CA Estate Planning Blog

Tuesday, February 17, 2015

Challenges to a Revocable Trust

What is a revocable trust?

A revocable trust is used for estate planning because it allows a transfer of assets to someone during a person’s life (a transfer after death would happen through a will). The assets become the legal property of a trustee, who is supposed to manage them and carry out the wishes of the person creating the trust, the settlor. The trustee is not supposed to profit from the trust; those profits need to go to the beneficiaries (though the trustee could be paid for his or her services).

Sometimes, people name themselves as the trustee and thereby maintain control of their assets during their lifetime. A successor trustee can be named to manage the trust's assets if the trustee becomes unable to do so.

The settlor can revoke or change the trust at any time. After the settlor dies, the trust becomes irrevocable and cannot be changed or ended, unless the trust language provides for that or if there are no more assets in the trust.

A revocable trust can be challenged by a beneficiary under certain circumstances. The settlor's mental capacity at the time the trust was created might be challenged. California law requires evidence of a deficit in mental functions, such as alertness and attention, information processing and thought processes.

Also, a trustee might be challenged as unfit to administer the trust. Someone who is not named as a beneficiary to the trust might challenge it, just as individuals cut out of a will contest that document.

Contact OC Wills & Trust Attorneys today at (949)347-5256 to learn whether a revocable trust is right for your estate plan. Brian Chew has more than 20 years of experience with trusts administration and can provide you the sound advice you need when devising a plan to protect your assets and provide for your heirs.

Friday, January 16, 2015

Concerns When Applying for Medi-Cal

Can I Apply for Medi-Cal?

Open enrollment for Medi-Cal (California’s version of Medicaid) is open through the spring.  During the first month of enrollment 216,423 state residents signed up for Medi-Cal. The program is designed to help those with low income (having less than $2,000 in liquid assets), elderly and disabled individuals pay for health care, including long term care.
Read more . . .

Monday, January 5, 2015

California Notary Law Change

There’s a new California Law that just went into effect this New Year that at first glance may seem like it has little effect on you.  California Senate Bill 1050 affects the language required on a notary certificate, specifically it changes the form and wording of the statutory certificates of acknowledgment, jurat and proof of execution. 

What does that mean?

Essentially, the law requires a prescribed consumer disclosure box at the top of each of these certificates that are being notarized.   That means that any document that you have which requires a notary now needs to include this required boxed language at the beginning of the notary section to be legal:  

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. 

According to the author of the Bill, Monning, “When people are unfamiliar with the meaning and effect of a notary’s seal and signature, there is an opportunity for criminals to pass deceptive legal documents claiming a false right to money, authority, or real property by inferring, suggesting, or stating that the notary’s seal and signature constitute an official endorsement of authenticity. SB 1050 seeks to reduce fraud by including a clear consumer notification statement as to the limited effect of a notary’s seal and signature. People unfamiliar with notary seals who are studying a fraudulent document presented to them will not give undue consideration to a notary seal as an official endorsement of authenticity and legal correctness.”

In our office we notarize a variety of legal documents, including Living Trusts, Power’s of Attorney, Advanced Health Care Directives and Deeds for Real Property.   Beginning January 1, 2015 any documents that are signed and notarized need to have the above required language in a box at the beginning of each notary section in order for them to have legal effect.  This is not a retroactive requirement, only that any documents signed from this point on need to include the disclosure language.  This is important information for you in case you had a deed or trust prepared last year that you hadn’t yet signed or gotten recorded.  As well as any future documents that you sign from this point on.  As always, if you have any questions, please feel free to contact us at our office.

Wednesday, December 31, 2014

Planning to Qualify for VA Pensions: The VA Compliant Irrevocable Trust

 What kind of planning is needed to qualify for VA benefits?

One of the benefits of serving in the military is the potential ability to collect retirement benefits from the Veterans Administration (VA). These types of benefits could help many Californians. Though not available to all veterans, according to the VA, there are 1,053,964 veterans older than 60 living in California.

A VA pension, known as non-service connect pension, is paid to wartime veterans and certain dependents. This is a means-based benefit with the following requirements:

• The veteran must be 65 or older or permanently and totally disabled (not due to his or her own willful misconduct). There is no age requirement for a surviving spouse to qualify for widow’s pension.
• The veteran’s discharge must be other than dishonorable.
• For those who entered active duty before September 7, 1980, the veteran must have served at least 90 days of active military service. One of those days must have been during wartime.
• The veteran’s net worth cannot be “excessive.”
• The countable family income must be below a yearly limit.

The last two present opportunities for us to help veterans and/or their spouses. Normally irrevocable trusts can be used to reduce a veteran’s net worth to qualify for pension benefits. Unlike Medicaid, which has a five year “look back” period when considering the assets of a person applying for benefits, the VA currently does not impose a penalty for the transfer of assets if it was done prior to the filing of a formal claim, or notifying the VA of the intent to file a claim.

Many veterans have irrevocable trusts created to hold assets gifted by a veteran claimant or surviving spouse to reduce their net worth to qualify for benefits. To satisfy the VA, these trusts must meet certain limitations and requirements. This is a highly technical area that is subject to change, so if you are interested in obtaining these benefits, you need the services of an attorney experienced in creating planning documents that comply with the applicable laws, regulations and VA rules.

Brian Chew is a VA Accredited Attorney and is available to help veterans living in Orange County, California and the surrounding areas obtain VA pension benefits. Contact the estate planning and veterans planning lawyers at OC Wills & Trust Attorneys by calling (949)288-3598 today.

Friday, December 12, 2014

Protecting Your Assets Without Making Fraudulent Transfers

What are Fraudulent Transfers?

Asset protection planning is best done before you have a legal or financial problem. If you wait until these issues occur and then create an asset protection plan, you may be perceived as engaging in a fraudulent transfer.

Fraudulent transfers are asset transfers done in the hopes of evading some kind of financial obligation or debt.
There are two types of fraudulent transfers. An intentional fraudulent transfer is made with the intent to hinder, delay or defraud a creditor. A constructive fraudulent transfer happens when you do not receive “reasonably equivalent value” in an exchange and as a result you have inadequate assets to pay your bills.

On the other hand, transfers made for legitimate estate planning reasons should not be viewed as fraudulent. Transfers to a spouse or one’s children have traditionally been looked upon suspiciously but since they are also used for legitimate estate planning, transfers and gifts which are consistent with valid estate planning, they should be viewed as lacking the requisite intent to defraud a creditor. 

Generally, when courts consider whether or not assets have been transferred fraudulently, they look at all the facts and circumstances of the situation and the credibility of the debtor-transferor. Motivation to benefit family is important to rebut an inference that the transfer was done with the intent to avoid the payment of creditors.  Just the existence of a transfer without other suspicious activities is generally insufficient to establish fraudulent intent.

The ideal time to protect assets is before there are any potential creditors. That way transfers into a plan do not fall within the fraudulent transfer statutes. Making transfers when a lawsuit is imminent or pending or when you have outstanding financial obligations makes the outcome of a legal challenge less certain. The success of the asset protection plan will depend on your ability to show remaining solvency and a legitimate purpose for the arrangement.

If you live in Orange County, California or the surrounding areas and have questions about protecting your assets while having debts and financial obligations, contact the estate planning and asset protection lawyers at OC Wills & Trust Attorneys by calling (949)288-3598 for a consultation.

Wednesday, November 26, 2014

Planning for the Needs of Disabled Children

If your child has a disability, you are not alone. The 2010 census estimates that about one in twelve American children has a disability. Medical care and long term treatment can be terrifically expensive. One way to ensure that those needs will be met while protecting your assets is through a special or supplemental needs trust. Through that trust, your child may qualify for various government programs while also benefiting from assets you set aside.
Special or supplemental needs trust planning is necessary to make sure that your child can enjoy the benefit of the trust without negatively impacting his or her eligibility for government benefits under Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), Medi-Cal and many other programs. 

For this to work the benefits received by your child through the special needs trust cannot duplicate government program benefits.  Also, the trust assets cannot be owned by your child and the trustee must have complete discretion under the terms of the trust to make distributions or investments.

Instead of leaving assets directly to the disabled adult child through a will, you could create a special needs trust in your living trust or will. Your assets are protected in that the trust allows government benefits to continue to pay for your child’s necessities, freeing up your assets to be spent on making your child’s life more comfortable. The trust would own various assets that are used by the child such as a car or home. Because the trust owns them, not the child, they are not counted as being owned by the child when an agency determines if the child qualifies for benefits.  The trust could pay for such things as telephone bills, education or car repairs without affecting the eligibility for government programs. The trustee would not be able to make cash payments to your child because they would be considered income, resulting in reduced or lost benefits. The trustee would be independent and the trust would continue for the lifetime of the child.

If you live in Orange County, California or the surrounding areas and have questions regarding protecting your assets while doing special needs planning, contact the lawyers at OC Wills & Trust Attorneys by calling (949)288-3598 for a consultation.

Monday, November 17, 2014

Advance Health Care Directive Expiration

The term Advance Health Care Directive often gets thrown around and interchanged with a Durable Power of Attorney for Health Care, but they are not the same thing.  The Advance Health Care Directive actually replaced the Durable Power of Attorney for Health Care and allows you to not only appoint a health care agent to act on your behalf but also to give instructions about your own health care choices.  If your Durable Power of Attorney for Health Care (DPAHC) was executed before 1992 when the laws changed, then your DPAHC has expired and needs to be replaced. 

Now if you're like most people you are getting frustrated right now with the news that you need to get a new Advance Health Care Directive.  But realistically, 1992 was 22 years ago, and undoubtedly some things have probably changed in your world in the last two decades.  Minor children have grown up and now can be trusted to make decisions for you, parents may have passed away or friends may have changed.  So if you haven't already updated your Durable Power of Attorney for Health Care, now is the time to address the situation.

And if you are going to make an appointment and come into the office to make changes to health care documents, it makes sense to discuss changes to your Durable Power of Attorney, Living Trust and Will for precisely the same reasons.  Because if it has been 20 years since you thought about these documents, it's time to revisit your decisions and appointments.  Not to mention there have been a few changes and even dare I say, improvements in the law over that period of time and it may be to your benefit to have some of that language included in your legal documents.

If you have any questions, please feel free to contact us at the office.

Saturday, November 15, 2014

Powers of Attorney Should be Part of All Estate Planning

It’s called estate planning for a reason. It requires you to look ahead and plan for the future to try to avoid or mitigate the risks of decreased assets or healthcare procedures you do not want. Those issues can be addressed with powers of attorney.

Through these legal documents you authorize someone to act on your behalf. That person acts as your agent and needs to follow your directions (as much as possible) and act in your best interests. As long as you are competent to make decisions you can revoke a power of attorney or amend it. 

Financial Power of Attorney

This empowers someone to make financial decisions for your benefit. This can save your assets in a number of ways. For example, if you have a home, you have bills to pay (mortgage, taxes, utilities and insurance). Who will pay them if you’re incapacitated for an extended period time and no other person is authorized to access your financial accounts? Your agent could pay those bills, potentially liquidating one type of asset to grow another type, allowing you to maintain your home. 

This document can be as all encompassing (power over any and all assets and spend money on anything that benefits you) or narrow (access to one bank account to pay certain bills). Since this person will have access to your financial resources, chose an agent you trust and who’s capable of making rational financial decisions.

Healthcare Power of Attorney

This power of attorney authorizes your agent to make healthcare decisions for you if you’re unable to do so. It should spell out what kind of healthcare you want, and don’t want, in case you’re incapacitated. 

If you want treatment that the rest of your family may disagree with (such as not wanting extraordinary measures to prolong your life) you’ll need to pick an agent able and willing to make unpopular, important, life altering decisions. If you want minimal intervention, someone carrying out your wishes could limit medical procedures and costs, saving your assets for other purposes that should be spelled out in your will.

No matter your age or physical condition, it’s a good idea to get these types of documents done now before something unexpected happens. Orange County, CA estate planning attorney Brian Chew can help.  Call (949)347-5256 to discuss your situation, your future wants and needs and how your plans can be protected with a power of attorney.

Tuesday, November 11, 2014

Happy Veterans Day!

Veteran's Day

What better way to honor a Veteran’s service than by ensuring that the Veterans that we love are well cared for.   The costs of care are rising and it can be hard to keep up, but you can help.  If you know of a Veteran, spouse or widow who is in need of assistance with their activities of daily living and their medical needs exceed their income then their military service could qualify them for a reimbursement pension through the VA, called Aid & Attendance, of up to approximately $2,000 per month. 

There may be a way to help contribute to the costs of care of our Veterans, their spouses and widows, whether they live at home or in an Assisted Living facility.  To be considered, the Veteran needs to have served at least 90 days of active duty, with one day during a war time (date specific), be 65 years or older or disabled, have limited resources and need assistance with at least two of the Activities of Daily Living, or ADL’s for short: feeding; toileting; dressing; grooming; incontinence; bathing; and transferring. 

The Aid & Attendance Pension is a reimbursement program for medical and care costs that are already being incurred but is not dependent upon service-connected injuries for compensation.   If you have any questions about whether or not a Veteran, their spouse or widow can qualify for this pension please contact us. 

To all those Veterans who have served our Country so bravely, thank you for your service and Happy Veteran’s Day!

Wednesday, October 22, 2014

Life Estates: Why They May Not Be The Best Avenue For Asset Protection

Some people work their whole lives to save money so that so that their families are taken care of should they pass away.  As they age, many of these people become concerned that their assets will be depleted should they need long term care.  This is a legitimate concern and many try to protect their main assets, such as the family home using estate planning.  One estate planning tool used for this purpose is the life estate.  Although life estates can be useful in many situations, a person might be better off using another approach.

Essentially, a life estate is where the owner of property transfers this property to another but retains the right to live there for a period of time and continues to be responsible for the expenses associated with the property.  Parents often use this tool to transfer the family home to their children with the stipulation that they are allowed to live out their time there.  If the life estate is created properly and within the requisite period of time, this can be a beneficial situation for everyone.  The parents do not have to worry about losing their home as a result of long term care costs and continue to have a place to live, while the children receive an inheritance.  Unfortunately, as beneficial as this tool is, it can still be risky depending upon the situation.

There are many risks involved with granting a life estate to children.  First, the children’s creditors may be able to reach the property.  After the life estate is created, the children are considered the owners and if they incur liability, creditors can collect by placing a lien on the property.  Although the children might not have any foreseeable liabilities, should they get divorced or sued, they might incur some.  Also, since the children are considered the owners of the property, they will have to agree to any sale or transfer of the property going forward.  Again, this might not seem like a problem now, but can become one in the future.  Divvying up the proceeds in these situations can also be complicated.  In addition, there certain tax implications associated with the creation of a life estate that could end up costing the parent and their children substantial sums of money.  For these reasons, a life estate might not be the best tool if you are concerned about protecting your assets.  A revocable living trust can offer the same if not more asset protection and might be a better option.

If you are considering estate planning to protect your assets from long term care costs, you should speak with a qualified attorney as soon as possible.  Orange County, CA estate planning attorney Brian Chew can help.  Call (949)347-5256 to schedule a consultation today.  

Wednesday, October 8, 2014

Asset Protection for Medi-Cal Enrollees Staying the Same For Now

Many Americans rely on the government to pay for their very expensive long term care costs.  The Federal and state governments usually work together to assist those in need through their respective Medicaid programs.  In California, these benefits are managed by Medi-Cal, which is a means tested program.  Only those that fall below a certain financial level qualify for these benefits in the state.

Even for those who are eligible, chances are that when the money becomes available they will be pursued.  If a Medi-Cal enrollee passes away, the state can take steps to collect the money they spent on that persons care from their estate or surviving spouse.  Right now, the only protection for the surviving spouse of a Medi-Cal enrollee is an exception that exists if collecting the money would cause the spouse substantial hardship. 

There has been a push in the California legislature to reform the Medi-Cal recovery rules.  Senate Bill 1124, proposed by Senator Ed Hernandez, was introduced but eventually rejected.  This bill would have revised the Medi-Cal recovery rules to allow only Federally required actions to collect expenditures.  It would have limited recovery to cases where the recipient used the benefits to cover nursing home care and disallowed recovery in cases of expenditures for necessary medical treatment.  The bill would have also barred recovery from surviving spouses’ estates.  In essence, the legislation would have made it much more difficult for the state to collect the money they laid out to Medi-Cal recipients.  Recently, the bill was vetoed by Governor Jerry Brown.  While he expressed that reform might be necessary in this area a better solution is needed.  As the state does not collect anywhere near what it expends on Medi-Cal benefits, the Governor reiterated that reform must be made with this is mind.  

If you or a loved one are having trouble paying for long term care or are interested in planning to avoid this hardship, speaking with an experienced Medi-Cal planning attorney is in your best interest.  Eligibility for Medi-Cal benefits can be difficult to understand and you should rely on a trusted advisor to explain all of the options to you.  Call Orange County, CA attorney Brian Chew at (949)347-5256 for a consultation today.

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