6 Life Events That Require An Immediate Estate Plan Update

Estate planning is the process of developing a strategy for the care and management of your estate if you become incapacitated or upon your death. One commonly known purpose of estate planning is to minimize taxes and costs, including taxes imposed on gifts, estates, generation skipping transfer and probate court costs. However, your plan must also name someone who will make medical and financial decisions for you if you cannot make decisions for yourself.  You also need to consider how to leave your property and assets while considering your family’s circumstances and needs.

Since your family’s needs and circumstances are constantly changing, so too must your estate plan. Your plan must be updated when certain life changes occur. These include, but are not limited to the following Six: 1) Marriage, 2) The birth or adoption of a new family member, 3) Divorce, 4) The death of a loved one, 5) A significant change in assets, and 6) A move to a new state or country.

1. Marriage: 

It is not uncommon for estate planning to be the last item on the list when a couple is about to be married - whether for the first time or not. On the contrary, marriage is an essential time to update an estate plan. You probably have already thought about updating emergency contacts and adding your spouse to existing health and insurance policies. There is another important reason to update an estate plan upon marriage. In the event of death, your money and assets may not automatically go to your spouse, especially if you have children of a prior marriage, a prenuptial agreement, or if your assets are jointly owned with someone else (like a sibling, parent, or other family member). A comprehensive estate review can ensure you and your new spouse can rest easy.

2. Birth Or Adoption Of Children Or Grandchildren: 

When a new baby is born, it seems like everything changes—and so should your estate plan. For example, your trust may not “automatically” include your new child, depending on how it is written. So, it is always a good idea to check and add the new child as a beneficiary. As the children (or grandchildren) grow in age, your estate plan should adjust to ensure assets are distributed in a way that you deem proper. What seems like a good idea when your son or granddaughter is a four-year-old may no longer look like a good idea once their personality has developed and you know them as a 25-year-old college graduate, for example.

 3. Divorce: 

Some state and federal laws may remove a former spouse from an inheritance after the couple splits, however, this is not always the case, and it certainly should not be relied on as the foundation of your plan. After a divorce, you should immediately update beneficiary designations for all insurance policies and retirement accounts, any powers of attorney, and any existing health care proxy and HIPAA authorizations. It is also a good time to revamp your will and trust to make sure it does what you want (and likely leaves out your former spouse).

 4. The Death Of A Loved One: 

Sometimes those who are named in your estate plan pass away. If an appointed guardian of your children dies, it is imperative to designate a new person. Likewise, if your chosen executor, health care proxy or designated power of attorney dies, new ones should be named right away.

 5. Significant Change In Assets: 

Whether it is a sudden salary increase, inheritance, or the purchase of a large asset these scenarios should prompt an adjustment an existing estate plan. The bigger the estate, the more likely there will be issues over the disposition of the assets after you are gone. For this reason, it is best to see what changes, if any, are needed after a significant increase (or decrease) in your assets.

 6. A Move To A New State Or Country: 

For most individuals, it is a good idea to obtain a new set of estate planning documents that clearly meet the new state’s legal requirements. Estate planning for Americans living abroad or those who have assets located in numerous countries is even more complicated and requires professional assistance. It is always a good idea to learn what you need to do to completely protect yourself and your family when you move to a new state or country.

We’d love to help. Let us design your Family Legacy Protection Plan, a fully customized Estate Plan curated according to the unique needs of young families, single parents, or multi-generational families. Click here to learn about our estate planning services.

If we can be of assistance, please schedule a time to talk with us. Due to the San Francisco Bay Area’s current shelter in place order, we are conducting our client meetings by phone or video call.

Integrating Community Property Trust Into Your Estate Plan

A well-crafted estate plan is comprised of many individual parts, and careful, trust-based estate planning is the best way to ensure the highest possible quality of life for you and your loved ones.

One way couples can make get the most mileage out of their estate plans is through community property trusts. This is a special type of trust that combines a couples jointly acquired assets as community property and can save a significant amount of taxes.

Why Community Property Trusts Are Beneficial:

The essential benefit of a Community Property Trust (“CPT”) is that the basis of community-owned property is stepped up when one member of the couple dies. Not only that—it also steps up the basis for the surviving spouse’s half of the property (rather than only half, which is what happens with “plain” jointly owned property). This means that the capital gains tax will take a much smaller percentage of the surviving spouse’s wealth when the property is sold.

The Limits Of Community Property Trusts:

There are two states in which CPT’s can be formed: Alaska and Tennessee. These trusts must be funded and have ongoing requirements to achieve their tax benefits. So, they are not a panacea and don’t necessarily fit every married couple’s situation.

How CPT’s Fit In With Other Estate Planning Strategies:

If your estate plan is robust and ready for all of life’s potential successes and challenges, it likely includes any number of revocable and irrevocable trusts, powers of attorney, long-term care directives, and miscellaneous probate-avoidance precautions.

Community property trusts can only work for the property you fund into them, meaning that you can and should have other strategies in place such as a revocable trust, will, power of attorney, etc. The same property cannot be managed under multiple trusts at the same time, so it is important for us to figure out which of your assets you’d like to set aside for other types of trusts before settling on the details of your CPT.

Community property trusts are not for everyone. However, if we can determine that setting one up is a realistic fit for you and your family, you can expect to save a large sum by avoiding taxes you would otherwise accrue. Schedule your complimentary Estate Planning Strategy Session with our office, to see whether this solution might be an effective addition to your other estate planning strategies.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

5 Essential Legal Documents Required for Incapacity Planning

Comprehensive estate planning is more than your legacy after death, avoiding probate, and saving on taxes. Good estate planning includes a plan in place to manage your affairs if you become incapacitated during your life and can no longer make decisions for yourself. 

What happens without an incapacity plan?

Without a comprehensive incapacity plan in place, your family will have to go to court to get a judge to appoint a guardian or conservator to take control of your assets and health care decisions. This guardian or conservator will make all personal and medical decisions on your behalf as part of a court-supervised guardianship or conservatorship. Until you regain capacity or die, you and your loved ones will be faced with an expensive and time-consuming guardianship or conservatorship proceeding. There are two dimensions to decision making that need to be considered: financial decisions and healthcare decisions.

• Finances During Incapacity:

If you are incapacitated, you are legally unable to make financial, investment, or tax decisions for yourself. Of course, bills still need to be paid, tax returns still need to be filed, and investments still need to be managed.

• Health Care During Incapacity:

If you become legally incapacitated, you won’t be able to make healthcare decisions for yourself. Because of patient privacy laws, your loved ones may even be denied access to medical information during a crisis and end up in court fighting over what medical treatment you should, or should not, receive (like Terri Schiavo’s husband and parents did, for 15 years).

You must have these five essential legal documents in place before becoming incapacitated so that your family is empowered to make decisions for you:

1. Durable Power of Attorney:

This legal document gives your agent [called your Attorney-in-Fact] the authority to pay bills, make financial decisions, manage investments, file tax returns, mortgage and sell real estate, and address other financial matters that are described in the document.  

Financial Powers of Attorney come in two forms: “durable” and “springing.” A durable power of attorney goes into effect as soon as it is signed, while a springing power of attorney only goes into effect after you have been declared mentally incapacitated. There are advantages and disadvantages to each type, and we can help you decide which is best for your situation.

2. Revocable Family Trust:

This legal document has three parties to it: the person who creates the trust (you might see this written as “trustmaker,” “grantor,” or “settlor” — they all mean the same thing); the person who legally owns and manages the assets transferred into the trust (the “trustee”); and the person who benefits from the assets transferred into the trust (the “beneficiary”). In the typical situation, you will be the trustmaker, the trustee, and the beneficiary of your own revocable living trust. But if you ever become incapacitated, your designated successor trustee will step in to manage the trust assets for your benefit. Since the trust controls how your property is used, you can specify how your assets are to be used if you become incapacitated (for example, you can authorize the trustee to continue to make gifts or pay tuition for your grandchildren).

3. Advance Health Care Directive:

This legal document, also called a medical or Health Care Agent, gives your agent the authority to make healthcare decisions if you become incapacitated.

4. Living Will:

This legal document shares your wishes regarding end of life care if you become incapacitated. Although a living will isn’t necessarily enforceable in all states, it can provide meaningful information about your desires even if it isn’t strictly enforceable.

5. HIPAA authorization:

This legal document gives your doctor authority to disclose medical information to the agents selected by you. This is important because health privacy laws may make it very difficult for your agents or family to learn about your condition without this release. It is crucial that each fiduciary nominated in your estate plan that may need access to your HIPPA-protected health documents is granted such legal authority.

Is your incapacity plan up to date?

Once you get all of these legal documents for your incapacity plan in place, you cannot simply stick them in a drawer and forget about them. Instead, your incapacity plan must be reviewed and updated periodically and when certain life events occur such as moving to a new state or going through a divorce. If you keep your incapacity plan up to date and make the documents available to your loved ones and trusted helpers, it should work the way you expect it to if needed.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Life Insurance and Estate Planning: Protecting Your Beneficiaries’ Interests

One misconception people have about life insurance is that naming beneficiaries is all you should do to ensure the benefits of life insurance will be available for a surviving spouse, children, or other intended beneficiary. Life insurance is an important estate planning tool, but without certain protections in place, there's no guarantee that your spouse or children will receive the benefit of your purchase of life insurance. Consider the following examples:

Example 1: David identifies his wife Betsy as the beneficiary on a life insurance policy. Betsy does receive the death benefit from the insurance policy, but when Betsy remarries, she adds her new husband’s name to the bank account where she deposited the death benefit. In so doing, she leaves the death benefit from David’s life insurance to her new husband, rather than to her children as she and David discussed before his death and which is what she indicates in her will.

Example 2: Dawn, a single mother, names her 10-year-old son Mark as a beneficiary on her life insurance. She passes away when he is twelve. The court names a relative as a guardian or conservator for Mark until he is of age. When Mark reaches his 18th birthday, his inheritance has been partially spent down on court costs, attorney’s fees, and guardian or conservator fees. Additionally, it hasn’t kept pace with inflation because of the restrictive investment options available to guardians or conservators. Dawn hoped the life insurance proceeds would be there for Mark’s college, but the costs and lack of investment flexibility mean there may not be as much as Dawn hoped.

Solution: Use a Trust as the Beneficiary on Your Life Insurance:

When estate planning, a common method for passing assets is by placing them in a trust, with a spouse or children as beneficiaries. The same approach may also be used for life insurance policy proceeds. You can designate the trust as the life insurance policy's beneficiary, so the death benefits flow directly into the trust. Two popular ways to accomplish this:

1. Revocable Living Trust (RLT) Is the named beneficiary:

This option works well for those who have a modest-sized estate or who have already set up a trust. Naming your RLT as a life insurance beneficiary simply adds those death benefits to what you already have in trust, payable only to beneficiaries of the trust itself. The benefit of this approach is that it instantly coordinates your life insurance proceeds with the rest of your estate plan.

       2. Set up an Irrevocable Life Insurance Trust (ILIT):

For an added layer of protection, an ILIT can both own the life insurance policy and be named as the beneficiary. As The Balance explains, this not only protects the death benefits from potential creditors and predators, but from estate taxes as well.

With the estate tax exemption at $5.49 million per person in 2017, and a potential repeal on the legislative agenda of President Trump and the Republican Congress, you may not need estate tax planning. But everyone who’s purchased life insurance needs to take an extra step to ensure your loved ones' financial future. To discuss your best options for structuring your life insurance estate plan, schedule your complimentary Estate Planning Strategy Session with our office.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

5 Reasons to Embrace the Emotional Side of Estate Planning

When you hear the phrase “estate plan,” you might first think about paperwork. Or your mind might land on some of the uncomfortable topics that estate planning confronts head-on: end-of-life decisions, incapacity, and your family’s legacy from generation to generation. Those subjects hit home for everyone.

But while that could feel like a reason to avoid estate planning, the emotional nature of these decisions is a reason to embrace the process with enthusiasm. Here are a few ways in which emotion in estate planning is a good thing:

1. Estate Planning Creates Stability In Times Of Loss:

If you end up in a state of incapacity later in life, it’s guaranteed to be a difficult time for your family. If your estate plan doesn’t include detailed instructions for a trusted decision maker and an actionable long-term care plan, it’s guaranteed to be even worse. You can save your loved ones from the confusion about what to do and the pressure to make rushed choices if this occurs, allowing them to save their energy for processing the situation.

     2. Comprehensive Estate Plans Keep Emotional Matters Private

Detailed, trust-based estate planning with lifetime beneficiary directed trusts keeps your private matters out of the public eye. When your estate plan is scant—such as a simple “I love you” will—you’re running the risk of your estate going through court in a proceeding called probate. This means that choices become visible to those outside your inner circle. Because of the notice requirements, probate can also invite controversy and conflict which a private transfer would have avoided.

     3. Estate Planning Can Bring A Family Together:

Everyone has heard of a situation in which siblings argued over what their parents left them as beneficiaries. But the opposite is also quite true. When you get your family and other loved ones involved in your estate planning process, you gain a wonderful opportunity to show them how much you care. Creating your estate plan can strengthen the bonds of love in a family and serve as a reminder of those bonds for years to come.

     4. Your Estate Is About Much More Than Money:

Estate planning is about a whole lot more than just wealth distribution and taxes. During an estate planning session, we can talk about significant family heirlooms, your hard-won hobby collection, and other matters totally unique to your life. We can even dive deeply into the memories and intellectual property you want to make sure your beneficiaries receive, such as photos, art, and even recorded videos or audio files of family stories you’d like to share with future generations.

     5. An Estate Plan Means You’re Not Going It Alone:

You shouldn’t have to face trying times alone. Whether the estate in question is yours or a loved one’s, your estate planning attorney will have the answers. Let us take care of the nuts and bolts with regards to educating your appointed agents about their duties so you can know that your family will be in good hands if anything happens to you. The idea of setting everything straight on your own can be a stressful one, but these emotional decisions are much easier to make with a trusted advisor by your side.

We want you to feel ownership and investment in getting your estate plan to reflect who you are. Estate planning is an opportunity to look at some of life’s big questions and ultimately make sure your family feels your care for them through the choices you make. Schedule your free consultation with us today to see how we can create custom-made solutions that do just that.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

How to Build Freedom From Court Interference Into Your Estate Plan

It’s clear why you might want to avoid court involvement in your estate for financial reasons, knowing that probate can quickly get costly and time consuming for those involved. But there is an emotional component to it as well. Your assets are just that: yours. And the idea of them being discussed and deliberated on in a public forum might not be such an appealing one.

If you feel that the matters of your estate should be kept private and that your assets should be distributed to your loved ones rather than eroded by court fees, you’re not alone. And luckily, all it takes to get there is a proactive attitude toward planning your estate. Let’s dive in:

A. Court Interference 101

Two of the most common situations in which the court becomes involved in your estate are guardianship and probate: 

B.  Guardianship and Conservatorship

When someone experiences mental incapacity, documents in their estate plan can direct a trusted person to carry out that individual’s wishes for the situation. But what if no such documents have been drafted? Then their business becomes the government’s business, too. A court proceeding called guardianship or conservatorship (also known as “living probate”) will be held to appoint guardians and conservators to manage the affairs of the incapacitated person.

C. Probate:

When an estate goes through probate, the court oversees the gathering of the probate assets, payment of any outstanding debts, determining whether a will is valid, and who the deceased’s heirs are. The proceedings ultimately determine who should receive the assets that are left after payment of debts, taxes, and costs.

D. Free Your Estate From Interference:

To avoid guardianship, conservatorship, and probate, you can work with us to keep your affairs out of court entirely.

1. Powers Of Attorney:

Agents or attorneys-in-fact are the individuals or entities you appoint to make decisions for you, be they medical or financial. You designate agents or attorneys-in-fact in a document known as a power of attorney. Durable powers of attorney are documents that continue in validity after the incapacity of the maker of the document (i.e. “durable” against incapacity). Since a durable power of attorney continues in validity, a durable power of attorney can help bypass the need for court-appointed guardianship or conservatorship.

       2. Trusts:

Trusts are agreements that hold some or all your assets, and trustees can be either individuals or corporate entities. Unlike wills, trusts do not go through probate. There are several types of trusts, and we can help you decide exactly which kind is best suited to your estate. By setting up and completely funding a revocable living trust, you can accomplish two important things. First, you can rest assured that your assets will be distributed to your chosen beneficiaries and won’t go through probate upon your death. Second, you also retain the ability to change or cancel the arrangement during your lifetime enabling you to adjust your plan as your financial or family circumstances change.

Ensure That Your Estate Plan Is Air-Tight:

Deciding on appropriate powers of attorney and drafting revocable living trusts are just two of the many steps we can take together to keep your affairs free from court involvement. With a solid estate plan put into place with the help of a trusted attorney, you can take comfort knowing that everything you’ve worked so hard to build and maintain will be passed along to only the people who matter most. Contact our office today to learn more about interference-proofing your estate plan.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Avoid Living Probate: How to Keep Guardians and Conservators Out of Your Estate

While most proactive individuals know the importance of having a well-rounded estate plan, it is typically considered as something that will take effect after they have passed away. But in fact, there are many ways in which comprehensive estate planning can have a positive impact on your life while you are still around to reap the benefits.

Planning for Incapacity:

Most people who reach old age come to a point at which they are no longer able to handle all their affairs on their own. In many cases this incapacity is due to dementia or other cognitive impairments associated with the elderly. At that point, the decisions they’ve made with their estate planning attorney can have major repercussions on their lifestyle and the handling of their wealth.

Take Alex for example. Long before Alex retired from his long and successful career as an IT manager at a large corporation, he put a cursory estate plan in place with a will detailing who would get which of his assets upon his death. But, Alex didn’t update his plan as he aged. In his late seventies, he developed Alzheimer's and it became unclear to his family how to proceed with his medical care and wealth management. Since Alex did not formally choose an individual to be in control of his affairs in the event of incapacity, it falls upon the court to appoint a guardian or conservator. Unfortunately, that’s where things get complicated.

What is guardianship?

Guardianship goes by a few other names, so it’s important to get familiar with various terms used to indicate similar and somewhat overlapping concepts. The other terms you may hear include “conservatorship,” “plenary guardianship,” and “living probate.”

It’s important to note that these terms are used in slightly different manners from state-to-state, with some states using “guardian” and “conservator” interchangeably. Others maintain the distinction of a guardian being a person who makes decisions about medical care and living arrangements, whereas a conservator makes decisions about property and assets. In either case, the guardian or conservator is essentially a substitute decision maker that’s authorized by the court to make decisions on behalf of the incapacitated person.

3 Reasons You Should Avoid It:

In the process of living probate, the court tries to settle on solutions that will fit the incapacitated individual’s best interests. However, there is a much better way. Here are just a few of the reasons guardianship and conservatorship are not ideal fallbacks:

1. Cost To put it simply, living probate is expensive. The legal fees associated with court-appointed attorneys representing incapacitated individuals can chip away at their estates very quickly. Living probate also brings your affairs into the public sector.

2. Privacy Alex may not have wanted his family to have to experience the financial and emotional costs of his living probate court proceedings, but he may also have felt less than enthusiastic about his personal affairs being discussed in a public forum.

3. Clarity In addition to being costly and a compromise of privacy, living probate is also full of guesswork. If Alex had assigned powers of attorney and established long-term care provisions in his estate plan, his affairs would be handled exactly as he wished in the event of his incapacity. When the court is involved, they usually apply default rules of state law, which means the legislature is essentially making some choices for you and your family.

How to Structure Your Estate Plan:

What does an individual like Alex need to do to avoid the chance of his family having to go through living probate? There are a few specific steps we can take to make in planning your estate to ensure your affairs never end up in a court-appointed guardian’s hands:

1. Powers of Attorney:

A complete estate plan includes named powers of attorney who will fulfill the roles of guardians and conservators in the event of your incapacity. The difference is that these individuals will be chosen by you rather than by the court. There are several different types of powers of attorney for specific purposes, such as a healthcare power of attorney or a general durable power of attorney, the latter of which controls the management of your finances.

       2. Long Term Care Planning

Although you may never need long-term care, building a strategy for it into your estate plan will allow you to relax knowing that you’ll receive long-term care according to your wishes if that becomes necessary. This type of planning also helps protect the assets in your estate plan from being used up on medical expenses before going to your beneficiaries.

Avoiding guardianship and conservatorship through living probate is a relatively pain-free process if handled well ahead of time. Get in touch with us today to go over the parts of your estate plan that may need amending to give you and your family the best possible outcomes. We are here to help and can quickly get your estate plan in optimal shape.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.