Frequently people come in to my office and are unaware of what their estate planning documents say. For all they know, their attorney made herself the beneficiary of their estate.  While that is extremely unlikely and while most of the time, the documents do what they are supposed to do, it is important that you understand what your documents state and also what they can accomplish on your behalf. 

I also see many clients who have not reviewed their California estate planning documents since their attorney drafted them (I use the word “attorney”, but about 20 percent of the time, I review documents that were drafted by paralegals or companies that claim to do things like an attorney, but are not an attorney – more about that in another post).

Your attorney should explain to you in detail what you are signing.  I realize that there are a lot of documents and frankly some of my clients do not want to hear everything.  However, I make certain that my clients have a basic understanding of their estate plan when they leave my office.

Compare it to the purchase of a car.  Before you buy the car, most people do some research about the car; they talk to the salesman; and they learn about the car.  The same thing should be done with regard to an estate plan. 

If you do not understand something that the attorney is explaining to you, speak up!!  Make him give you an example or two.  I am not talking to hear myself talk, but to convey the benefits of the document to my clients.  I attempt to tailor the explanation to my client, but sometimes I need to be asked to explain things in a different way.

In summary, you need to make sure that what you are signing is something that you understand and that is appropriate for you.  If it is not the way you want it, then just as with the car salesman, have the attorney craft the document to meet your needs.    

California Prepaid Funeral Plans and Estate Planning and Elder Law

Part of California Elder Law planning and California Estate Planning includes planning for funerals.  Medi-Cal exempts prepaid funeral plans.  These can be funded by a cash purchase.

The Federal Trade Commission has published Funeral’s: A Consumer Guide.  It certainly does not hurt to read this.  Among the points it makes is that funeral homes are required to provide a  price list that includes all goods and services the funeral home will provide the buyer.  The buyer is entitled to select whatever he or she wants.

While most people do not like to consider their funeral and burial, it is part of estate planning.  Moreover, it frequently assists in qualifying for Medi-Cal.   Please contact a California Estate Planning attorney for assistance in determining eligibility for these programs.

Living Trusts were popularized as a way to avoid probate fees.  That is true.  A properly funded living trust will avoid probate and therefore the fees associated with probate.  In Los Angeles (or for that matter Culver City, Santa Monica, Westchester, Marina del Rey, etc.), that should not be the sole reason for doing a living trust.

The reality is that most outside people will charge a fee for administering a trust as well.  This may occur when administering a trust for someone who is incapacitated to act – the alternative to having a trust in this situation is a conservatorship.  I will discuss this in another blog.

So what about the fees at death.  Sometimes the trust instrument will provide a specific fee.  Most banks and trust companies charge between 1% and 2% depending on the size of the trust.

Section 15680 of the California Probate Code speaks to the issue as follows:

            (a)        Subject to subdivision (b), if the trust instrument provides for the trustee’s compensation, the trustee is entitled to be compensated in accordance with the trust instrument.

            (b)        Upon proper showing, the court may fix or allow greater or lesser compensation than could be allowed under the terms of the trust in any of the following circumstances:

                        (1)        Where the duties of the trustee are substantially different from those contemplated when the trust was created.

                        (2)        Where the compensation in accordance with the terms of the trust would be inequitable or unreasonably low or high.

                        (3)        In extraordinary circumstances calling for equitable relief.”

In the event that compensation is not specified, Section 15681 of the California Probate Code provides as follows:

            “If the trust instrument does not specify the trustee’s compensation, the trustee is entitled to reasonable compensation under the circumstances.”

Therefore, as we see administering a trust is not free!  However, there are other reasons for having a living trust besides avoiding conservatorships.  These include avoiding probates in multiple states if real estate is owned in more than one state. 

A big reason for creating a trust is creating a plan for the distribution of the entire estate.  Frequently, people have different beneficiaries on different assets which are not coordinated with their will.  Another benefit to having a living trust is avoiding the problems associated with joint tenancy including loss of control and in California, the loss of step-up in basis at the first death.

There are many other reasons to have a living trust; the point of this blog is to explain that there are costs associated with them.

Estate planning is about more than simply preparing documents.  It is about protecting your values and not just your valuables.  It is about working with an attorney that has the ability to counsel you about your estate and offer a variety of solutions.

When this California estate planning attorney meets with people concerning their living trust, I listen to them and over the years have seen the way to do it right and the mistakes that people frequently make.  Few make all of these mistakes, but many make some of these mistakes.

1. Spend more on a home than you should: this is especially in the news right now as frankly many people thought that appreciation would continue forever.  Real estate, like virtually everything else is cyclical.  Remember that and remember that property taxes, homeowners insurance, maintenance and repairs only increase with time.

2. Debts and Retirement: Ideally prior to retirement the vast majority of your debts will be paid off and your mortgage will be easily managed.  In the event that you are thinking about moving and undertaking a new mortgage, see the previous paragraph!!

3. Raiding the Retirement Account:  Often there are large penalties associated with doing so.  Even if there were not, think about the long term consequences.  Obviously that money will not be there when you are going to need it.

4. Think about health costs: The good news is that we are living longer; the bad news is that many of us are going to be incapacitated for a fairly long time.  Many companies are reducing, if not eliminating, health benefits for retirees.  Have a plan in place.  While it is not for everyone, think about long term care insurance. 

Sometimes a California estate planning attorney is a great person to speak with about planning for retirement.  In addition to making sure that your legal documents (living trust, will, power of attorney, advance health care directive, HIPAA authorization), he/she can provide you with a variety of options concerning your future.

In the event you are in Culver City, West Los Angeles, Marina del Rey, Westchester, Santa Monica, Brentwood, Beverly Hills, or nearby areas, please give me a call!