Orange County Elder Law and Estate Planning Blog

Saturday, February 04, 2012

Be Cautious of "Simple" Estate Plans

Beware of “Simple” Estate Plans

“I just need a simple will” or "I am looking for a simple living trust." It’s a phrase estate planning attorneys hear practically every other day.   From the client’s perspective, there’s no reason to do anything complicated, especially if it might lead to higher legal fees.  Unfortunately, what may appear to be a “simple” estate is all too often rife with complications that, if not addressed during the planning process, can create a nightmare for you and your family at some point in the future.   Although the list can be long, some common complications may include:

Probate - Probate is the court process whereby property is transferred after death to individuals named in a will or specified by law if there is no will. Probate can be expensive, public and time consuming.  A revocable living trust is a great alternative that allows your estate to be managed more efficiently, at a lower cost and with more privacy than probating a will.  A living trust can be more expensive to establish, but will avoid a complex probate proceeding. In California, the cost of probate is high, and the fees are governed by California law.  The cost of probate is based on a percentage of the estate in California.  Additionally, the probate process in California takes, on average, well over a year.

Minor Children - If you have minor children, you not only need to nominate a guardian, but you also need to set up a trust to hold property for those children. If both parents pass away, and the child does not have a trust, the child’s inheritance could be held in a frozen account, as ordered by the court, until he or she turns 18, at which time the entire inheritance may be given to the child. By setting up a trust, which doesn’t have to come into existence until you pass away, you are ensuring that any money left to your child can be used for educational and living expenses and can be administered by someone you trust.  You can also protect the inheritance you leave your beneficiaries from a future divorce as well as creditors.

Second Marriages - Couples in which one or both of the spouses have children from a prior relationship should carefully consider whether a “simple” will is adequate. All too often, spouses execute simple wills in which they leave everything to each other, and then divide the property among their children. After the first spouse passes away, the second spouse inherits everything. That spouse may later get remarried and leave everything he or she received to the new spouse or to his or her own children, thereby depriving the former spouse’s children of any inheritance.  Couples in such situations should establish a special marital trust to ensure children of both spouses will be provided for.

Taxes - Although in 2011 and 2012, federal estate taxes only apply to estates over $5 million for individuals and $10 million for couples, that doesn’t mean that anyone with an estate under that amount should forget about tax planning. Currently, in 2013 the estate tax laws are slated to change, and the amount an individual may die with tax free falls to $1,000,000.

Incapacity Planning – Estate planning is not only about death planning.  What happens if you become disabled?  You need to have proper documents to enable someone you trust to manage your affairs if you become incapacitated.  There are a myriad of options that you need to be aware of when authorizing someone to make decisions on your behalf, whether for your medical care or your financial affairs.  If you do not establish these important documents while you have capacity, your loved ones may have to go through an expensive and time-consuming conservatorship proceeding to petition a judge to allow him or her to make decisions on your behalf.  

By failing to properly address potential obstacles, over the long term, a “simple” will can turn out to be incredibly costly.   Bradley Erdosi, an experienced estate planning attorney, can provide valuable insight and offer effective mechanisms to ensure your wishes are carried out in the most efficient manner possible while providing protection and comfort for you and your loved ones for years to come.

Thursday, January 12, 2012

What is your New Year's Resolution?

2012 is here.  Are you keeping to your New Year’s resolutions? According to Forbes, there are 12 resolutions we should all make – and “plan your estate” is number two.  Here is the list:

1.            Set goals;

2.            Plan your estate;

3.            Check your credit;

4.            See where your money is going;

5.            See where you can cut back;

6.            Make sure you have the right amount of insurance;

7.            Build an emergency fund;

8.            See if you can refinance your debt;

9.            Pay down bad debt;

10.          Get on track for retirement;

11.          Consider saving for education;

12.          Make sure your investment portfolio is properly diversified.

As to plan your estate, the author recognizes that we never know when we might need estate planning documents, and that these are “notoriously easy to procrastinate so it’s good to get them out of the way.”

The full article, 12 Financial Resolutions for 2012, is available online at http://www.forbes.com/sites/financialfinesse/2011/12/28/12-financial-resolutions-for-2012/

Sunday, January 01, 2012

Increase in Veteran Pension Benefit

Many veterans and surviving spouses receiving pension and Aid and Attendance benefits from the U.S. Department of Veterans Affairs (VA) will be happy to know that effective December 1, 2011 (commencing with benefits payable on January 1, 2012), their benefits will increase 3.6% due to a cost of living increase authorized by federal law.  The following chart details the new benefit amounts:

The increase in veteran and survivor's benefits is the first cost of living increase since 2008.  To learn more about veterans benefits, including the Aid and Attendance benefit, do not hesitate to contact a VA Accredited lawyer in our office.

Thursday, December 15, 2011

VA Aid and Attendance Benefit

Veterans’ Non-Service Connected Pension Benefits

The Veterans’ Administration’s non-service connected pension program can help supplement the income of elderly or disabled veterans. The VA deems any veteran age 65 or older to be permanently and totally disabled. This “disabled” classification entitles senior citizens who are veterans, or their widows, to tax-free pension payments regardless of their actual physical condition, provided they meet the needs-based criteria.

One significant advantage of this program is that, unlike a traditional service-connected pension, there is no requirement that your injury or disability be tied to your time in service. On the other hand, this is a needs-based assistance program, so many veterans may not qualify for benefits.

To qualify for benefits under the program, you must have served on active duty for at least 90 days, and at least one of those days must have been during a time of war. Additionally, you must not have had a dishonorable discharge from the military.

Periods of war time are determined by the U.S. Congress as follows:

• Mexican Border Period: May 9, 1916 through April 5, 1917, only if you served in Mexico, on its borders or in adjacent waters
• World War I: April 6th, 1917 through November 11, 1918, or through April 1, 1920 if you served in Russia
• World War II: December 7, 1941 through December 31, 1946    
• Korean Conflict: June 27, 1950 through January 31, 1955
• Vietnam Era: August 5, 1964 through May 7, 1965, or beginning February 28, 1961 you served in Vietnam
• Persian Gulf War: August 2, 1990 through the present

Once qualifying military service is established, you must also pass the income and asset tests. The VA must determine that your net worth is not "excessive" in their eyes.  Although a subjective standard, net worth is considered excessive if it is high enough to adequately support you during your lifetime, based upon your income, medical expenses, and life expectancy. Your vehicle and primary residence are not counted when determining your net worth.

Additionally, your countable income must be lower than the available pension amount. Fortunately, countable income is offset by your unreimbursed, recurring health care costs, including prescriptions, insurance premiums or assisted living expenses.

Our Orange County Veteran Benefit attorney can assist you in determining if you are eligible for the Aid and Attendance benefit.

Monday, October 17, 2011

Welcome to our new site and Happy National Estate Planning Awareness Week!

Welcome to our very first blog and our completely revised website.  As luck would have it, this week is National Estate Planning Awareness Week.

In 2008, Congress passed a resolution declaring the third week of October as National Estate Planning Awareness Week.  According to the resolution passed by Congress, “Many Americans are unaware that lack of estate planning and financial illiteracy may cause their assets to be disposed of to unintended parties by default through the complex process of probate.” The resolution goes on to state that “careful planning can greatly assist Americans in preserving assets built over a lifetime for the benefit of family, heirs, or charities.” It is estimated that over 120 million Americans do not have proper estate plans to protect themselves or their families in the event of sickness, accidents, or untimely death. This costs many families wasted dollars and hours of hardship each year that can be minimized with proper planning.

For young families, estate planning is particularly important, as those who stand to lose the most are their young children. In the event of the death of both parents, who will care for the children? Who will handle the affairs of the estate and ensure that property will be transferred according to the wishes of the deceased parents? If there is no estate plan or will, the courts will appoint a guardian for the children, and the guardian may be an individual who does not share the values and beliefs of the deceased parents.

Or in the event of divorce and remarriage, how will property pass from the former spouse to the children living in a household with a stepparent?

In the event of the death of the primary breadwinner, consider if there is sufficient life insurance coverage for purposes of income replacement to support the surviving spouse and children who were dependent upon the primary breadwinner for their daily maintenance and support.

Advanced age and substantial wealth are not the primary indicators of the need for an estate plan. Young families, especially those with children who have special medical or educational needs, should seek the advice of an estate planning attorney who can guide them in providing for the current and future needs of their young children.

Please feel free to contact us if we can be of assistance.