CA Estate Planning Blog

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.


Tuesday, September 23, 2014

Estate Planning Lessons from Joan Rivers

Many of us like to make an entrance.  But, some of us, like recently passed Joan Rivers, want to make an exit.  When referring to an exit, we mean a final exit, or a funeral.  Rivers wanted her funeral to be Hollywood affair. She wanted a flashy, star-studded event, a Valentino gown and even a Harry Winston toe tag.  While most of her requests were facetious, she did want a larger than life funeral and that costs money.  After her recent passing, her family has been charged with this task and expense.  Luckily, funeral expenses can be deducted when calculating Federal estate taxes, which will save them a lot of money.  

Currently, the Federal estate tax will be assessed on estates worth over $5,340,000.  As Rivers’ estate is most likely worth much more than that, it will probably be subject to the tax.  Just like with an income tax return, certain things can be used as deductions on an estate tax return.    One of these deductions is funeral expenses.  Funeral costs can be claimed as deductions on Schedule J of the Federal estate tax return.  There is no cap on how much can be claimed except that it cannot be more than the gross estate is worth.  There are really no other regulations governing the amount, but there are some guidelines.  The costs have to be reasonable in light of the life of the person who has passed.  The costs that may be deducted include expenses for basic funeral components such as the funeral home, burial plot and marker, bringing the body to the place of rest and even flowers and sometimes the refreshments after the burial or service.

As the State of California does not assess an estate tax, if your loved ones estate is above the Federal exemption, the only place to claim these expenses as deductions would be on an estate tax return.  If you have questions about the Federal estate tax or estate planning in general, call OC Wills and Trust Attorneys at (949)347-5256.

Thursday, September 11, 2014

Should You Name A Trust As Beneficiary of Your IRA?

Some of us are lucky enough to have an IRA account that we will not have to use during our life.  For these individuals, it might be a concern whether to leave this IRA to beneficiaries outright or in a trust.  There has been an ongoing debate relating to whether it is more beneficial to simply designate a beneficiary or use a trust to receive IRA assets.  After a United States Supreme Court case recently found that an IRA is accessible by creditors in bankruptcy, many are leaning towards the latter option.

IRA accounts do not pass according to a person’s will.  When you open an IRA account, you are asked to fill out a beneficiary designation that specifies who will receive the assets in the event of your death.  If you decide to use a trust to receive these assets, you must create one specifically for that purpose, to be sure that is has all of the necessary terms and manages the assets according to your requirements.  

Using a trust to receive an IRA account after death can be beneficial to your heirs.  They can offer protection from creditors, even in the case that one of your beneficiaries gets divorced.  They also allow you to put certain restrictions on the inheritance to protect it from an irresponsible heir.  In addition, the use of a trust can allow you to leave these assets to an heir that is a minor, a task that cannot be done using a beneficiary designation, and allows you to control the way the inheritance is used when the minor becomes of age.  

But, the use of a trust does have some disadvantages as well.  For instance, a trust allows you to name multiple beneficiaries of IRA assets.  But, by doing this, you might be burdening your other heirs.  If one of the beneficiaries is much older than the rest, the minimum required distribution (the amount your heirs are required to take every month) might be significantly greater than it would be had you only appointed a single beneficiary of a younger age.  Spouses can also be negatively affected by using a trust to receive an IRA.  Spouses can lose the income tax benefit that they would get if the IRA was inherited outright, among other things.

If you want to know whether it is in your heirs’ to create an IRA beneficiary trust, you should speak to a qualified estate planning attorney.  Call Brian Chew at (949)347-5256.


Thursday, August 28, 2014

Is a Trust Right for You?

A trust is an estate planning tool that holds assets to be distributed after you die.  Most people think that you must be wealthy to benefit from the use of a trust in an estate plan. This is not the case, as there are many different types of trusts.  Some estate planning attorneys recommend that anyone with an estate worth over $100,000 and satisfying one of the following conditions should consider using a trust.  The conditions are as follows:

• A good amount of your assets are in the form of real estate, art or business holdings.
• You want to control how your assets are distributed to your beneficiaries.
• It is important to you that you provide your spouse with financial support after your death and also that your other beneficiaries inherit after your spouse passes away.
• You are worried that you might be subject to significant estate taxes and you want to reduce the liability as much as possible.  
• Your goal is to provide for a disabled beneficiary but want that beneficiary to continue to be eligible for government benefits.

No estate planning situation is the same and there are many different types of trusts that can be used in a wide variety of situations.

• Credit-Shelter Trust
A credit-shelter trust allows you to stipulate to leave a certain amount of assets (under the estate tax exemption) to a trust upon your death.  By then leaving the remainder of your estate to your spouse you can reduce or even avoid estate taxes.

• Dynasty Trust
A dynasty trust is created for the benefit of your grandchildren by allowing assets under the generation-skipping tax exemption to be passed to them tax free.  Your children can also benefit from trust income during this time.

• Qualified Personal Residence Trust (QPRT)
The QPRT trust allows you to transfer your residence or vacation home into the trust but continue to control it for a certain number of years.  The IRS values the asset at less than its current value as it assumes that your beneficiaries will not possess it for a while.  As long as you outlive the trust the home will not be included in your estate upon your death.

Trusts are complex legal documents that can assist in the preservation of assets if drafted correctly.  It is imperative to consult with a qualified estate planning attorney if you are considering a trust.  If you think a trust might be right for you call OC Wills and Trust Attorneys at (949)347-5256 for a consultation today.


Thursday, August 14, 2014

How to Avoid a Conservatorship

Becoming incapacitated is a common fear among those considering putting together an estate plan.  Who will take care of your needs is an even more frightening question.  Many people incorrectly believe that their loved ones are entitled to take over care immediately.  Someone has to be legally appointed to care for a loved one in the event they become incapacitated.  Also, not just anyone is allowed to manage a person’s finances if he or she is unable to do so.  An individual has to be appointed to assist with financial management in the same way as they do for personal needs.  This person can either be selected by the court or can be chosen in advance using certain estate planning documents.  

A conservatorship is a legal proceeding in which a court chooses a person or organization to care for an incapacitated adult and/or manage their finances.  A conservator can be selected for one need and not the other or to fill both roles.California has different types of conservatorships including a general and limited conservatorship, as well as one for the purpose of caring for a mentally ill individual.  A conservator of the person tends to the personal needs of the incapacitated such as making living arrangements, arranging for meals and housekeeping.  A conservator of the estate is chosen to handle the incapacitated person’s finances.This person controls the income, assets and expenses of the person subject to the conservatorship.

Just like many other legal proceedings, conservatorships can be long, drawn out, expensive and emotionally trying. Luckily, all of this can be avoided by a small amount of pre-planning.  Health care directives can circumvent the need for a conservator of the person and a durable power of attorney can be used to avoid the need for a conservator of the estate.  Going to an estate planning attorney saves beneficiaries money that would otherwise go towards legal fees in the event that a conservatorship becomes necessary.  This also allows a person to maintain a certain amount of control over who cares for them in the event of incapacity.

If you are interested in discussing a durable power of attorney and a health care directive, or have any other estate planning or asset protection questions, call Brian Chew at (949)347-5256.

Thursday, July 31, 2014

Financial Advantages of a Revocable Living Trust

Revocable living trusts  are estate planning tools that have become very popular in recent years mostly because of the financial advantages they offer.  A trust is a vehicle in which property is held for the benefit of another person.  A living or inter vivos trust is one created during an individual’s lifetime as opposed to upon their death.  A trust is revocable when the grantor (creator of the trust) has the freedom to change the trust terms throughout their life.  Assets held by the trust are managed by an individual, known as the trustee, who is appointed by the grantor.

There are many benefits to the use of a revocable living trust in your estate plan.  Although you should always speak to a qualified attorney before creating a trust to ensure that it is drafted correctly, some of the advantages are as follows.

Revocable living trusts avoid probate.  Probate is the legal process by which a last will and testament is validated.  Assets held in a revocable living trust pass immediately to beneficiaries upon the grantors death.    By passing your assets via a revocable living trust instead of a will, you can avoid the costly and lengthy probate process.  In the case that you own property in more than one state and hand down your assets by will, ancillary probate will be necessary.  Ancillary probate is the process of validating a will in another state where property is owned.  This can be even more expensive and time consuming than the standard probate process.  Using a revocable living trust to distribute these out of state assets will also eliminate the need for ancillary probate, saving your heirs time and money.

This type of trust offers the grantor a large amount of control over their assets throughout their life.  By naming themselves as trustee, the grantor can manage the assets in the trust as long as they are competent, enabling them to make financial decisions that will grow their wealth over time.  

A revocable living trust also enables the grantor to appoint a co-trustee that will manage the trust assets in the event that the grantor trustee becomes incompetent.  If you have not designated someone to handle these affairs via a revocable living trust or another method, a conservatorship proceeding could be necessary.  These proceedings are also quite expensive and can be avoided by the use of a revocable living trust, preserving money for your heirs.

If you are interested in the financial advantages of a revocable living trust, call Brian Chew at (949)347-5256.


Thursday, July 17, 2014

Important Estate Planning Steps for Newlyweds

Are you newly married?  The honeymoon isn’t even over yet, but, one of the first things you should think about is estate planning.  People are getting married later in life and may have amassed a large amount of assets before entering into their first nuptials.  That is why it is important to understand how your marriage affects the way your estate will be handled and to create an estate plan with these considerations in mind.  Newlyweds can do certain things to create a comprehensive estate plan and should always start this process by discussing everything with their new spouse.

Update Beneficiaries on Accounts
One of the easiest ways to start the estate planning process is to change the beneficiaries on your financial accounts.  These accounts include banking, investment and retirement accounts.  You should also talk to your spouse about who you would want to inherit from your estate should something happen to both of you.

Last Will and Testaments
You should execute or update your will.  A will instructs how you would like your property distributed after you die.  In most cases, spouses name each other as beneficiaries to each other’s estates.  But, this might not be right for you.  You should consider other beneficiaries such as existing children, parents and other loved ones if you would like them to inherit from your estate.
Discuss it with your spouse and decide how you would like your assets distributed in the event of your death or if both of you die.  

Durable Power of Attorney
If you and your spouse want to be able to make personal and financial decisions on each other’s behalf in the event of incapacity, you should appoint each other in reciprocal durable powers of attorney.  You should also check with your account holders to determine if you will need additional paperwork for the appointments to apply to specific financial accounts.

Advanced Directives
You and your spouse should also be sure to discuss end of life issues.  You should each document your wishes in advanced directives and appoint each other as health care proxies if you decide that is the best course of action.

If you have a sizeable estate and/or own a lot of property, you should discuss with your attorney the best way to title your assets and the possibility of using a trust in your estate plan.  Whenever you have a major life event, i.e. marriage, children, divorce, death of a loved one, you should think about how this affects your estate plan. It is in your best interest to consult with an experienced attorney on these matters such as the Orange County, California attorney Brian Chew.  Call OC Wills and Trust Attorneys at (949)347-5256 for a consultation today.

Friday, June 27, 2014

Supreme Court rules that Inherited IRA's provide no asset protection in Bankruptcy

The Supreme Court has ruled in the case of Clark v. Rameker that inherited IRA's (i.e. and IRA/401k account that you receive from your parent's estate) do not have the same creditor protection as an employer funded 401k or a self funded IRA.  As a result, the funds held in an inherited IRA's can be attached by creditors in a bankruptcy proceeding.  

This ruling should result in an increase in the use of an IRA Beneficiary Trust as a vehicle in which the inherited IRA can reside for the lifetime of your heirs and while the funds are held within the trust, it is unavailable to your heir's creditors.  


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