Last week I shared with our readers my favorite saying: People don’t plan to fail, they fail to plan! This goes for everything from a will and health care directive to having the phone number of a plumber, electrician, doctor and attorney by your phone so that when you need to get help you do not have to look while you are panicked.
I am often asked: Do I Need Estate Planning?
You do! Age, gender, marriage or domestic partner/divorced; straight or gay we all want to take care of our loved ones at our death. However you must also take care to ensure your well-being throughout your life, in sickness and in health.
Do you have an Estate Plan? UNLESS YOU TAKE THE TIME now to prepare an estate plan then at your DEATH, what you have may not go to the people to whom you want it to go. Your estate could wind up in such a mess that neither you, during your life, nor your loved ones after your death, will be adequately taken care of. Without a will/trust the money will pass on by the Intestate laws of the State of California. I explained last week: If you had a classic car worth $1,000,000 and left it to son A and a million in cash and left it to son B and if the car was sold before you passed away, then the son that was to get the car would get nothing. This is because it was a Specific Bequest of the car not money.
1. KNOW where your testamentary documents are located: Where are the Wills, Trusts, Insurance Policies, Health Care Directives and Power of Attorney forms located? Know how to access them. If they are in a safe deposit box, do you know where it is located? Do you have access? Do you know where the key is located?
2. KNOW your professionals: Who are the attorneys who created these documents? Who are your accountants? Know how to access them so that you can seek their advice. Make a list with the name, address, phone number and email of your Lawyer, CPA, Stockbroker and Financial Advisor for starts.
3. KNOW where the documents concerning your properties are located: Know where the deeds to your properties are located, as well as the location of the purchase documents, escrow documents, loan and refinance documents. Your tax basis for these properties is an important piece of information and that can only be determined from these documents.
4. KNOW where your ownership certificates are, as well as other documents of acquisition and title, to personal property.
5. KNOW where your tax returns are and where the backup information for the current return is located.
6. KNOW the source of your income, whether it be retirement plan, 401(k) plans, Social Security, rental income, notes receivable, interest, dividends, annuities or other business income and know how to identify it.
7. KNOW where bank accounts are located and who the signatories are.
8. KNOW where the stockbrokerage accounts are as well as who your broker
9. Know where beneficiary designations for retirement accounts and insurance policies are located.
7 ALTERNATIVES TO PROBATE You should know about
1. The Joint Tenancy Process: By holding various assets in joint tenancy, with right of survivorship, the asset will pass to the survivor upon the death of either, rather than by the Laws of Intestacy or the provisions of a Will. This is a good idea in some cases and not such a good idea in others.
2. Insurance: An insurance policy, naming the spouse as a beneficiary of the policy, will cause the proceeds to be paid to such spouse under the insurance contract without reference to a Will.
3. Retirement Funds: When you name a Beneficiary of your IRA, Keough or other retirement fund, it will cause the proceeds to be transferred to your named Beneficiary without the necessity of a Probate.
4. Community Property: Upon the death of a married person, all of the decedent’s community property may pass to the surviving spouse without full probate
5. Summary Proceeding: There are also means of setting aside Small Estates.
6. Pay on Death Accounts: Also, there are a number of types of bank accounts, such as “A POD account” (sometimes called a Trustee Account or a Totten Trust), which allows you to avoid the problems of both Probate and co-ownership.
7. The Living Trust: And, of course, the other way to avoid a Probate is by the use of a LIVING TRUST. I suggest all our Coachella Valley Weekly readers contact their attorney to look into this for your family. If you do not have one please call me at 760 341 4411.
A Trust is a fiduciary relationship with respect to property in which one person is the holder of the legal title to property, subject to an equitable title in another.
“I own Black Acre. I give it to you or even myself, as Trustee, to do with as I direct; and when I die, I give it to my son in Encino, and if he does not survive me, then to his children in equal shares.”
You may be your own Trustee, but you should name a Successor Trustee to act upon your death or if you are incapacitated; and that Successor will manage and distribute the assets in your Trust. You may give the Trustee specific instructions about how you want to manage the Trust or allow the Trustee to have broad discretion; and you may put any of your assets into the Trust, or you may put some of them into the Trust and not others. You can also retain almost complete control over your assets. You may make the Trust revocable, so that you can change it, or cancel it, at any time during your lifetime. You can always change that Trustee during your lifetime, but remember that the Trust is only a piece of paper. It is only as good as that which you put into it. If you transfer nothing into the Trust, it is simply a shell and has no force and effect. It is then important that you arrange for the transfer of assets into a Trust and that is not a simple matter.
Next week I will talk about The Pros and Cons of a Trust.