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Estate Planning. It’s Not for Everybody. So Who’s It For?

CunninghamLegal – The Living Trust Lawyers

“Estate Planning” is a general phrase that most people associate with planning for the end of one’s life. While that basic definition is a good place to start, estate planning goes far beyond just planning for the distribution of assets upon death. It also includes planning for periods of incapacity, healthcare decision making, Medi-Cal planning, and more.

Despite its importance, not everyone has an estate plan. Since not everybody has an estate plan, it can be reasoned that estate planning is not for everybody. If it’s not for everybody, who is it for?

If you’re the type of person who prepares before leaving town, estate planning is for you.

Most people would not dream of taking a vacation of any duration without making arrangements for their responsibilities and what they hold dear. Bill paying, pet care, home security, giving someone the power to make decisions, etc. are all topics that cross our minds when going away for a week or more. Estate planning is a process through which a person can, in a similar but formalized manner, prepare for life’s unplanned events.

During a period of incapacity, an estate plan allows a person to select who will act on their behalf, how their assets will be controlled and who will participate in medical decision making. Upon passing away, an estate plan allows a person to direct important outcomes, such as: guardianship of minor children, who will care for pets, and distribution of assets. The same foresight that people apply prior to travel can be formalized in an estate plan to thoroughly prepare for whatever lies ahead.

If you’re the type of person who likes to have control over your assets, estate planning is for you.

It has been said that even those without an estate plan, actually do have an estate plan. The problem with the default plan is that it is provided by the government through statutes. A person without their own estate plan who becomes incapacitated is likely to be the subject of a court-ordered conservatorship. A person who passes away without their own estate plan will have their assets administered through the statutory “one-size-fits-all” distribution scheme under the oversight of the probate court.

Few people would consciously invite the government to make such important decisions on their behalf. Living trusts, pour-over wills, powers of attorney, and advanced healthcare directives allow a person to create a unique plan that prepares for their possible incapacity and eventual death based upon their particular circumstances without governmental interference.

If you’re the type of person who wants your financial legacy to be protected from taxes, estate planning is for you.

Tax consequences cause most people to get professional advice, prior to buying, selling, or gifting major assets. The same approach should be taken when considering the transfer of assets upon death.

Estate planning can prevent a person’s financial legacy from being reduced due to estate taxes, generation-skipping taxes and capital gains taxes. What may sound like a good idea (“I’m putting my children on the title to my house now, just in case something happens . . . ”) could cause a tax burden that an estate plan could have prevented.

Conclusion

Estate planning allows a person to create a unique plan to control their assets during their life, through periods of incapacity, and asset distribution after their death. Most people make a plan regarding their assets when just leaving town for a few days. Likewise, most people would rather not have the government control their assets and decision making upon incapacity or death and most people would not want to create a large tax bill simply due to lack of planning, or poor planning. Therefore, upon reflection, most people are likely to determine that estate planning is for them.

By: Doug Reeve. Doug can be contacted in our Camarillo office at (805) 484-2769. Doug’s profile is also found at: Doug Reeve

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Incapacity – Snow White and the Seven Steps

CunninghamLegal – The Living Trust Lawyers

Incapacity is generally defined as lacking the ability to make decisions for oneself. This can occur due to a mental impairment or a physical disability or illness, which prevents a person from having the ability to communicate their reasonable decisions to others. Like most people, Snow White did not know that she would become incapacitated. However, she did understand that proper estate planning doesn’t merely focus on transferring assets upon a person’s death. She knew that an estate plan should also prepare for the possibility that a person may become incapacitated and provide for control of assets and guidance for health care decisions during that time.

Snow White had been warned that the evil queen was out to get her. Despite the warning, she still took a bite of a poisonous (and possibly non-organic) apple. That one bite led to Snow White’s incapacity. She lay unconscious in the forest surrounded by non-CPR certified dwarves, while her real property and financial accounts seemingly had no guidance and medical professionals feared that there was no one who could speak on Snow White’s behalf.

Fortunately, Snow White had a thorough estate plan and she had taken the proper steps to ensure that during her period of incapacity, she didn’t lose control of her assets or medical decisions. The steps she followed were to:

1) Have a Revocable Living Trust: Snow White visited a qualified estate planning attorney who drafted a Revocable Living Trust as the cornerstone of her estate plan. The person she selected as her successor trustee will be guided by the provisions of the trust during Snow White’s period of incapacity.

2) Have a Durable Power of Attorney: A durable power of attorney allows for a person to act as the agent, or attorney-in-fact, on behalf of a person who is incapacitated. Snow White named the successor trustee of her trust to be her attorney-in-fact, thus this person has the power to manage assets that are inside or outside of the trust.

3) Decide When the Durable Power of Attorney Will Be Effective: The durable power of attorney can be effective immediately, upon the signing of an authorization by a person who still has capacity, or upon the occurrence of an event that causes a person’s incapacity. Snow White preferred that her durable power of attorney be effective immediately upon the signing of her estate plan, which means that her attorney-in-fact could act in her best interest anytime thereafter.

4) Create a List of Assets, Obligations and Accounts to Guide Your Successor Trustee and Your Attorney-in-Fact: It can be daunting to assume responsibility for another person’s assets and finances. It is recommended that you keep a current list of assets, obligations, and accounts to allow the people that you have nominated to seamlessly act on your behalf.

5) Have an Advance Health Care Directive: Also referred to as the “medical-power-of-attorney”, this document allows a person to be named as the health care agent and empowers them to make decisions on behalf of an incapacitated person.

6) Thoughtfully Select Who is Best Suited to Make Medical Decisions: It is important to select a health care agent who is comfortable speaking with medical professionals and advocating on behalf of the incapacitated person. Snow White selected the dwarf named Doc as her health care agent. His name indicates that he has a medical background and therefore would be comfortable discussing possible treatments and procedures with Snow White’s doctors.

7) Name People to Receive Medical Information (HIPAA Authorization): The Health Insurance Portability and Accountability Act requires that information relating to a person’s medical condition only be released to named “HIPAA agents.” Although Snow White wanted only one health care agent to make decisions for her, she authorized a handful of dwarves and family members to receive information related to her medical condition.

By following the steps listed above, Snow White’s assets were managed during her period of incapacity by people she had previously selected. Additionally, her health care agent was able to discuss and authorize her treatment. The experimental “kiss-by-a-prince” therapy proved successful and Snow White regained her capacity and her ability to control her assets and make her own health-care decisions. And by avoiding poisonous, non-organic apples, she was able to live happily ever after.

By: Doug Reeve. Doug can be contacted in our Camarillo office at (805) 484-2769.

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Your Estate Planning Binder Misses You

CunninghamLegal – The Living Trust Lawyers

For some people, a sighting of their estate planning binder is as rare as seeing Bigfoot in line at your local Starbucks. The binder is often initially reviewed and then is stored away for various reasons; to protect the documents, to protect confidential information contained in the documents, or to prevent one from having to think about the possibility of incapacity or their eventual passing.

Estate planning binders have been stored in the back of hall closets, underneath beds, or even inside mini-storage units located miles from the house. While the goal of protecting the documents from harm and protecting the sensitive information within from the curious glances of others is praiseworthy, the “out-of-sight, out-of-mind” approach goes against the responsible action of having had the estate plan created in the first place.

A quality estate plan takes an uncertain future into consideration. For example, naming contingent trustees and contingent beneficiaries addresses the possibility of changing circumstances. Another example of preparing for an uncertain future is that well-drafted estate plans address the possibility that a beneficiary may be receiving government benefits at the time of distribution. This beneficiary would then have their share distributed to a Special Needs Trust in order to augment, and not supplant, assistance they are receiving from the government.

Despite the ability of a quality estate plan to be forward-looking, a proactive approach is needed to ensure that the estate plan still meets the needs and the goals of the client. Is the estate plan still understood? Are there questions? Are changes needed?

Currently, there are many families relying on estate plans that were drafted before Congress dramatically increased the estate tax exemption in 2012. The “A-B Trust” structure that protected a family’s legacy from being eaten away by estate tax is often no longer needed and now can be cumbersome and expensive upon the passing of a married client.

Clients know about their own changing circumstances, but may not be aware of changes in the law. Estate planning attorneys are cognizant of changes in the law, but may not be aware of changes in the lives of all of their clients.

The key is to spend some time with your estate plan. Review the structure of the plan. Review the people you have nominated as your successor trustee, your financial power of attorney, and your health care agent. Review what will occur if you become incapacitated and how your legacy will be distributed upon your passing. As you review your estate plan, have post-it notes handy to write down questions that arise or to mark provisions that you are considering changing.

A dusty estate planning binder is the enemy! Vanquish the enemy today. Review your estate plan in light of your circumstances. Call us if you need help with the review.

Posted by: Doug Reeve. Doug can be contacted in our Camarillo office at (805) 484-2769.

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Looking for Original Estate Planning Documents?

CunninghamLegal – The Living Trust Lawyers

When Nordman, Cormany, Hair & Compton closed its doors in 2013, hundreds of estate planning files were left without a home. In June 2016, CunninghamLegal was entrusted with these files, and is currently in the process of letting the owners of the original documents know about the transfer. If you or someone you know is looking for original estate planning documents drafted at Nordman, Cormany, Hair & Compton, please refer them to our office and we will likely be able to locate their documents. CunninghamLegal can be reached at (805) 484-2769.

Stephen M. Wood is an attorney at CunninghamLegal in Camarillo, where he handles estate planning, trust administration, elder law and probate matters. Mr. Wood is also available to assist with Nordman, Cormany, Hair & Compton estate planning files.

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