A cautionary tale
I recently received a call from my daughter to bring her mother to me to draw up a trust. I wondered why the mother wasn’t calling me herself, which should have happened since the mother, not the daughter, would be my client. I asked the daughter some typical screening questions over the phone to understand how lucid her mother was. The daughter assured me that although her mother was aging, she could execute legal documents.
Once they got to my office, I quickly realized that the mother was so on the road to total dementia that she didn’t even know the names of her children, much less what she was going to leave them with. The mother was no longer legally eligible to make a legal document. Aside from spending thousands of dollars in legal costs to establish a guardianship, there is no remedy for someone who waits too long and has lost mental capacity without making an estate plan.
If you love them, don’t put them through a succession
In the scenario outlined above, instead of developing a simple trust and backing will that would have cost less than a couple thousand dollars, the woman’s estate will have to pass to her children through an expensive and time-consuming process called probate.
A great irony is that people can be reluctant to incur legal fees to make an estate plan. The reality is that having an estate plan virtually always reduces legal costs, by magnitude. Succession, which is required if an estate has a fair market value of $ 100,000 or more (excluding assets such as retirement accounts if they have designated beneficiaries) results in high fees for executors and their attorneys, according to a formula established in California Code probate, which is the law that governs the administration of estates. Even with a will, if the estate is worth more than the $ 100,000 threshold, probate is likely to take place. Succession takes a big bite out of an inheritance and can be easily avoided.
Anyone who owns a property should have a succession plan
An estate plan is actually quite simple: it involves written documents stating one’s wishes on how property should be distributed after death. Property includes real estate and also liquid assets like cash and securities, in addition to all the tangible items one has. Even if all you have is a shoebox with your coin collection stored under your bed, you need a written document that stipulates how your belongings will be distributed. Even more important, regardless of the size of your estate, you need a durable power of attorney and advance health directive outlining your financial affairs and medical decisions if you are ever unable to do it yourself due to illness, injury, or just plain old age. .
Barriers to estate planning
There are many factors that prevent people from developing an estate plan while they are well and well informed. For some, it is procrastination. For others, it is the denial of the inevitability of old age, illness, and death. For many, the dynamics of their families are so complex that it is easier to put off making difficult decisions. In today’s economy, many people would rather not think about what has happened to their finances. In fact, their properties have been depleted by layoffs and licenses.
An acquaintance who was the director of advertising for a major bank now lives off what remains of his daughter’s college fund. He has no interest in planning what is left of his estate or thinking about retirement because he does not see how he will ever be able to retire, and at this point he is more concerned with whether or not his wife is going to have sex. off. For this gentleman and others, there is a perception that because your wealth has decreased, you do not need an estate plan. This perception is a misconception.
Your savings may be smaller than they used to be, but you still have equity
A “farm” does not have to include a barn and tennis courts. For most people, this is certainly not the case. An estate includes your home in which you have accumulated equity, your vehicles, jewelry, artwork, your 401 (k), and other investments. Include items that may have little monetary value but a lot of sentimental value. Funny things happen to families when someone dies. Make sure you have been proactive in creating the necessary estate planning documents so that your property is distributed to your friends and family as per your instructions, avoiding the grudge that accompanies the death of a family member.
Most people die without a will
This is shocking, but true. It can leave a terrible mess for families and is easily preventable. A will can only be as simple as a holographic will, written in your own handwriting. Or an attorney can advise on drafting a will and trust if necessary. When someone dies without even a basic will, their property does not go to the government as many people think. Rather, the state of California, like all other states, has a Succession Code in which the government has enacted a law based on what most people would want to happen to their property.
Assets acquired during the marriage go to a spouse. For those who are not married but have children, the inheritance is divided equally between them. If one does not have a spouse or children, one’s property goes to parents, siblings, or other relatives. If you want to leave the property to friends or a charity, it must be documented.
Don’t wait until dementia incapacitates you or a family member
If you don’t have an estate plan yet when you can no longer make decisions for yourself, someone may have to go to court and apply to become your conservator. A guardianship, like an estate, is very expensive and can be prevented. A conservatorship is a failure in estate planning. It means that someone other than a person of your choosing may end up managing your finances and personal care.
Be proactive
As an estate planning attorney, I see many scenarios where people wait too long and become physically or mentally unable to make decisions about how their estates will be managed. Making plans while you still can is a gift to your loved ones.