What Can I Do if my Parents Do Not have an Estate Plan?

Begin a Conversation with your Parents

Discussing your parents' estate plan can be an emotionally difficult conversation because money, health, and control are all sensitive subjects.  Consider bringing up estate planning with your parents by telling them you are working on your estate plan, and ask if they have done their own.

You may be able to encourage your parents to plan their estate by discussing how they can use a trust to avoid exposure to taxes, avoid probate, and control how or when their beneficiaries receive certain assets. In addition, you may want to point out that an estate plan can make your parents’ intentions clear, which may help avoid conflicts among family members after they have passed away.

Image credits belong to HelenOnline

If they do not have an estate plan, you can refer them to an estate planner.  You can also use the checklist below, to help discuss estate planning with your parents.  A checklist can help with the estate planning conversation because it is acts as a step-by-step guide that can direct your conversation and help minimize emotions.  The checklist conversation may also help motivate your parents to plan their estate.

Estate Planning Checklist

I. Make a List of Key Contacts for Financial Matters

Write down the names and contact information for any professionals involved in your parents’ financial care. This list should include any financial planners, investment advisors, brokers, lawyers, and accountants.

II. Make a List of Medical Professionals and Resources

Since you may be called on to help with medical decisions for your parents, make a list of their doctors, other health care professionals, and health insurance policies.  In addition, you may consider including member ID numbers, long-term care policies, and any medications they may be taking.

III. Make a list of Assets, Account Numbers, Account Locations, Personal Identification Numbers (PINs,) and User IDs

If you ever need to step in and help manage their finances, you need to know your parents’ assets, including bank accounts, brokerage and mutual fund accounts, life insurance policies, and real estate.

IV. Identify a Suitable Location for Sensitive Information

If for some reason your parents do not want to give the above details to you, ask them to make a list on their own and store it in a secure location that you can access.

V. Decide on How Financial and Medical Affairs will be Handled with Legal Documents

Your parents will need legal documents to give an agent or trustee the authority to manage their financial and medical affairs if they are unable to do so for themselves.

A Trust - A trust is a legal arrangement in which your parents appoint a person to act as a trustee to manage their assets for their benefit if they are unable to manage the trust assets for themselves. The trust provides their trustee with a set of rules that must be followed when managing their assets.  It also creates a fiduciary relationship between them and their trustee, so that their trustee is personally liable for the mismanagement of trust assets.  After their death, their property will be distributed according to the directions in the trust.

A Pour Over Will – A Pour Over Will acts as a safety net for their estate. At the time of your parents’ death, it collects assets that were not made property of their trust and moves those assets into their trust. In addition, conservators may also be nominated in a Pour Over Will.

A Durable Power Of Attorney - appoints agents to make financial decisions for your parents regarding non-trust assets in the event they are not able to make financial decisions for themselves.

An Advanced Health Directive - appoints agents to make medical decisions for your parents in the event they are unable to make medical decisions for themselves.

Summary

Consider recommending Timothy Follett at Santa Barbara Estate Planner for your parents' estate planning needs. We are experienced at helping first time estate planners navigate the complicated estate planning process in a stress free environment.  We will take the time to provide counseling so your parents are comfortable and help them make informed decisions about their estate plan.

For more information visit our website:  https://santabarbaraestateplanner.com/    

(805) 669-7009 or tim@santabarbaraestateplanner.com

Do I Still Need an AB Trust?

It depends. . .

This article is for educational purposes only.  Your attorney should help you decide whether you need an AB Trust.  The decision on whether to keep or replace an AB Trust is highly fact specific and subject to your personal goals and risk tolerance.

AB Trusts are very common estate plans, because prior to 2012, the only sure way for a married couple to both use their Federal Estate Tax Exemptions, through a trust, was by the use of an AB Trust.  However, a major change in the Federal Estate Tax Law in 2012 gave married couples more options for their estate plan.  Estate plans that have an AB Trust should be reviewed by an estate planner to determine if an AB Trust is still the best option.

How Does an AB Trust Work?

In general, upon the death of the first spouse in an AB Trust, two subtrusts are created: Trust A (the Survivor’s Trust, holding the surviving spouse’s property); and Trust B (the Bypass Trust, holding the deceased spouse’s property). The deceased spouse’s Federal Estate Tax Exemption is used to fund Trust B, the Bypass Trust.  The reason Trust B had to be created to hold the deceased spouse’s property was because the Federal Estate Tax Exemption was like a use-it-or-lose-it coupon.  The coupon had to be used at the time of death or it could not be used at all.  As a result, the AB Trust used the first deceased spouse’s Federal Estate Tax Exemption when the first spouse died, and the surviving spouse’s Estate Tax Exemption was used later when the surviving spouse died.

What Changed?

In 2012, a major change in the law now allows a surviving spouse to claim the deceased spouse’s Estate Tax Exemption (referred to as portability).  Now, the tax coupon is not a use-it-or-lose-it coupon.  The surviving spouse can now use his or her coupon and their Deceased Spouse’s Unused Exemption (“DSUE”).  This change in the law makes Bypass Trusts optional because the surviving spouse can use both of the couple’s Federal Estate Tax Exemptions.

Why Does This Change Matter?

The change in the law can help couples avoid passing capital gains taxes onto their beneficiaries. Inclusion of an asset in a decedent’s estate allows for a step up in the basis of that asset.  The step up in basis can eliminate or reduce the beneficiary’s capital gains taxes.  This example is specific to California, a community property state with no estate taxes:

When Husband dies, his share of the community property and his separate property are passed to Wife.  As a result, all of Husband’s and all of Wife’s community property get a step up in basis to the current fair market value.  Husband’s separate property given to Wife also receives a step up in basis to the current fair market value.  When Wife dies, all of Husband’s property is included in her taxable estate, so all of the property gets a second step up to the current fair market value before it is passed to the beneficiaries.

The beneficiaries can avoid paying capital gains taxes when they sell the property, and Wife can avoid Federal Estate Taxes by using her Federal Estate Tax Exemption and her Deceased Spouse’s Unused Exemption.

How is the AB Trust Unable to Avoid Capital Gains Taxes?

The AB Trust uses the first deceased spouse’s Estate Tax Exemption to fund the Bypass Trust.  The assets that are placed into the Bypass Trust are not included in the surviving spouse’s taxable estate. As a result of the non-inclusion of the assets in the surviving spouse’s taxable estate, the assets in the Bypass Trust only get one step up in basis when the first spouse dies.  When the assets come out of the Bypass Trust upon the death of the surviving spouse, the beneficiaries may pay a capital gains tax on the growth in value of the assets during the period of time that they were in the Bypass Trust.  If the Bypass Trust is not funded carefully and if the spouses die many years apart, the assets in the Bypass Trust could grow significantly and create a large capital gains tax that the beneficiaries would be responsible to pay.  

So, Should I get rid of my AB Trust?

It depends, talk to an attorney.  An AB Trust has its benefits and drawbacks and there are still many good reasons to have an AB Trust.  In addition, capital gains taxes are just a possible product of an AB Trust, not a certainty.  An alternative to an AB Trust can eliminate capital gains taxes, but the alternative has its benefits and drawbacks as well.  As a result, the decision to keep or get rid of an AB Trust is highly personal and fact dependent.  The best way to determine if an AB Trust is still the best option for you is to meet with your estate planner.

If you are unable to meet with your estate planner, Timothy Follett at Santa Barbara Estate Planner will review your existing estate plan and counsel you on your options so you can make an informed decision about the future of your AB Trust.   

tim@santabarbaraestateplanner.com    https://santabarbaraestateplanner.com/    (805) 669-7009

Emergency Contact Authorization Forms Help Financial Firms Prevent Financial Elder Abuse

Proactive Financial Firms Use Emergency Contact Authorization Forms To Help Prevent Financial Elder Abuse 

An Emergency Contact Authorization Form allows a client to list trusted persons who shall be contacted if their financial advisor suspects diminishing capacity, financial abuse, or a financial predator.  The goal of the Emergency Contact Authorization Form is to permit your financial advisor to make your designated emergency contacts aware of the issues, and then, your emergency contact persons can reach out to you personally to determine if the advisor’s concerns are legitimate.

Financial advisors are in a unique position to know your financial history.  As a result, your advisor is also in a unique position to spot unusual activity and requests.  As you fill out an Emergency Contact Authorization Form with your financial advisor: 1) carefully consider who you should name; 2) discuss your choice with your advisor; 3) let the person you have chosen know that they have been designated as an emergency contact; and 4) and give your emergency contact your advisor’s contact information.

Please be aware that the Emergency Contact Authorization Form does not take the place of a Durable Power of Attorney (a legal document in which you give a person you trust the authority to make financial decisions on your behalf).  The Emergency Contact Authorization Form only allows you to designate individuals your advisor can contact to discuss their concerns.  The designated emergency contact individual could be the same person as the agent named in your Durable Power of Attorney, or you could designate another person as a way to provide some checks and balances. 

An Emergency Contact Authorization Form is an important part of a comprehensive estate plan.  The form will only work at the institution where it is on record.  You will still need to execute a Durable Power of Attorney to insure that all of your financial accounts will continue to be managed and your bills will get paid if you become mentally incapacitated.   

Please contact our office if you have any questions about Emergency Contact Authorization Forms, Durable Powers of Attorney, or if you suspect a family member or friend is being financially exploited or abused.

For more information visit our website:  https://santabarbaraestateplanner.com/    

(805) 669-7009 or tim@santabarbaraestateplanner.com

Amazing photo courtesy of Candida Performa http://flickr.com/photos/40006794@N02/3937474049

Beneficiary Designations for Real Property

Real Property Beneficiary Designations in California

The California State Assembly unanimously passed legislation that will allow homeowners to put beneficiaries on their real property (AB 139 will now move to the State Senate for consideration). Upon the death of the property owner, the property will pass to the named beneficiaries without the need for probate if the Senate also passes the bill.  

I think the article, linked below, is a great resource on this topic. However, I disagree with the title, "Huge Win for the Middle Class." A beneficiary designation for real property is a huge win for everyone because it helps avoid probate, saves taxpayer money, and provides some relief to our overburdened courts.   

Despite being a huge win for everyone, I would not recommend planning an estate by only using beneficiary designations. A comprehensive estate plan that utilizes a revocable living trust is the best way to protect property during illness, avoid probate, and distribute property to beneficiaries. Beneficiary designations cannot protect a persons's property during a long term illness. Without a comprehensive estate plan, a person's property could be in limbo as to how the property is to be used and managed during a long term illness.  

A revocable trust is the best tool for managing property for the benefit of the owner during a period of illness thereby planning for a period of time between health and death. As a result, beneficiary designations on real property should only be viewed as a tool for estate planning, not a substitute.       

http://californianewswire.com/2015/04/09/huge-win-for-middle-class-californians-as-probate-simplification-legislation-passes-state-assembly-ab139-CNW24745_103734.php/

Top Ten Estate Planning Mistakes

Visit Our Website and Request our Free Brochure 

Get our free brochure that identifies the ten most common estate planning mistakes by visiting our website at the link below.

Contact me today for a free consultation.

Email: tim@santabarbaraestateplanner.com
Phone: (805) 669-7009

For more information about our firm, visit our website at
https://santabarbaraestateplanner.com/

We Have Preferred Estate Planning Rates for Teachers

Annually, We Provide a Limited Number of Estate Plans to Teachers at Reduced Rates  

Before I became an attorney, I was an elementary school teacher for ten years.  I taught public school in Lansing, Boston, and New Orleans.  Throughout law school, I promised myself that I would give back in some way to my fellow teachers.

As a way to give back, I offer my estate planning services at a preferred rate to a limited number of teachers and retired teachers. If you would like to see if I have any remaining preferred rate plans available, please contact me for a free consultation.    

In addition, if your school is willing to host me, I can give a forty-five minute presentation on the basics of estate planning at no cost if at least four members of your staff are willing to attend.  If your school is unable to host me, I can give a forty-five minute presentation to you and some of your colleagues at my office.

Contact me today to inquire about our reduced estate planning rate for teachers.
Email: tim@santabarbaraestateplanner.com
Phone: (805) 669-7009

For more information about our firm, visit our website at https://santabarbaraestateplanner.com/

Great Article that Explains the Impact of the Supreme Court's Decision on Same-Sex Estate Planning

Estate Planning for Same-sex Couples
 After Obergefell v. Hodges

By: Matthew T. McClintock, JD 

Vice President, Education and Supplemental Legal Content 

This article was posted in Wealth Counsel's Legal Education Blog and was authored by Matthew T. McClintock. The link to this article is below.  Mr. McClintock concisely sums up current estate planning needs for same-sex couples after the Supreme Court's recent ruling.

http://info.wealthcounsel.com/blog/estate-planning-for-same-sex-couples-after-obergefell-v.-hodges

When Should I have my Estate Plan Reviewed?

How Often Should I have my Estate Plan Reviewed?

You should have your estate plan reviewed every two to five years and after major life events. Your estate plan is like a car. An estate plan will not keep running without regular maintenance because laws change, people and relationships change, and assets are sold and acquired after an estate is planned.  

Our firm reviews existing estate plans. We will review your existing estate plan and provide counseling in light of your concerns and goals. We believe the attorney that drafted your estate is the best person to review your estate plan, but we understand that is not always possible.

We suggest a review of an estate plan:

• every two to five years;
• if the estate plan was drafted prior to 2012;
• prior to a divorce and post-divorce;
• after an addition to your family through birth, adoption, or marriage;
• if a spouse or a family member has died, become ill, or is incapacitated;
• if your spouse, parent(s), or other family member has become dependent on you;
• if you anticipate a substantial change in the value of an asset;
• if you would like to change a beneficiary, successor trustee, or agent;
• if you would like to change how your property is distributed;
• if you have received a substantial inheritance or you believe you will inherit a substantial amount of money or property;
• if your child has become disabled or has a handicap and will need lifelong support; or
• you are retiring.

If you have questions or you would like an estate plan review, contact us at tim@santabarbaraestateplanner.com or (805) 669-7009.  

For more information about our firm visit our website at https://santabarbaraestateplanner.com/

Where Should I Keep my Estate Planning Documents?

Safekeeping Your Estate Planning Documents

Now that you have finished planning your estate, you may be wondering, "Where do I keep all of these papers?"

The best place to keep your original documents is in a secure location. Your agent(s) and successor trustee(s) should know where the originals are, and they should have access to the documents.

A safety deposit box is a great location for storing original documents. If you have an estate planning binder, you should place the originals in your safety deposit box while leaving copies of the originals in the binder.

If you choose to store the documents in a safety deposit box, please make sure that your agent or trustee has access to the safety deposit box. A problem can occur when the documents that empower your agent to have access are locked inside the safety deposit box. This problem is usually resolved by obtaining a court order which is counterproductive to your estate plan and an unnecessary expensive.  As an alternative to a court order, your agent may be able to ask the financial institution to conduct a "will search" which may give your agent access to your documents, but only upon your death.

A home safe is also a great location for storing originals, and most home safes also provide some sort of fire protection. You should show your agent and trustee where the safe is located and provide them with the combination.

I do not recommend storing the original documents with your attorney even if the attorney recommends it. Attorneys are people and businesses.  People move, die, and can be hard to find. Businesses change their names, are bought and sold, relocate, and go out of business. Your agent or trustee should be able to easily locate a safety deposit box, or your home safe, after you have provided them with access.     

Pet Trusts are Enforceable in California

​Pet Trusts are Enforceable in California

Traditionally, Pet Trusts were referred to as Honorary Trusts because Pet Trusts were not enforceable.  In essence, the person entrusted with assets to be held for the welfare of a pet was only on their honor to obey the terms of the trust.  There was no legal way to enforce the terms of the Pet Trust ​to make sure the pet was cared for and make sure assets were not squandered.

However, a new California law recognizes the special relationship between pets and their owners. Now, a California pet owner can create a legally enforceable trust to provide for the care of his or her pet animals. Under this new law, Pet Trusts are presumed to be valid as long as certain legal requirements are met. Generally, these requirements ensure that all of the money left in trust for the pets is actually used for the benefit of those pets. 

At Timothy Follett, Attorney at Law, we are experienced in drafting Pet Trusts.  If you have questions and would like to know more about Pet Trusts, please contact us at tim@santabarbaraestateplanner.com or (805) 669-7009.  For more information about our firm visit our website at https://santabarbaraestateplanner.com/

Welcome To Our Blog

Welcome

About My Practice

My practice is focused on you, the client, because I care about you, and I care about offering high quality representation. My desire to help others has always been present in my professional career, first while I worked as a public school teacher, and now, as an attorney in my own practice.

​I enjoy estate planning because ​I understand that the legal system can intimidate and overwhelm anyone. I am here to help find answers and create the solutions you need.  I achieve this by drafting customized estate plans by first listening carefully to client concerns and goals, and then counseling clients on their options.  Together we create an estate plan that is truly the client's plan, not just a fill-in-the-blank document.  

​In order to provide the best legal representation possible, I am a proud member of Wealth Counsel. Wealth Counsel is an active community of over 3,600 estate planning and wealth management professionals. It provides continuing legal education that keeps me sharp and up-to-date.  Wealth Counsel's legal document drafting technologies also help me create customized, high quality legal documents that encompass the latest, most relevant legal strategies.

Contact me today,  I can provide peace of mind while you protect yourself and your loved ones.

Email: tim@santabarbaraestateplanner.com
Phone: (805) 669-7009.
For more information about our firm visit our website at https://santabarbaraestateplanner.com/