open court that you do not have the ability to care for yourself. It can be draining financially and emotionally. Your Conservator would have to report to the court for as long as you are disabled.

Unless you have planned properly, you probably will be kept on life support. In most states, you will be kept on life support unless there is clear evidence you expressed wishes to the contrary; usually this requires something in writing.

Depending on the state, if your family members agree, they can make that decision. However, if family members disagree, you could be back with the local judge getting a Guardian appointed.

A local judge would have to appoint a Guardian who would make that decision. Of course, the judge may not choose the same person you would have chosen.

Yes. If you’re part of the Lesbian, Gay, Bisexual, and Transgender community, a Living Trust offers protection for your estate, as well. It will completely eliminate a living probate, a death probate, and you can minimize or eliminate estate taxes. Further, it allows you to override the laws that may fail to recognize the importance of your relationship.

Yes. The default in state law, called “intestacy,” is designed with married couples in mind. If a married couple dies without any estate plan, the survivor will get a good portion of the assets left behind. However, if you are unmarried, unless you are in a state that legally recognizes domestic partnerships or civil unions and you have registered as such, the survivor would get nothing. Instead, the family of origin of the unmarried partner who died would get anything in that partner’s name, including bank accounts, real estate, etc.

Only your Will is a matter of public record. Your Revocable Living Trust and your Powers of Attorney are not public. Therefore, by using a Revocable Living Trust you can maintain the privacy of your wishes. Prying eyes of co-workers and neighbors will not have access to the details of your estate plan.

Maybe. Federal law allows married couples to give each other an unlimited amount of property without gift tax during life or estate tax at death. Federal law does not recognize non-marriage relationships. However, each person gets to give up to his or her tax exclusion during their lifetime to anyone they want. But, any use during lifetime reduces the amount available for transfers at death. In addition, anyone can make a gift to any other person, called the Annual Gift Tax Exclusion, without gift tax and without reducing his or her estate tax exclusion.

Unless your spouse or partner has adopted your minor children, a court would decide what would be in the child’s best interest. Typically, your family of origin and that of the child’s other biological parent are given preference by the court. However, in your last Will, you can nominate your spouse or partner to be the guardian for your minor child. The court will then give weight to your suggestion while weighing what is in the child’s best interest.

Yes, if you are married or in a registered relationship and in a state which recognizes that relationship. However, if you’re unmarried and either, 1) not in such a registered relationship, or 2) you are in a state which does not recognize that relationship, then default state law allows your partner’s family of origin rather than you to make those decisions. However, if your spouse or partner designates you as agent under their Health Care Power of Attorney, then you would be able to make such decisions.

If you are married or in a state that recognizes civil unions or domestic partnerships and you register as such, proof of such marriage or registration would be sufficient. Otherwise, you would need to have your spouse or partner designate you as agent under their Health Care Power of Attorney. The agent also can limit other visitors.

If you are in a marriage, registered domestic partnership, or civil union, your spouse or partner can make those decisions for you. If you are not in a registered relationship, then state law would recognize your family of origin to make those decisions. However, you can override state law and give your partner the authority to make such decisions by signing a Health Care Power of Attorney. With such a document, when you are unable to make your own medical decisions, your partner can step in and speak for you. Further, this document will designate your partner as your choice to be guardian for you if one needs to be appointed. Without such a designation, your family of origin would have priority for such an appointment.

No, you have to do estate planning in order to allow your spouse or partner to have that authority. Specifically, by designating your spouse or partner as agent under a General Durable (Financial) Power of Attorney, he or she can make decisions on your behalf regarding financial matters.

You will be treated as “legal strangers” for purposes of state and federal laws. As a result, if you do not have an estate plan, your partner would not have the right to inherit from you, have preference to be appointed your guardian, or many other rights you would assume a spouse would have.

There are still many places and people who are reluctant to recognize your marital rights. Additionally, there are many other important reasons to create an estate plan, such as avoiding probate, minimizing taxes and providing creditor and divorce protection for beneficiaries.

No. These various relationships affect state law rights and responsibilities only in the states which recognize them. Only marriage is respected by the federal government. As a result, unmarried same-sex couples will not get federal benefits, such as social security survivorship benefits.

I’m also asked, “How do I fund my trust?”. Well funding a trust occurs when the assets that you own as an individual, are transferred into your trust. For example, at the Collins Law Group, we provide our clients with funding letters which they present, in person, to their financial institutions, to ensure that their bank accounts are properly transferred into trust. When it comes to real estate, we prepare quick-claim deeds for our clients to ensure that their real estate is properly transferred into trust.

I often get asked, “What will happen to my property if I die without a will or a trust?”. Well if you die without a will or a trust, the state determines who will be your ultimate heirs, through a court supervised process called probate. Probate is a public process, it’s a costly process, and worst of all, it can be a lengthy process. It typically takes anywhere between six months to a year, but if you have family drama, it’ll take much longer than that.

I’m often asked, “Can I revoke my trust, or can I make changes to my trust?” And the answer is yes. Making minor changes is generally called an amendment and making multiple, major changes at one time, is called a restatement. And you can always revoke your trust at any time while you are alive.

Social Security will continue to send out benefit checks until they are notified of an individual’s death. The executor/spouse/trustee should contact the local Social Security Administration office and notify them of the death, or if a benefit check is received, send it back with a letter notifying them. This is important. If checks continue to be deposited, the recipient can incur liability later when Social Security learns of the recipient’s death.

If you are a relative of the deceased, this is simple in most states. To transfer the title of vehicles owned by the deceased, simply take the death certificate to the DMV, and perform the transfer, paying whatever fees they require. If not a relative, bringing along the will and or any trust documents indicating your status should be sufficient.

The answer depends upon the language of the trust document. Certain trusts include “pick and choose” language that allows trustees to selectively place assets into the “B” trust.

While having a living trust can significantly reduce costs compared to probate, there is still a considerable amount of work to be done in properly administering even a simple living trust. The services of an attorney are required, and that person or firm should be compensated fairly for their services. It is important to remember that the fees allowed for trust administration are usually much lower than those for probate, and there is generally less work involved, as there is less involvement of the courts and state bureaucracy.

To summarize the process, trust administration can be broken into five basic steps:

1. Inventory assets
2. Determine estate tax
3. Division of trust assets
4. File the Federal and State tax forms
5. Distributions to beneficiaries

Although the trust administration process seems relatively straightforward, there are several reasons it can sometimes be drawn out over several months or even years. The first step, the inventory of assets, must be completed before the trust administration can begin, and this can be difficult to complete depending upon the prior organization and the size and complexity of the decedent’s assets. Next, the 706 estate tax return must be filed within 9 months, or 15 months if an extension is filed. Often, it is prudent to wait until the last minute to file this form. If the spouse of the decedent is in failing health and may pass away before the deadline, then both 706 forms can be used to maximize tax advantages to the estate. The final step, asset distribution, cannot take place until the 706 has been filed, and even then should not take place until the “Closing Letter” is received from the IRS certifying acceptance of the 706 return. This closing letter will take a minimum of 6 to 8 months, and as long as 3 years, to arrive after the 706 is filed. In addition, there may be a state estate or inheritance tax return required, even if a federal return is not required.

Probate begins and ends with the special Probate Court set up in each state to handle estate issues. (Sometimes known as the Orphan’s or Chancery Court in certain states.) All actions taken regarding the estate are accountable to this court, and must be noted and reported regularly. This court is staffed by special judges qualified to oversee estate resolution issues.

Depending on the complexity of the estate and the thoroughness with which accounting has been carried out before death, probate can either be a relatively simple task or a daunting one. Be aware that no matter the situation, probate may be a lengthy process often taking months or possibly years to play out, and one which may take a considerable amount of an executor’s time.

To summarize the process, probate can be broken into six basic steps:

1. Validation of the Will
2. Appoint executor
3. Inventory estate
4. Pay claims against the estate
5. Pay estate taxes
6. Distribute remaining assets

Each of these steps involve legal documentation and validation, and more importantly, proper accounting each step of the way.

Probate is designed to create a “final accounting” upon death. It is the legal process of “proving up” a Will, or verifying that a Will is valid, takes place in one of two instances. First, if a person dies leaving behind a Will, or second, if the deceased has died intestate, that is, has not left behind a Will or estate plan of any type or the Will cannot be found.

The best approach is to meet with an attorney who understands the Legacy Wealth Planning process. This will ensure you address the financial and non-financial assets of your family. The right attorney will help you, first, set up a Family Wealth Trust to preserve your financial legacy. Then, you will be educated about completing the My Legacy workbook, to share in your own words about your life story, family history, memories, and life lessons. And finally, writing a Legacy Planning Letter to distribute your cherished possessions with sentimental value.

YES, but you would be better off choosing an attorney whose practice is focused on estate planning. Members of the American Academy of Estate Planning Attorneys receive continuing legal education on the latest changes in any law affecting estate planning, allowing them to provide you with the highest quality estate planning service anywhere.

No. A Family Wealth Trust can help anyone who wants to protect his or her family from unnecessary probate fees, attorney’s fees, court costs and federal estate taxes. In fact, the Family Wealth Trust offers substantial protection for your family, regardless of your total estate. In addition to savings at death, especially if your estate is over $100,000, the Family Wealth Trust also provides savings and peace of mind during life, because it avoids the expense and emotional nightmare of an incapacity or “living probate” proceeding. Also, a Family Wealth Trust protects spouses in the event of remarriage after one spouse dies and affords greater protection for children.

You can certainly go back to the attorney you worked with before, however, few attorneys offer Legacy Wealth Planning. If you want Legacy Wealth Planning, contact a member of the American Academy of Estate Planning Attorneys.

Very few estate planning attorneys offer Legacy Wealth Planning. A “bare bones” living trust covers probate avoidance and usually ignores important issues to protect you, your spouse (if married) and your children. Bring your existing trust to your free one-hour consultation and we can review it for you.

NO. The Family Wealth Trust has been authorized by the law for centuries. The government really has no interest in making you or your family suffer a probate that will only further clog up the legal system. A Family Wealth Trust avoids probate so that your estate is settled exactly according to your wishes.

YES. In fact, all real estate should be transferred into your Family Wealth Trust. Otherwise, upon your death, depending on how you hold the title, there will be a death probate in every state in which you hold real property. When your real property is owned by your Family Wealth Trust, there is no probate anywhere.

NO. The purpose of creating a Family Wealth Trust is to avoid living probate, death probate, and reduce or even eliminate federal estate taxes. It’s not a vehicle for reducing income taxes. In fact, if you’re the trustee of your Family Wealth Trust, you will file your income tax returns exactly as you filed them before the trust existed. There are no new returns to file and no new liabilities are created.

YES. In fact, most people who create a Family Wealth Trust act as their own trustees. If you are married, you and your spouse can act as co-trustees. And you will have absolute and complete control over all of the assets in your trust. In the event of a mentally disabling condition, your hand-picked successor trustee assumes control over your affairs, not the court’s appointee.

Not only does a Family Wealth Trust provide for the disposition of your property (like a Will), but it also offers the following benefits:

1. Provides for the immediate transfer or trust management and distribution in the future of assets after death;
2. Allows for a smooth transition of management upon incapacity or death;
3. Avoids the expense and hassle of probate proceedings;
4. Minimizes estate taxes and defers payment of estate taxes for married couples;
5. Allows for continued control over assets after death or incapacity;
6. Provides security to you and your loved ones;
7. Protects your children’s inheritance from their own potential divorce;
8. Safeguards your estate for your kids if your surviving spouse remarries;
9. Offers flexibility.

Unfortunately, you would be subject to “living probate,” also known as a conservatorship or guardianship proceeding. If you become mentally disabled before you die, the probate court will appoint someone to take control of your assets and personal affairs. These “court-appointed agents” must file a strict accounting of your finances with the court. The process is often expensive, time-consuming and humiliating.

Most Revocable Living Trusts are primarily concerned with avoiding probate and estate taxes. A Family Wealth Trust offers lifetime benefits, and protects wealth for current and future generations.

A Will is a legal document that describes how your assets should be distributed in the event of death. The actual distribution, however, is controlled by a legal process called probate, which is Latin for “prove the Will.” Upon your death, the Will becomes a public document available for inspection by all comers. And, once your Will enters the probate process, it’s no longer controlled by your family, but by the court and probate attorneys. Probate can be cumbersome, time-consuming, expensive, and emotionally traumatic during a family’s time of grief and vulnerability. Con artists and others with less-than-pure financial motives have been known to use their knowledge about the contents of a will to prey on survivors. A Living Trust avoids probate because your property is owned by the trust, so technically there’s nothing for the probate courts to administer. Whomever you name as your “successor trustee” gains control of your assets and distributes them exactly according to your instructions. There is one other crucial difference: A Will doesn’t take effect until your death, and is therefore no help to you during lifetime planning, an increasingly important consideration since Americans are now living longer. A Family Wealth Trust can help you preserve and increase your estate while you’re alive, and offers protection should you become mentally disabled.

A Family Wealth Trust is the main component of a Legacy Wealth Plan and covers important issues other than avoiding probate.

YES. But your family may not like it. The government’s estate plan is called “Intestate Probate” and guarantees government interference in the disposition of your estate. Documents must be filed and approval must be received from a court to pay your bills, pay your spouse an allowance, and account for your property–and it all takes place in the public’s view. If you fail to plan your estate, you lose the opportunity to protect your family from an impersonal, complex governmental process that can become a nightmare. Then there is the matter of the federal government’s death taxes. There is much you can do in planning your estate that will reduce and even eliminate death taxes, but you don’t suppose the government’s estate plan is designed to save your estate from taxes, do you? While some estate planners favor Wills and others prefer a Family Wealth Trust as the Estate Plan of Choice, all estate planners agree that dying without an estate plan should be avoided at all costs.

Traditional estate planning is focused on financial assets and is concerned with avoiding probate and estate taxes. On the other hand, Legacy Wealth Planning is concerned with financial and non-financial assets of a family and creating a family’s personal legacy plan. Legacy Wealth Planning addresses how to capture and transfer family traditions and values, as well as protecting financial wealth for current and future generations.

Most of us spend a considerable amount of time and energy in our lives accumulating wealth. With this, there comes a time to preserve wealth both for enjoyment and future generations. A solid, effective estate plan ensures that your hard-earned wealth will remain intact as it passes to your beneficiaries, instead of being siphoned off to government processes and bureaucrats.

Traditional estate planning (Wills and Trusts) focuses on the accumulation, the preservation, and the distribution of only your financial assets and worldly possessions. It protects material wealth from probate and minimizes taxes.

Legacy Wealth Planning is the creation of a definitive plan for managing your total wealth while you’re alive, distributing your estate how you choose after your death, and a clear plan to pass on your legacy. Your estate includes all assets of any value that you own. This includes non-financial assets as well as financial assets, including real property, business interests, investments, insurance proceeds, retirement accounts and personal property. Your legacy incorporates important decisions ensuring your family core values, responsible behaviors and community involvement are passed on to future generations. Keep in mind, your legacy also includes personal effects, such as family heirlooms, stories, and accumulated wisdom and life lessons of your family.

Yes. If you’re part of the Lesbian, Gay, Bisexual, and Transgender community, a Living Trust offers protection for your estate, as well. It will completely eliminate a living probate, a death probate, and you can minimize or eliminate estate taxes. Further, it provides privacy from prying eyes.

Yes. The default in state law, called “intestacy,” is designed with married couples in mind. If a married couple dies without any estate plan, the survivor will get a good portion of the assets left behind. However, if you’ve not married, or you are in a state that does not recognize domestic partnership or civil union, your survivor would get nothing. Instead, the family of origin of the partner who died would get anything in that partner’s name, including bank accounts, real estate, etc.

Only your Will is a matter of public record. Your Revocable Living Trust and your Powers of Attorney are not public. Therefore, by using a Revocable Living Trust you can maintain the privacy of your wishes. Prying eyes of co-workers and neighbors will not have access to the details of your estate plan.

Maybe. Federali law allows married couples to give each other an unlimited amount of property without gift tax during life or estate tax at death. Federal law does not recognize non-marriage relationships. However, each person gets to give up to his or her tax exclusion during their lifetime to anyone they want. But, any use during lifetime reduces the amount available for transfers at death. In addition, anyone can make a gift to any other person, called the Annual Gift Tax Exclusion, without gift tax and without reducing his or her estate tax exclusion.

Unless your spouse or partner has adopted your minor children, a court would decide what would be in the child’s best interest. Typically, your family of origin and that of the child’s other biological parent are given preference by the court. However, in your last Will, you can nominate your spouse or partner to be the guardian for your minor child. The court will then give weight to your suggestion while weighing what is in the child’s best interest.

Yes, if you are married or in a registered relationship and in a state which recognizes that relationship. However, if you’re either, i) not married or in a registered relationship, or ii) you are in a state which does not recognize that registered relationship, then default state law allows your partner’s family of origin rather than you to make those decisions. However, if your spouse or partner designates you as agent under their Health Care Power of Attorney, then you would be able to make such decisions.

If you are married or in a state that recognizes civil unions or domestic partnerships and you register as such, proof of such registration would be sufficient. Otherwise, you would need to have your spouse or partner designate you as agent under their Health Care Power of Attorney. The agent also can limit other visitors.

If you are in a marriage, registered domestic partnership, or civil union, recognized by the state in which you live, your spouse or partner can make those decisions for you. If you are not in a registered relationship, or that relationship is not recognized by your state, then state law would recognize your family of origin to make those decisions. However, you can override state law and give your spouse or partner the authority to make such decisions by signing a Health Care Power of Attorney. With such a document, when you are unable to make your own medical decisions, your spouse or partner can step in and speak for you. Further, this document will designate your spouse or partner as your choice to be guardian for you if one needs to be appointed. Without such a designation, your family of origin may have priority for such an appointment.

No, you have to do estate planning in order to allow your spouse or partner to have that authority. Specifically, by designating your spouse or partner as agent under a General Durable (Financial) Power of Attorney, he or she can make decisions on your behalf regarding financial matters.

There are many important reasons to create an estate plan, such as avoiding probate, minimizing taxes and providing creditor and divorce protection for beneficiaries.

No. These various relationships affect state law rights and responsibilities only in the states which recognize them. Only marriage is respected by the federal government.

The sad reality is that there are predators who intentionally prey on society’s most vulnerable, including the elderly. Then there are those who commit opportunistic elder abuse. In fact, experts tell us that about 75 percent of the time it is a family who is the perpetrator of elder abuse, particularly when that abuse is financial abuse. Conservative estimates also indicate that more than 40 percent of nursing home residents have reported abuse, and more than 90 percent report that they or another resident of the facility have been neglected. Elder abuse is a crime; however, it can also form the basis of a civil lawsuit against the perpetrator and/or the facility that allowed the abuse to occur. If you suspect that an elderly loved one is the victim of abuse, an elder law attorney can discuss your legal options and help you remove your loved one from the abusive environment.

Neither Medicare nor most basic health insurance plans will cover the costs associated with long-term care. Unless you have the resources to cover the high cost of nursing home care out of pocket and indefinitely, you will likely find yourself turning to Medi-Cal (California’s Medicaid program) for help. To be eligible, however, you must contend with very low “countable resources” limits that can put your retirement nest egg at risk as well as a variety of other complex eligibility guidelines. An elder law attorney can help you incorporate Medi-Cal planning into your overall estate plan to make sure you are eligible for benefits if you need them while still protecting your retirement nest egg.

Date from 2015 indicates that approximately 43.5 million caregivers provided unpaid care to an adult or child that year. Lost income and benefits over a caregiver’s lifetime  is estimated to be, on average, over $300,000. Caregivers face emotional stress, financial hardship, and often legal struggles as a result of the care they provide. Sometimes, help is available if you know where to look and how to qualify. An experienced elder law attorney may be able to help with things such as getting a loved one approved for Medi-Cal benefits, pursuing a claim of elder abuse against a paid caregiver or family member, or analyzing eligibility for additional state and federal benefit programs.

Watching a parent succumb to the natural aging process is not easy. Making the decision to seek guardianship (referred to as conservatorship in California) over a parent is ever more difficult; however, it may become necessary to prevent serious injury and/or victimization by those who prey on the elderly. An elder law attorney can help you pursue conservatorship to ensure that you have the legal authority required by law to properly care for an protect your parent.

Because an elder law attorney focuses more on the client demographics than the area of the law, there are numerous different legal issues an elder law attorney might be able to help you with, such as:

• Denial of SSI, SSDI, or other benefits
• Guardianship – petitioning for, or objecting to
• Housing discrimination
• Long-term care planning
• Estate planning
• Elder abuse
• Health insurance issues
• Preparing advance directives
• Retirement planning
• Nursing home abuse
• Medicaid planning
• Veteran’s benefits

The National Academy of Elder Law Attorneys, or NAELA, was formed in the late 1980s as a way to better serve this growing segment of the population. Five years after the creation of NAELA, the National Elder Law Foundation was formed. The purpose of the non-profit NELF was to help improve the professional skills of attorneys who choose to focus on elder law. Toward that end, NELF then developed a national certification program for attorneys known as the Certified Elder Law Attorney, or CELA, certification program.  Attorneys who wish to gain certification in the area of elder law may do so through a rigorous and selective certification program recognized by the American Bar Association and administered by NELF.

As the elderly population began to grow several decades ago, it started to become clear that the legal issues that impact them needed to be addressed. Consequently, the relatively new area of the law known as “elder law” began to evolve. An elder law lawyer, therefore, is a lawyer who has chosen to focus much, or all, of his/her practice on legal issues that impact the elderly and those who care for them. Unlike other areas of specialty, however, an elder law lawyer does not focus on learning everything there is to know about a single area of the law. Instead, an elder law lawyer is more concerned with how the elderly, and their caregivers, are impacted by various legal issues and problems.

Watching a parent’s mental and/or physical deterioration is heart-wrenching. If you have a parent who has become incapacitated, as a result of Alzheimer’s or simply the natural aging process, seeking conservatorship may be your only option if you wish to keep your parent and his/her assets safe. A conservatorship is a relationship established by a court of law between the person who needs help, referred to as the “ward,” and the person or entity named by the court to help the ward, known as the “conservator.” Considered the option of last resort, court’s don’t like to order a conservatorship unless it is absolutely necessary because it is the most restrictive option.  To prevent putting your kids in the position where they have to consider petitioning for conservatorship over you when you get older, you should incorporate an incapacity planning component into your estate plan now.

One of the most commonly used incapacity planning tools is a revocable living trust. When used to plan for the possibility of incapacity it works by allowing you to appoint yourself as the Trustee of the trust and appoint someone of your choosing as the successor Trustee. Your estate assets are then transferred into the trust. Because you are the Trustee, you continue to control those assets just as before; however, if you become incapacitated the successor Trustee (chosen by you) takes over as Trustee, thereby shifting control of your assets to the person of your choice without the need for court intervention. Moreover, when you recover you can resume your position as Trustee as if nothing happened. Finally, because the trust is revocable, you can move assets in and out of the trust with ease and even replace the successor Trustee if you wish to do so at any time.

An advance directive is a legal document that allows you to plan ahead and make your own end-of life wishes known in the event that you are unable to communicate those wishes at some later time and/or appoint someone to make decisions for you.  State law dictates what types of advance directives are recognized in the state. California recognizes two types of advanced directives, including:

• Power of Attorney for Health Care which allows you to appoint someone to make health care decisions for you if your primary doctor determines that you lack the ability to understand the nature and consequences of your health care decisions or the ability to make and communicate your health care decisions.
• Individual Instructions which is California’s version of a Living Will. In this you can state your wishes with regard to health care in the event you can no longer speak for yourself.

A Power of Attorney is a legal agreement that allows you (the “Principal”) to grant another person (your “Agent”) the legal authority to act in your place in legal matters. That authority can be general, allowing your Agent almost unfettered power to act on your behalf, or limited, only granting your Agent the authority to act on your behalf in specific situations or for a designated period of time. While a Power of Attorney can be a helpful incapacity planning tool, it has some drawbacks, including the risk that third parties won’t accept your Agent’s authority. It also has some limitations because even a general POA won’t usually cover all situations. Most states, for example, require you to execute a specific type of document to give someone the legal authority to make healthcare decisions for you.

By incorporating an incapacity plan into your comprehensive estate plan you are able to use legal strategies and tools that collectively determine who will control your assets and make important decisions for you in the event you are ever incapacitated. It allows you to make crucial decisions now instead of a judge making them for you later or deciding who will make them for you.

The same problem could occur when it comes to control over your assets during a period of incapacity. In the absence of a plan that gives someone the legal right to control your assets, a court will likely be forced to appoint someone. That person may – or may not – be someone you would want taking over control of your assets.

This common misconception is precisely why many people fail to plan for incapacity. The reality is that even if you are married there is no guarantee that it will be your spouse making serious, even life or death, healthcare decisions for you if you are unable to make them because of incapacity. All too often more than one family member believes that he/she should be the one making those decisions and the right to make them ends up in a court battle – a battle that could result in a family feud that leaves lasting scars.

The short answer is “yes.” In fact, if you are relatively young and healthy you probably need to be more worried about a period of incapacity than you do death. Up to about age 40 you are three times more likely to become incapacitated than you are to die. One in four of today’s 20-year-olds can expect to be out of work for at least a year because of a disabling condition before they reach retirement age. Because you undoubtedly care what happens to you and your assets if incapacity does strike, it is imperative that you plan for that possibility.

The best way to protect your pet and ensure that he/she is provided for in your absence is through the creation of a pet trust. A pet trust is a specialized type of revocable living trust. Like any trust, you will appoint someone as the Trustee of the trust and you will fund the trust with sufficient assets to care for your pet in your absence. The Trustee of your trust is legally obligated to use the utmost care when managing the trust assets and to follow the trust terms just as you wrote them. Those terms can be used to dictate how you wish your pet to be care for in as much, or as little, detail as you wish. A pet trust provides the legal oversight you need to ensure that the funds you leave behind will be used exclusively for your pet and that your pet’s care will be continued in the manner to which your pet is accustomed. Finally, a pet trust can also address a situation wherein you are incapacitated. The Trustee can take over the care of your pet until you recover, or forever if your incapacity eventually leads to your death.

Gifting your pet to a designated caregiver in your Will does resolve the issue of the legal transfer of ownership; however, it does not solve all of the issues found in a verbal agreement. It does not legally obligate your caregiver to take over the care and maintenance of your pet nor does it provide a satisfactory funding method. You can also gift funds that are intended to be used to care for your pet; however, once gifted in a Will, the funds become the property of the beneficiary to do with as he/she pleases which provides no guarantees that your pet will be cared for as you wished. In addition, gifting a pet in a Will does not address the possibility of your incapacity because the terms of a Will only apply in the event of the Testator’s death, not incapacity.

You may not think of your pet as property; however, the law considers an animal to be property. Therefore, ownership of that “property” needs to be legally transferred to a new owner after your death. In the event of your incapacity, someone needs the legal authority to take control of that “property” during your incapacity. In addition, by making it clear who you wish to be your pet’s new “owner” you can help prevent disputes that could arise if more than one friend or family member wants to take over your pet’s care.

People frequently make the mistake of relying on nothing more than a verbal agreement with a family member or friend to care for their pet in the event of their death or disability. There are numerous problems with this option. First, your intended caregiver could be unable or unwilling to fulfill the agreement when the time comes and there is no legal way to enforce the agreement. Second, although you may not view your pet as your property, the law does, and a verbal agreement does not legally transfer ownership. Finally, a verbal agreement does not provide a funding method for the continued care and maintenance of your pet.

Unfortunately, over half a million dogs and cats end up in shelters each year in the U.S. as a result of the death or incapacity of their owner. When a pet owner dies or becomes incapacitated, a beloved family pet can easily be overlooked, or be viewed as a burden, if plans were not made ahead of time to care for the animal in the event something happened to his/her human “owner.” Your loved ones may be so focused on their worry or grief over your death or health problems that your pet simply gets lost. Even if they do remember your pet, they may be unwilling to take on the practical and financial responsibilities associated with caring for your pet. Including a pet planning component in your estate plan is the only way to ensure that this doesn’t happen to your pet.

Despite the fact that they feel their pet is part of the family, most people do not think to include Fluffy or Fido in their estate plan either because they are not aware it is possible, don’t think it’s necessary, or are unsure how to do so. If you consider your pet to be part of the family, why wouldn’t you include him/her in your estate plan? Including your family pet in your estate plan allows you the peace of mind that comes with knowing your pet will be well cared for if you are unable to provide that care one day.

One of the most common mistakes people make is to under-estimate, or overlook entirely, the potential impact long-term care costs will have on their finances. With an average annual cost of over $100,000 for 2020, and an average length of stay of three years, a LTC bill can quickly deplete a retirement nest egg given the fact that Medicare will not pay for LTC. Medicaid will cover LTC costs, but you must first qualify, a process that could put your assets at risk if you failed to plan ahead.

When a participant in a retirement plan dies, benefits the participant would have been entitled to are usually paid to the participant’s designated beneficiary in a form provided by the terms of the plan (lump-sum distribution or an annuity). Many retirement plans require the account owner to name a spouse as the beneficiary unless he/she signs a form allowing the owner to name someone else as the beneficiary. The Employee Retirement Income Security Act (ERISA) protects surviving spouses of deceased participants who had earned a vested pension benefit before their death. The nature of the protection depends on the type of plan and whether the participant dies before or after payment of the pension benefit is scheduled to begin, otherwise known as the annuity starting date.  It is also important to remember that because they are non-probate assets, the assets held in a retirement account can be paid out to the beneficiary shortly after the owner’s death.

An IRA is a tax–advantaged retirement account that you own and control. Earnings generated can compound on a tax–deferred basis until withdrawal. In essence, an IRA is like having your own personal pension that you and/or your employer may contribute to for your retirement years.  There are numerous different types of IRAs, the most common of which include a traditional IRA and a Roth IRA. Because each has different rules regarding taxation and withdrawals it is important to understand those rules before establishing an IRA.

The federal gift and estate tax is effectively a tax on the transfer of wealth. A gross estate includes anything a decedent owned at the time of death that has value.  Without any deductions or adjustments to your estate, it could lose 40 percent of its value to federal gift and estate taxes. Both your financial planning and estate planning goals should consider the impact taxes will have throughout your life and at the time of your death.

Yes. Asset Protection planning should be part of any well thought out estate plan. Creating a financial plan that helps you amass a respectable estate and an estate plan that ensures your estate assets will be distributed accordingly to your wishes when you are gone only takes care of two-thirds of the bigger plan. You also need to protect the assets you acquire so that you will still have some left to pass down to loved ones after you are gone.

Financial planning focuses on acquiring assets and building up your estate. A comprehensive estate plan will include numerous goals, including things such as ensuring that your assets are available to provide for loved ones when you are gone and making sure your wishes are honored at the end of your life.  At some point, the goals of your financial plan with become entwined with the goals of your estate plan. For example, your financial plan will likely include retirement accounts. Those accounts could impact your eligibility for Medicaid if you need long-term care at some point. To ensure that everything works together well it is imperative that you incorporate financial planning into your estate plan.

For small business owners that do not plan to pass the business down to the next generation, it is a good idea to plan ahead for the sale of the business in the event of your death or capacity. One option is to enter into a Buy-Sell agreement. A Buy-Sell agreement guarantees that you (or your loved ones) will receive the fair market value of your interest in the business in the event you, or your surviving loved ones, must sell it later. In essence, a Buy-Sell agreement is a binding agreement between you and someone who agrees to purchase your interest in the business in the future for a pre-determined price or using a fixed method of determining the fair market value at the time of the sale.

One popular method used to transfer ownership of your business from one generation to the next is to create a Family Limited Partnership (FLP). An FLP allows you to transfer your legal interest in the business to the next generation slowly, over time, while maintaining control over the day-to-day management of the operation until such time as you are ready to retire. In addition, you may be able to gain tax advantages by using an FLP to transfer interest in your business to future generations.

At some point, you will no longer be at the helm of your business, either because you retire, sell your interest, or because of your death. Planning for that eventuality is imperative to ensure that you, or your loved ones, do not lose the value of all your hard work up to that point. Precisely when you should start thinking about transitioning ownership of the business depends, to a great extent, on whether you plan to pass it down to the next generation, sell your interest to a partner, or sell to a third party. If you plan to pass the business down to the next generation it is never too soon to get started. On the other hand, if the business is to be sold upon your death or incapacity, you should be planning for that now to ensure that your loved ones receive the fair market value of your interest in the business when the time comes to sell it, but you will not actually start transitioning ownership now.

Liquidity refers to cash assets or assets that can be readily converted to cash. A small business often lacks sufficient liquidity, particularly when they are relatively young businesses or when they are farm/ranch operations. All too often, the business’s assets are tied up in things such as equipment, supplies, merchandise, or livestock that cannot easily be converted to cash. In the event of your death, however, your entire estate could be subject to federal gift and estate taxes which are calculated based on the value of your estate, without regard to whether your estate assets are liquid or non-liquid assets. If your business lacks sufficient liquid assets to pay any tax due, critical assets might have to be sold to pay the tax, putting the entire business at risk.

Management continuity focuses on what happens in your absence. Who will take over the day-to-day management of your business? Never assume that someone is willing and able to do so, even if that person is an adult child or even a trusted senior employee. Even if they are, does he/she have the legal authority and practical capacity to step into your shoes? If not, the business could falter rapidly. Both customers and suppliers can become reluctant to do business with an operation when they are unsure who is running the show. You need a designated successor who is ready and able to step up and take over as smoothly as possible should the need arise.

Because every business is unique, no two business succession plans are the same. Nevertheless, there are some common goals and objectives that most business owners try to achieve with their plan, including:

• Designating someone to take over the immediate day to day control of your business if you are incapacitated tomorrow because of a catastrophic accident or debilitating illness.
• Ensuring that everyone impacted, including employees, business associates, and family, is prepared to accept your designated replacement.
• Preparing the necessary legal documents to ensure that your designated replacement will have the legal authority required to step in and take over.
• Making sure that your family will continue to benefit financially from the success of the business in the event of your incapacity.
• Putting a plan in place for someone to take over permanently, or to sell the business, in the event of your death.
• Keeping the business out of probate if possible.
• Devising a plan to value your interest in the business at the time of your death.
• Preparing the next generation to take over the business if you plan to keep it in the family.
• Creating the most advantageous legal structure for the business.
• Anticipating the tax implications for the business in the event of your death.
• Making sure sufficient liquid assets are available to cover any tax debt that might be owed when you die.

You understand the importance of protecting your business from common threats such as natural disasters, theft, and fire. In fact, you likely purchased insurance to compensate you in the event of a loss caused by a covered event. Have you considered though what would happen to the business if something happened to you? Not only could your business suffer considerable economic losses in your absence, but the entire business could go under without you at the helm. Incorporating business succession planning into your overall estate plan helps to ensure that your business continues to successfully operate in the wake of your sudden death or incapacitation.

Not to worry – you can delegate the authority to make health care decisions for you to a chosen loved one; however, you must execute a different type of document known as an “advance directive.”  State law also governs which advanced directives are recognized within the state. In California, an advance directive known as a Medical Power of Attorney gives the person you name as your Agent the authority to make any and all health care decisions for you in accordance with your wishes, including your religious and moral beliefs, when you are no longer capable of making them yourself. Similar to a general POA, you can give your Agent as much authority as allowable under the law or you can limit that authority.

Yes. Even a general Power of Attorney has limits. Exactly what those limits are will depend on the state; however, most states prohibit an Agent from self-dealing, making gifts in the Principal’s name, and making health care decisions for the Principal.

Although the authority granted in a Power of Attorney is well established by law, it is not uncommon for a third party to refuse to honor that authority nonetheless. A common reason for refusing to honor an Agent’s authority is claiming that the POA was executed too long ago. A third party may also question the authenticity of the document or refuse to honor a POA unless it is created using their form. Enacted in 2017, the California Durable Power of Attorney Law dictates that when a POA is presented to a third-party that third-party now has three choices – to accept it, to request that the agent sign a certificate, or to request the agent provide an opinion of counsel. The new law also imposes time periods within a third part must act and sets forth 11 reasons why a third-party can refuse to honor an Agent’s authority. If the third party does refuse using one of those 11 reasons, it is required to give the Agent a written Private Reason Affidavit, which is signed under penalty of perjury.

Both a general and a limited POA can be a springing POA. A springing POA has special language in it that causes the Agent’s authority to “spring” into action at a specific time or upon the occurrence of a specific event. For example, you might create a general POA that does not actually go into effect unless you have been missing for more than 48 hours or until you have been declared incapacitated by a physician. If the event occurs, your Agent’s authority “springs” into action.

Historically, the authority granted to an Agent in a POA automatically terminated upon the death or incapacity of the Principal. The problem with that was that the possibility of becoming incapacitated has always been a common motivation for executing a POA in the first place. If your goal is to ensure that the person you name as your Agent has the authority to act on your behalf if you suffer a period of incapacity, but that authority automatically terminates when you become incapacitated, there’s a problem. To resolve that problem, the concept of a “durable” POA evolved. When a POA is made durable it simply means that the Agent’s authority survives the incapacity of the Principal.

A limited POA only grants to your Agent the limited, and specific, authority outlines in the POA. For example, you might grant an Agent the specific power of attorney to act on your behalf during the closing for the sale of your home because you have to be out of town on business.  A limited POA is also frequently used by the parents of a minor child as a way to grant a caregiver the authority to consent to medical care for a child should an emergency arise while the parents are away.

A POA can be either general or limited. A general POA grants your Agent almost unlimited power to act on your behalf. This means that your Agent may be able to do things such as withdraw funds from your financial accounts, sell property and assets owned by you, and even enter into contracts in your name. Most states enforce some statutory restraints on an Agent even under a general Power of Attorney; however, if you execute a general POA you should assume that your Agent will have virtually unfettered control over your assets. With that in mind, you should only execute a general POA if you have complete trust in the person you name as your Agent.

At its most basic, a Power of Attorney (POA) is a legal document that allows you (the “Principal”) to grant another person (the “Agent”) the authority to act on your behalf in legal matters and transactions.  The type and extent of the legal authority you grant to an Agent in a POA depends on the type of Power of Attorney you execute.

Although you are not legally required to retain an attorney, doing so will help you avoid costly mistakes. Moreover, the estate will cover the cost of legal counsel.

The Executor must request several certified copies of the decedent’s death certificate. A copy will likely need to be submitted to the court to open probate. One will also be needed for the funeral home, and copies will likely be needed for third parties when acting as Executor.

No which is why the Executor must categorize estate assets. Some assets are classified as “non-probate” assets because they bypass probate altogether. Determining which assets are probate assets and which are non-probate assets is necessary to determine if the estate may qualify for a small estate alternative to formal probate. Common examples of non-probate assets include:

• Assets held in a trust
• Proceeds of a life insurance policy
• Accounts designated as POD or TOD
• Certain types of jointly held property
• Certain retirement accounts

Examples of steps to take include:

• Take possession of vehicles.
• Close financial accounts.
• Lock up real estate and arrange for upkeep.
• Speak to employees at a business and arrange for continued operations.

The Executor must locate and review all estate planning documents. Because estate planning documents may interact, it is crucial to locate all of them as soon as possible. Documents to look for may include a Will, trust agreement, life insurance policies, and/or Letter of Instruction among others. An original copy of the Will must be located to initiate the probate process which will officially grant you the authority you need to act as the Executor of the estate. An Executor must also ensure that assets are identified, located, and secured because he/she is ultimately responsible for them throughout the probate process.

If this is the first time you have been directly involved in the probate of an estate, it helps to get a general idea if what your role is during the process. The overall purpose of probate is to ensure that a decedent’s estate assets are identified, valued, and eventually transferred to the new owners. Before assets can be distributed, however, creditors must be given the opportunity to file claims and any federal and/or state gift and estate taxes must be paid. The Executor of an estate is appointed by the decedent in his/her Last Will and Testament and is charged with overseeing the probate of the estate.

Creating a family foundation is yet another way to include charitable gifting in your estate plan. This option, however, if best used when you have considerable assets to gift and the time to run the foundation once it is established. The benefits of using a foundation as your charitable gifting vehicle are numerous though, starting with the amount of control you will retain over how your gifts are used. In addition, creating a charitable foundation makes it much easier to involve your children and/or grandchildren in your philanthropic endeavors.  Running a foundation requires a considerable amount of your time and attention while you are alive though, particularly if you plan to grow the foundation by soliciting gifts from other donors as well. If you do create a family foundation, it can be an amazing gift to pass down to future generations.

A donor advised fund or annuity may also work for your gifting. It works by transferring gifted assets into the fund. Although you will no longer own the assets, you will be able to direct how the funds are used. If you gift to an annuity, you will also be able to choose the beneficiary who will receive the benefits from the annuity.

As the Settlor of your trust, you can appoint anyone you choose to be the Trustee; however, given the complex nature of a charitable lead or remainder trust you may wish to consider appointing a professional Trustee. One of the most common mistakes settlor’s make is appointing a family member or close friend as their Trustee without considering whether the individual is well suited for the position. Given the duties and responsibilities of a Trustee, you should appoint someone who has more than a rudimentary understanding of financial and legal concepts, which is why a professional Trustee is often the best choice.

A charitable remainder trust works just like a charitable lead trust, but in reverse. Trust assets are first distributed to at least one non-charitable beneficiary for a specified period with the remainder assets being distributed to at least one charitable beneficiary at the end of the time period. Using that same $1 million, in a charitable remainder trust you might create terms that direct distributions of $20,000 to each of your four children for ten years. After ten years, the assets remaining in the trust would be distributed to your named charitable beneficiary (or beneficiaries). Keep in mind that the trust should be earning interest during the ten-year period of initial distributions as well.

A charitable lead trust is structured so that assets from the trust are distributed to at least one charitable beneficiary for a specified period first. At the end of that time, the assets remaining in the trust are distributed to at least one non-charitable beneficiary. For example, imagine that you established a charitable lead trust and transferred $1 million into the trust. The terms might direct distributions in the amount of $50,000 to be made to your chosen charity each year for ten years. The terms might further dictate that at the end of that 10-year period the assets remaining in the trust are to be distributed to your four adult children

For many people, a trust does offer several advantages that a Will cannot when it comes to charitable gifting. For instance, you can retain a significant amount of control over how your designated charity uses the assets you gift through the trust terms you create as the Settlor of the trust. In addition, when you create a trust, you choose a Trustee who is responsible for managing the trust and protecting the trust assets, offering additional reassurance that the assets you gift will continue to grow and further your philanthropical goals.

Yes. Making gifts in your Will is certainly the simplest way to make a charitable gift; however, there are several drawbacks to using this method. First and foremost, gifts made using a Will do not allow you to retain any control over how the gift is used by the beneficiary. Once a gift is made in your Will the funds or assets gifted become the property of the recipient with no strings attached. If it matters to you how your assets are used by the charity, gifting in your Will is not an ideal option. In addition, if you wish to make any changes to the gifts you make in your Will it is usually necessary to revoke your Will and execute a new one. Adding a charitable gift, therefore, would require you to execute a new Will which is rather cumbersome. Finally, by waiting to make your charitable gift in your Will you miss out on any potential tax benefits you might get from those gifts and, instead, your estate may incur and estate tax debt because the assets remained in your estate until after your death.

If philanthropy is part of life right now, why not make it part of the legacy you leave behind when you are gone? Philanthropy can take many forms and can be directed at a wide number of diverse beneficiaries. It can also be handled in several different ways in your estate plan, depending on the type of beneficiary, size and complexity of the gift, and the amount of control you want to maintain over that gift. To help you better understand your charitable gifting options, the estate planning attorneys at Collins Law Group have put together some frequently asked questions and answers relating to charitable gifting. If you have additional questions or concerns, please feel free to contact our office to schedule a consultation.