1.  A will.  This document says who will inherit your property and possessions, and who will be your minor children’s guardian if you and their other parent have both died. It can also provide that life insurance proceeds and other assets will be transferred into a uniform trust for minors, to be used for your children’s care and education, if both parents have died.  This is the single most important legal document your family needs, and it can be short and to the point if your situation is simple. 

2.  An advance health care directive. It outlines what medical procedures you want taken if you are too ill or injured to state your wishes yourself.

3.  A health care power of attorney.  This permits your spouse / domestic partner to authorize medical treatment and receive medical updates for you if you are unconscious or too injured or ill to communicate.

4.  A Durable Financial Power of Attorney.  This allows your spouse or domestic partner to handle your finances and property if you become incapacitated. It is not appropriate for every couple, and it should never be given casually to other members of your family.

5.  A method for your spouse / domestic partner to avoid probate:

      a.  A revocable living trust  – if you own a house, brokerage accounts, and other assets, this document puts them into the name of your living trust, with you named as the trustee who has complete power to buy, sell, and transfer these assets as you wish.  Your spouse / domestic partner, another trusted person, or a bank trust department is named as the substitute trustee who can take over if you die or become incapacitated.

      b.  If you have few or no assets, you can get by with other legal mechanisms which will not help if you become incapacitated, but will help your spouse / domestic partner avoid probate if you die.  You can deed your home to a “tenancy by the entirety” of yourself and your spouse or a “joint tenancy with right of survivorship” of yourself and your domestic partner, and that person will automatically inherit all your interest if you die.  Vehicle titles can be placed in joint tenancy, and bank and brokerage accounts can either be owned jointly, or be made “payable on death” to your spouse / domestic partner or other person you choose.

6.  A letter of instruction. This provides funeral and other related instructions for your survivors.  It should also contain essential information they will need, such as the location of your key papers, your bank and brokerage account information, the name of your attorneys, and a contact list.  If you have a pet, this letter should include care instructions and your veterinarian’s name.

7.   Safe document storage:  keep signed copies of the above items at your attorney’s office and at your home in a fireproof box to which your spouse or domestic partner also has a key.  In addition to the above documents, your fireproof box should include copies of other financial and legal documents, such as a pet trust, life insurance policies, deeds, car titles, military records, birth and marriage certificates, divorce decrees, insurance policies, and real estate deeds, along with information about your bank and other accounts, retirement plan, any prepaid funeral plan, and long-term debts such as mortgages and car loans. This information is likely to be needed by your attorney and your executor, who must distribute your property and notify your creditors after you die.  

Call San Diego Law Firm for Legal Documents to Protect Your Family’s Future

Providing for your family’s future is a gift of love to those closest to you.  Making sure you and your spouse have basic legal safeguards in place can give you great peace of mind and make sure your family is fully protected if anything happens to you.  

San Diego Law Firm’s experienced will, trust, and probate attorneys can help you create a good plan to protect your family if you are no longer here. We prepare each will and trust document to fit your exact situation and your wishes, and we can readily update any documents you already have.  We can provide flat-fee estimates for all of our will and trust services once we know what your situation requires.  Please call us for an appointment at (619) 794-0243.  We look forward to helping you.

There are many specialized asset-preservation strategies, some involving a combination of trusts, partnerships, and corporations. You’ll want to plan, though, before the need arises.  If you transfer assets into a trust, a family limited partnership, or a corporation after a lawsuit is filed against you or your business, a court will likely treat the assets as though they were still in your name.

Here are three of the most common asset-preservation trusts:

1. Irrevocable life insurance trust.  In the United States, life insurance proceeds from a policy you own are counted as part of your estate for federal estate tax purposes, even if the proceeds are payable directly to your beneficiaries.  In addition, the cash value of the policy can be attached by creditors.

Both of these problems can be solved by putting your life insurance policy into an irrevocable life insurance trust.  You can fund the policy premiums with annual gifts to the trust. There will be no estate tax on the proceeds if the policy is put into the trust at least three years before you die. If the policy is put into the trust before any claims arise against you, the trust will also protect the cash value of the policy from your creditors. After you die, the trust will receive the insurance proceeds and will invest them for the benefit of the persons (usually, your spouse and children) you have named as “trust beneficiaries.”  A side benefit of this is that the policy proceeds can be held until any of the named beneficiaries, such as children or grandchildren, reach a certain age chosen in advance by you. 

2. Grantor-retained annuity trusts.  This trust is typically set up with a transfer of cash to the trust.  The cash is then invested.  As the “grantor” establishing the trust, you specify that you will receive an annuity at a specific rate – typically, around 6% – for a set number of years.  You can also specify that if you die first, your spouse will receive an annuity.  When both you and your spouse die, the remainder is then paid into trusts that will be automatically created for your children, or anyone else you specify.  Creditors cannot attach any funds other than the annuity payable to you each year.  Creditors can never attach the principal of the trust.

A variation on this trust exists where you anticipate that you may become the target of lawsuits – for instance, if you are a doctor who performs high-risk procedures.  Then the annuity can be made payable to your spouse, completely protecting it from creditors.  You can specify that if your spouse dies first, you will receive the annuity.  Although your annuity will then be available for creditors to attach, the trust principal will still be preserved.

3. Family limited partnership trust.  A family limited partnership trust usually combines business operations with asset protection and estate planning, and typically involves layering at least two entities.  First, assets are put into a family limited partnership.  These assets usually include your business, or the stock of your business.  Because creditors could foreclose on a partnership interest owned by you, the partnership is instead owned by a family trust.  In your status as trustee of the family trust, you control the trust, and therefore, the partnership, and therefore, your business.  This is a complicated but very flexible arrangement which can protect different assets from creditors, and each asset can be governed by its own terms.  It can also minimize estate tax if carefully drafted.

Asset protection is a complicated area of law, and each person’s finances, tax situation, and business must be considered on its own merits. If you would like the experienced business and estate planning attorneys at San Diego Law Firm to evaluate your particular situation for the suitability of asset-preservation strategies, please call us for an appointment at (619) 794-0243.  We look forward to helping you.

Parents also face financial challenges in caring for a special needs child due to medical bills that may not be covered by insurance, as well as increased educational expenses and costs of therapy programs.  For parents who have children who may require care into adulthood, there is the added worry of ensuring their child will be cared for after the parents pass away.  As one financial planner notes, parents of a special needs child must essentially plan for three retirements—both of their own and their child’s long-term care.

A special needs trust is an estate planning tool that is available to help parents plan for and protect their special needs child’s future.  A special needs trust can preserve government benefits, such as Supplemental Security Income (SSI) and Medi-Cal, for people with disabilities.  These benefits have specific financial eligibility requirements.  If a person with disabilities receives an inheritance when they reach adulthood, they may no longer be able to qualify for benefits.

A special needs trust is a wonderful way to help provide for a special needs child through his or her adulthood.  Under a special needs trust, a trustee (who may be a friend, relative, or the trust department of a bank) is named to hold property for the benefit of the child with disabilities after the parents are no longer alive.  The trust is used to provide for various needs of a person with disabilities, without causing them to be disqualified for government benefits and programs.  The trust may be funded by the parents’ life insurance policies or with monetary gifts from relatives.

The trust can be customized based on the individual wishes of the family and the needs of the child.

San Diego Law Firm’s attorneys have many years of experience in setting up special needs trusts, and are knowledgeable about the precise legal rules that must be followed.  They can create a trust that will permit your child or disabled adult family member to receive all government benefits to which they are entitled, that will fit your family’s needs, and that will help ensure that your special needs child will be protected and cared for in the future.  To learn more about special needs trust, and to receive expert legal help in setting up your child’s trust, please call San Diego Law Firm at (619) 794-0243 to schedule an appointment.

Some people believe that a will or trust is unnecessary if their property automatically passes to their spouse and children under the law.  However, a will and living trust are especially important for people who are married and those who have children to ensure the simple transfer of property, save on probate fees, and help safeguard a family’s financial future. 

Where a person dies without an estate plan, his or her real estate and personal property will go through probate.  Probate is a legal process where a deceased person’s assets are inventoried and distributed by the court to the heirs.  It is a costly and complicated legal process which can last anywhere from six months to two years.   Probate can be avoided by having an experienced attorney prepare a living trust and will.  A living trust saves the cost and time of probate and provides you and your family with peace of mind, and a will provides for any property that is acquired later and not put into the living trust.

The attorneys at San Diego Law Firm create customized wills and trusts, along with other “estate planning” documents, to fits the diverse needs of families throughout California.  They understand how to protect your wishes, ensure your privacy, and reduce or eliminate the death tax.  Avoiding probate costs and taxes can wave your family a considerable amount of money.  This means that more of your assets can be passed on to your family.  Please call 619-794-0243 to schedule a consultation to learn how a will, living trust, and related documents can help protect your assets and ensure your family’s financial well-being.

A Living Trust is a legal document that holds title to your assets on your behalf.  You, as the “trustee” of the Living Trust, can move assets in and out of the trust, revoke the trust, or amend the trust at any time.  However, after your death the trust becomes irrevocable and the assets in the trust are transferred to your “beneficiaries,” the people you want to inherit your property. 

Should a Living Trust be a Part of an Estate Plan?

When deciding whether to make a Living Trust part of your estate plan, you should consider the benefits it can provide.  One of the most important reasons to make a Living Trust part of your estate plan is to avoid probate. Under California law, if your estate has over $100,000 in assets at the time of your death, your estate must be probated whether or not you have a will.  (Some assets, such as life insurance benefits paid to others, do not have to be included in calculating the $100,000.)  Probate can be a time-consuming and costly process. However, assets conveyed to a Living Trust before death are not subject to probate, although a Living Trust generally does not contain every item you own, and a will is necessary to provide for the distribution of the remaining ones.  If the value of those assets is less than $100,000, then no probate is required.    

Can a Living Trust Help Me Plan For a Disability?

Without a living trust, if you become incapacitated, dramatic measures such as a court-supervised guardianship or conservatorship may be needed to manage your property.  The advantage of a Living Trust is that you can specify who can manage your property if you become disabled. However, you need to make sure that your Living Trust is written to specifically address disability planning.

Can a Living Trust Reduce Estate Taxes?

A Living Trust may reduce estate tax liability.  For example, a married couple can create an estate plan that qualifies for the federal estate tax exemption by having a Living Trust drafted as an “AB Living Trust.”   This may be a useful document to include as part of an estate plan depending on the value of the estate, whether or not each spouse has separate property of a substantial value, and whether there are children who are to be provided for after the death of  one parent. 

A final reason that a Living Trust may be valuable to you is that it keeps your information private.  Probate is a court-supervised process that requires the disclosure of private records that you may not want to become part of public court records.  If all your assets were handled in a probate, any person could find out who was going to inherit your assets and what those assets were. 

Estate planning is an intimate matter that you want handled with ease, efficiency, and a sense of trust between you and your attorney.  Estate planning does seem complicated when there is so much to consider.  Creating a living trust that will allow you the freedom to manage your assets while you are alive, plan for a potential disability, and avoid costly estate taxes takes the experience of a seasoned attorney. Call the team of estate planning attorneys at San Diego Law Firm at (619) 794-0243 for the living trust, will, and other estate plan options that will work best for you.  The cost is surprisingly affordable, while the protection and peace of mind you’ll gain are priceless.

What is a Special Needs Trust?

Under the current Social Security public benefits system, a disabled individual is eligible to receive government assistance to provide for basic needs such as food, clothing, health care, and shelter.  To receive assistance, a recipient cannot have more than $2,000 in cash and assets in their name.  A Special Needs Trust is a legal document that allows a person with a physical or mental disability to have, held in trust for his or her benefit, an unlimited amount of assets without jeopardizing state or federal benefits. If monies are placed in a Special Needs Trust they are not considered part of your child’s assets and your child can still qualify for all benefits and programs.

Why Alternatives to a “Special Needs Trust” May Lead to Catastrophe for Your Child

Regardless of the size of your estate, leaving all of your money to a relative to care for a disabled child is risky.  When an individual holds those assets, they may be spent, ill-managed, or attached by judgment creditors.  But a Special Needs Trust guarantees that the funds will be held only for the benefit of your disabled child.  Judgment creditors of the disabled child or of a caretaker cannot attach money in a Special Needs Trust.

How Your Child Can Benefit from the Funds in the Trust

The money in the Special Needs Trust can be used to pay for a number of things, including vacations, care-giving services, and even a home for your child. Plus, it will provide you with the peace of mind that your child’s access to vital government services and benefits is not threatened.

Contact San Diego Law Firm to Set Up a Special Needs Trust for Your Child

A Special Needs Trust, like all trust and estate planning documents, must be drafted precisely to be valid.  In an age when technology makes us feel empowered to take matters into our own hands, legal planning for the future of a disabled child is not something you should try to accomplish on your own.  A Special Needs Trust requires specific language, and if it is poorly crafted it can cause your child to lose benefits and health care he or she would otherwise be entitled to.  Our estate planning attorneys at San Diego Law Firm are familiar with the public benefits system, and can prepare a Special Needs Trust that will accomplish the purposes you intend.  They can also integrate it with your will, living trust, and other estate-planning documents, so that it operates exactly as you intent.  For more information or an appointment, please call us at 619-794-0243.

Knowing loved ones will be financially cared for in the event of death can give a family breadwinner great peace of mind.  Life insurance is a valuable tool in any estate plan because of the benefits it provides. 

First, life insurance can help family members bare the financial consequences of an unexpected death.  The National Funeral Directors Association approximates the average expense of a funeral to be upwards of $6500.00. This is a cost that may be prohibitive unless there is a reliable and immediate source of funds which can be used to pay for high funeral expenses.

Second, a life insurance policy ensures the loved ones’ future financial security. For example, if the family’s primary income earner passes away, a well funded life insurance policy will provide money to meet current and future household expenses such as mortgage and education costs. If you want to ensure that all of your life insurance proceeds are used for the purposes which you intend, you may want to consider having your attorney prepare an Irrevocable Life Insurance Trust for you.

Life Insurance and Estate Tax

What you may not know is that the proceeds paid on a life insurance policy are included in an estate (everything you own when you die) for estate tax purposes.  This means the size of the estate is actually inflated by the face value of the policy.  For example, if you have real estate, bank accounts, and stocks that add up to $2,000,000 you may think that only $2,000,000 of the estate will be subject to the federal estate tax rate. However, if you have $500,000 worth of life insurance it is considered part of your estate, and estate taxes will be due on $2,500,000!  The underlying reason life insurance benefits are included in an estate is because the policy holder is deemed to “own” the proceeds so that the IRS can fully tax those proceeds as part the deceased persons estate at death.  

Reduce Estate Tax With a Life Insurance Trust

One way to avoid tax on life insurance proceeds is to establish an Irrevocable Life Insurance Trust, or ILIT.   Under an ILIT, the life insurance policy is not “owned” by the decedent or his or her spouse.  Therefore, the proceeds are not considered part of the decedent’s estate. This is done by transferring ownership of a life insurance policy to the trustee of an ILIT.  After ownership interest of the life insurance policy is transferred to the trustee, you’ll no longer “own” the policy and the proceeds can’t be taxed as being part of your estate when you die.

Advantages and Disadvantages

However, there are a few drawbacks to consider in setting up an ILIT. For example:

• You can’t change the beneficiary of the policy:  If you as an insured want the flexibility to deal with changed family circumstances, an ILIT may not be the right choice for you because after the ILIT is created, the insured gives up the right to change the beneficiary of the policy.
• You can’t borrow from the policy:  If your policy normally allows you to borrow against the policy or make cash withdrawals from it, under an ILIT you will no longer be able to do this.
• Transferring an existing policy to the trust could be complicated:  If you already have a life insurance policy, ownership can be transferred. But, if the insured dies within 3 years of the date from which the policy was transferred, the life insurance policy will be included in the estate for tax purposes anyway!  However, depending on a number of factors, your attorney may be able to avoid this problem with a “fail-safe” clause that ensures that the proceeds of a transferred policy are held separately under an ILIT. 

Our estate planning attorneys at San Diego Law Firm know the complexities involved in making sure loved ones and assets will be cared for and protected in the worst-case scenario for a family. We can answer your questions about life insurance trusts and other estate planning tools that you can use to ensure that 100% of life insurance proceeds go to the beneficiaries instead of to paying estate taxes.  Also, we can look over your existing estate plan to make sure that all potential “fail-safe” mechanisms are in place.  Call us at 619-794-0243 for advice and a consultation on ILIT issues.

Dying Without a Valid Will (Intestacy)                                 

If you don’t leave behind any instructions for how you want your property divided (such as with a valid will or living trust), then California law steps in so that the probate court can distribute your property to your heirs.  A person who dies without a valid will is said to have died “intestate.”  In these situations, California’s intestacy laws apply.  These laws decide which family members will inherit by creating a hierarchy.  Sometimes things get more complicated, but here are the basics:

      ●    If You’re Survived by a Spouse or Domestic Partner

Your surviving spouse or domestic partner will receive your full share of “community property” (your shared marital property as determined by California’s community property laws).  You might also have your own “separate property” (usually this is property you owned before marriage or inherited while married).  Assuming that your separate property never turned into community property, then your spouse or domestic partner will get a share of those assets.  He or she will either get all, half, or a third of your separate property depending on whether you have certain relatives.  Those relatives (usually children) would receive the rest. 

      ●    If There’s No Spouse or Domestic Partner

If you had children (or a grandchild from a child who died), then they’ll inherit your estate.  If you didn’t have any children, then the hierarchy goes from parents, to siblings, to grandparents, to aunts and uncles, to cousins, and then more distant family members.  Keep in mind that once there’s someone eligible to inherit, the probate court won’t give property to anyone who’s further down on the hierarchy.  For example, if you have children, your parents will not inherit anything from you under the intestacy system.

What the Intestacy Rules Leave Out

When there’s no will or trust, the rules for distributing your property ignore many things that you probably think are very important.  For example:

      ●    Strained Family Relationships - Maybe someone who you wouldn’t want to inherit from you will under California’s intestacy rules.

      ●    Protecting Adult Children (From Themselves) - You may have a child who’s over 18, but who’s likely to seriously mismanage his or her inheritance, or lose it to creditors.  To avoid this situation, you’d probably want to establish a trust that can include safeguards.

      ●    Some People & Organizations Can Never Inherit From You - Even if you’re in a long-term relationship, your significant other won’t be eligible to inherit from you if you didn’t marry or enter into a domestic partnership.  Your friends, charities, and other organizations that you may want to leave a gift for also won’t receive anything. 

      ●    Leaving Loved Ones Out, Even If They’re Related - Your family member may not get to share in the inheritance, even if you would have wanted them to.  California’s intestacy system is a hierarchy.  Certain relatives (like a spouse or children) are higher up on the hierarchy than others (like parents, aunts, uncles, or cousins).  Under this system, your property is meant to be inherited by the relatives who are as high up on the hierarchy as possible.  As soon as there’s someone who can inherit, relatives who are lower on the list are shut out.

Create Your Own Plan Instead

If you create a will or trust, then you can usually decide who gets what and how.  You’ll also be able to control how much they get.  For example, even if you want your children to receive most of your property, you can still make gifts to a niece, friend, or others. 

After you’ve made your will and trust, watch out for pitfalls that can lead to intestacy (or partial intestacy).  In part, this means making sure all your property is covered by a valid estate plan.  If you get new assets after creating your will and living trust, then let us know.  For the same reason, any changes to your will or living trust need to be made carefully. 

We’ll advise you on your best options, so you can learn about the benefits of estate planning.  Remember, avoiding probate is not your only goal.  Estate planning is about taking control, while also finding the best way to minimize any taxes.  Get essential help with your will and living trust by contacting San Diego Law Firm’s experienced estate planning attorneys at (619) 794-0243.

Decide if you want your agent’s powers to start now, or later

Just as important as what your agent can do is when they can do it.  A power of attorney can give your agent power right away, or hold off until a future event or condition happens.  We’ll explain the benefits and drawbacks with either option.  Your decision will depend on who you will name as your agent and your personal circumstances.

For example, take a look at the following scenarios:

      ●    Illness, Medical Conditions, or Accidents

You can have your power of attorney go into effect only if you lose the physical or mental capacity to make financial decisions, such as after an illness or accident. 

You may want to include a requirement that a doctor first determine the incapacity before your power of attorney can be used.  On the other hand, this delay can work against you in an emergency when a decision needs to be made immediately.  We’ll explain your options and take all of this into account when preparing your power of attorney. 

      ●    Temporary Absence

If you go on vacation without your kids, you may want to set up a special power of attorney for the time you’ll be away.  Even if you don’t have kids, if you’ll be gone for a long time you may need someone to manage your finances while you’re out of the country.

      ●    Spouses and Domestic Partners

Many spouses and domestic partners decide to make their powers of attorney effective immediately.  If you’re married or in a registered domestic partnership, you probably own most of your property together.  Even so, some transactions require authorization from both of you.  Also, some of your money and property may be in your name only, so you need the power of attorney to give your spouse access those assets if there’s an emergency. 

Make sure your power of attorney is done right

With years of experience behind us, your lawyer at San Diego Law Firm will create a power of attorney that follows California law and avoids the pitfalls of generic or poorly written powers of attorney.  That way, you can be much more confident that your power of attorney will be accepted by banks, investment firms, and others. 

An alternative to “Conservatorships”

Remember that if you lose capacity in the future, by creating a power of attorney you can decide who you would like to manage your finances.  This means that in many situations, a good power of attorney can help you avoid the need for a “conservatorship” down the road.  A conservatorship would require that a loved one go to court so that a judge can appoint someone to manage your finances and healthcare.

A properly written power of attorney – along with a similar document for your medical decisions (called an “advance health care directive“) – can help minimize family conflict.  While conservatorships can be necessary for some, many times a power of attorney is appropriate and can avoid the expense and time involved with creating a conservatorship in court. 

Also keep in mind that a living trust and a guardianship can do more than you think, because both can help you plan for possible incapacity.  Don’t miss your opportunity to plan for the future.  Reach San Diego Law Firm experienced estate planning lawyers at (619) 794-0243.

Choosing someone to manage your finances

Whoever you choose to handle your finances through your power of attorney is known as your “agent.”  If this person steps in because you aren’t able to manage your finances, then you’ll depend on your agent to keep things on the right track for you.

Most people choose a family member such as a spouse or domestic partner for the job, but you might also consider naming an advisor or someone else who you can trust. 

Not only do you need to trust them personally, but also ask yourself whether you can trust their judgment because they’ll be handling your finances.  For instance, will this person be responsible and reliable enough to carry out your daily tasks?  What’s more, you may want to name a back-up agent in case your first choice is no longer available. 

How much power will you give your agent?

So exactly what does a power of attorney let your agent do?  How much (or how little) your agent can do will depend on what’s included in your power of attorney document.  It’s all up to you, but you can only make good choices if you really know and understand the options. 

You don’t want to make the mistake of using a generic power of attorney form that doesn’t capture your wishes.  We’ll make sure your authorization is accurate, complete, and really reflects what you want.  California law allows you to authorize many different types of actions in your power of attorney.  Here are a few common examples of what you may want your agent to do for you:

    ●    Sign contracts and other documents on your behalf

    ●    Manage your bank accounts

    ●    Accept your government benefits for you

    ●    File your taxes

    ●    Buy or collect insurance

    ●    Write checks to pay your mortgage, medical expenses, and other bills

    ●    Manage your property and make repairs

    ●    Buy and sell real estate

    ●    Manage your business

    ●    Take steps to minimize any estate taxes that could be due when your property is inherited

    ●    Invest your money in stocks and bonds, and oversee your existing investments

Beware of the outdated power of attorney

On her blog, Financial Planning Mastered, certified financial planner Sue Quint warns that banks and financial companies are more likely to accept your power of attorney if you update it every so often.  The bank may be more likely to question the document and deny your agent access to your accounts if it’s dated too far back. 

By reviewing your power of attorney, you’ll also have the opportunity to make changes and you may even decide to name someone else as your agent.  We’ll help you cancel your old power of attorney and get a new one in place. 

You can learn more in Part 2 of this post about how a power of attorney works.  Also get information about what you can do now to protect yourself and your loved ones by speaking with an experienced estate planning attorney at San Diego Law Firm.  Reach us at (619) 794-0243.