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Estate Planning Basics & Essentials

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Tuesday – February 28, 2018

6:00-7:30 PM

Local attorneys will describe what is a living trust, a will, a power of attorney, and a guardian designation. There will also be a discussion of estate planning when you are on benefits such as Medicare, Medi-Cal, and Social Security.

Park Branch Public Library

1833 Page Street - San Francisco

Estate Planning Basics and Essentials

Local attorneys will discuss the most common estate planning tools including wills, trusts, powers of attorney, and advance healthcare directives. There will also be an overview of the most common ways that property is titled in California and the effects of those titling decisions.

Eureka Valley Public Library

1 Jose Sarria Ct -  San Francisco

Tuesday – January 16, 2018

6-7:30 PM

New Rules for Those Concerned About Losing Their Home to Medi-Cal Recovery When They Die

By Loulena Miles

Partner, Miles & Torres Associates

In California, new Medi-Cal recovery laws just came into effect and will apply to those who die on or after January 1, 2017. The new rules mandate that the State’s right of recovery will only apply if the beneficiary dies with assets subject to probate. This is big news for people who are on Medi-Cal, or have family members on Medi-Cal, and are concerned that the State will seize their home when they die. 

While even before this law took effect, the State could only make a claim for reimbursement against the home of a beneficiary that had passed away under certain conditions; the new rules make it much simpler to protect a home and other property from estate recovery.

For estate planning purposes, this means that Medi-Cal beneficiaries who put their assets into a revocable living trust will not have their assets subject to Medi-Cal recovery.  Before this law, there was no guarantee that assets held in a revocable living trust would be protected from Medi-Cal recovery unless other strategies were in place that often involved loss of ownership or control over your property. Revocable trusts have the distinct advantage of allowing you to retain full control and ownership of your property during your lifetime.

There are many other reasons to put your home and assets into a revocable living trust such as simplified transfer of control of your assets if you become incapacitated, efficient management and transfer of your assets upon your death, administration of assets for minors or loved ones after you die, and potential tax benefits for your heirs.

Although a revocable trust provides you with many benefits, you do not need a trust to take advantage of the new Medi-Cal recovery rules.  Holding property in joint tenancy, life estates, and other types of transactions will also keep your property out of probate court and may accomplish the same result. But there can be serious drawbacks to transferring ownership of your property during your lifetime, such as loss of control over the property and adverse tax consequences that must be seriously considered before such a transfer occurs.

For more information, you can contact the California Advocates for Nursing Home Reform at: http://www.canhr.org/publications/PDFs/Medi-Cal_Recovery.pdf  and give our law office a call for a free consultation at 415-496-9396.

 

 

A short primer on California’s new right to die law

By Loulena Miles, Attorney at Miles & Torres Associates

End of life decisions are never easy, and people feel many different ways about the right to physician-assisted suicide. California is now the fifth state to allow physicians to assist people who have made a decision to end their life, but only under certain narrow conditions. 

What is it? 

California’s Governor Jerry Brown signed the End of Life Option Act into law last fall and it took effect on June 9, 2016. This law allows mentally competent individuals who are terminally ill (and are expected to die in the next six months) to take medication that will end their life at a time and private place of their choice. 

Who does it apply to? 

The law only applies to adult, terminally ill, California residents with no more than six months to live. A patient must be deemed terminally ill and mentally competent by two physicians to receive a prescription. To make a formal request for the medication, the patient must tell his or her doctor on two separate occasions, at least 15 days apart, that they want the lethal medicine. The patient must also submit a request to the doctor in writing. All licensed medical doctors in California can prescribe the medication, but they are not required to offer this option. 

Who doesn’t it apply to? 

This law does not apply to people who have a significant mental illness, including advanced Alzheimer’s and dementia. It also does not apply to people who are terminally ill and are in constant pain, but who have more than six months to live. Moreover this law will not provide an option for people who are unable to see multiple doctors and make multiple requests. The medication costs could be prohibitive, costing anywhere from $500 to $4000.  The State of California will pay for the medication for those who qualify for Medi-Cal coverage but no federal funds can be used to pay for the medication.   Some large health providers including Kaiser have opted to allow their doctors to prescribe the medication. Catholic affiliated medical providers, the Veterans Health Administration and Medicare have opted out of prescribing the medication.

How does it affect estate planning?

Generally, when a person does estate planning, they have to answer questions about what level of care they would want if they no longer had the mental capacity to make decisions for themselves. In California, those decisions are documented in what is called an Advance Health Directive. In that document, a person can name an agent to make decisions in the event that he or she loses mental capacity. The End of Life Option Act does not allow a person to choose physician assisted suicide in advance or name an agent to authorize this decision for them. But an advance health directive does allow a person to designate what other types of medical interventions they would want if they were terminally ill. For instance, many people choose not to have feeding tubes to keep them alive artificially if they are not able to eat or swallow, and they have no mental capacity to make that decision for themselves. Estate planning can help you navigate these difficult decisions in advance so that your friends and family are better prepared to make decisions for you if the time comes. 

Miles & Torres Associates provides estate planning services to help you navigate these difficult decisions and feel confident that your wishes will be carried out. Call us for a free consultation at 415-496-9396.

 

Same-Sex Couples and Estate Planning: The Effect of Saying “I Do”

By Miguel Torres
Partner at Miles & Torres Associates, a San Francisco Estate Planning Law Firm

Marriage carries a number of estate planning and tax benefits that all same-sex couples should be aware of. Here is an overview of some of the key benefits for married couples and alternative approaches for non-married couples to protect yourself and your rights. 

Titling Assets as Community Property with Right of Survivorship
In California, since 2001, married couples can hold property as “community property with right of survivorship”.  This is a form of ownership that transfers property to your spouse at your death without a court proceeding. The surviving spouse gets the coveted “full step up in tax basis” wiping out any capital gains on the property thus allowing the surviving spouse to sell the property free of capital gains tax. If you are not married but would like to share property with your partner then you should consider putting your property into a trust and discuss the tax consequences of different forms of ownership with an estate planning attorney.

Retirement Accounts Rollover
A surviving spouse who inherits his or her spouse’s IRA or workplace savings account can transfer the proceeds into their own IRA in order to maximize the tax savings and investment power.  This option is only available to surviving spouses.  For IRAs, the registration type of both IRAs must be the same, Traditional to Traditional or Roth to Roth.  If you are unmarried, then make sure that your beneficiary designations are up to date so that your partner can still inherit your IRA, albeit with slightly less advantageous terms than are available to spouses.  Regardless of whether you are married or not, it is generally not advised to pass your IRA assets through a will or trust.

Tax savings for property inherited from your spouse
The unlimited marital deduction allows a person to inherit an unlimited amount of assets from his or her spouse free from estate tax.  Further, the portability provisions of the federal gift and estate tax law allows a surviving spouse to use any remaining portion of the deceased spouse's exemption amount, enabling the surviving spouse to make additional tax-free gifts and reduce the amount of estate taxes owed on the surviving spouse's death.  Non-married couples must rely on the individual's exclusion amount from federal estate and gift tax (the applicable exclusion amount for 2016 is $5.450 million).  

Better protection if spouse dies intestate
In California, if your spouse dies without a will or a trust, the courts decide where your assets go based on intestate succession laws – this is called probate.  Usually your spouse gets all of your community property and half to one third of your separate property.  However, if you are living together but you are not married, your property goes to your closest blood relatives instead of your significant other.  California does not recognize common law marriages.  Unmarried couples should have wills and trusts drafted to make sure that their assets transfer to a beneficiary of their choice rather than by operation of law. 

A spouse takes priority for financial decisions and if a conservator needs to be appointed
If you are incapacitated, your spouse can make many important financial decisions on your behalf without the necessity of additional legal instruments.  A non-spouse partner would need a power of attorney document to have similar rights. Moreover, for people who really cannot manage their finances or affairs, a conservator is usually appointed by the court. If your spouse becomes incapacitated and a court must appoint a conservator, most states give preference to spouses.  If you are unmarried it is a good idea to have a power of attorney for finances and an advance healthcare directive in place that specifically gives your partner rights to speak on your behalf for healthcare and finance decisions. In the directive you can also specifically request the court appoint your partner as your conservator.

Regardless of whether you are contemplating marriage, happily married or never plan to be, you should think carefully about who you want to take care of you if you are incapacitated and who you would want to have your property and other assets when you pass away.  These are the key decisions that go into your estate plan.  Meeting with an estate planning attorney can help you look more closely at these issues and develop a plan that best protects you and carries out your wishes. 

Three Essential Tools for the Sandwich Generation

By Loulena Miles, a Partner at Miles & Torres Associates, an Estate Planning Law Firm

What is the sandwich generation anyway? It refers to those of us who are typically in our 30's or 40's and are responsible for bringing up our own children and for the care of aging parents. There are perks to this set up: it is enriching for children and grandparents to spend time together exploring the wonders of youth and the wisdom of a long life. But it can be difficult as well.  The burdens can be eased if you put some tools and protections in place to help out during times of crisis or transition.

First off, find out if your parents have these important planning documents: a Will, an Advance Healthcare Directive and a Durable Power of Attorney for Finance

The Will lays out your parents’ wishes if they pass away. This can eliminate a lot of stress and strife in families where are there multiple children or beneficiaries. A Will should be created as early as possible so that there is no question about your parents' mental capacity when the documents were created. If your parents have over $150K in assets, a Trust should also be considered to sidestep the costly and time consuming probate process. 

The Advance Healthcare Directive is where your parents lay out their wishes for the types of medical interventions that they would want or not want. Many people would only want risky and expensive medical interventions if they are still able to meaningfully interact with their loved ones.  An experienced estate planning attorney can assist your parents in writing down their wishes and naming a trusted individual who can make medical decisions if they are unable. If you are the caregiver, this often means you will be that person, and if difficult decisions have to be made, you’ll be glad to know their wishes in advance.

The Financial Power of Attorney is one of the most critical documents that can help a caregiver provide support to an aging parent while protecting the caregiver from having to pay for their parents' expenses out of pocket.  This document will also allow you to manage your parents' finances in general.  If you have this powerful document, you are less likely to need to go to court and get yourself appointed as the conservator for your aging parents. This document can either become effective immediately, while your parents still have capacity (very useful if your parents are physically home bound), or can be set up to only take effect if your parents lose mental capacity, usually as certified by a physician. Having this document can be invaluable and is easy to set up in advance.

Sandwich gen-ers also need to consider what would happen to their children if they are unable to care for them. At a minimum, you need to have a Will that names the preferred caregiver for your children. If you have significant assets to leave to your children (for example this includes your home, any expected life insurance proceeds, your possible inheritance and funds in an investment account) then it is a good idea to set up a trust to protect this property for your child’s living and educational expenses until they are fully launched adults.

 Finally, by virtue of you being a member of the sandwich generation, it is a good idea to consider life insurance for yourself. You are very important to a lot of people and if something happened to you, a life insurance policy would provide the funds to set up support for your dependents. 

The most important reason to set up these plans is to give you peace of mind. These tools will help you get your affairs in order and reduce stress if times get hard. As they say, an ounce of prevention….

Miles & Torres Associates provides a full range of estate planning services including wills, trusts, probate and conservatorships. We offer free initial one hour consultations. Visit us at www.milestorreslaw.com or call our office at 415-496-9396.

What is a Revocable Living Trust?

by Miguel Torres

Partner at Miles & Torres Associates

A revocable living trust is essentially a document creating a legal entity to hold your assets for your benefit, and under your control, during your lifetime. If you are ever temporarily or permanently incapacitated, the document would empower a trusted individual of your choosing to step into your shoes for the purposes of managing and distributing the assets in your trust according to the direction you provide in the trust. When you die, the trustee distributes the assets in your trust to your beneficiaries without need of state involvement.  It is one of the cornerstones of estate planning because it allows for a faster and less costly way of transferring property by avoiding court supervised wealth distribution, also known as probate.   

Let’s discuss some of the basic concepts in a revocable living trust.  The person who creates the trust is variously referred to as the trustor, grantor, and/or the settlor.  Usually, the same person is also the initial trustee, the person who manages and distributes the assets.  In other words, you retain control of your assets in the trust to manage as you see fit during your lifetime or until incapacity. The successor trustee is the person who succeeds you upon incapacity or death.  The trust assets or trust estate is the property transferred to the trust.  Funding the trust means to change the title of your property, both financial (account names) and real property (by deed) to the trust. A revocable living trust is most effective as an estate management tool if it is properly funded, meaning most of the assets are transferred to the trust so as to avoid probate.

A revocable living trust by definition is revocable during your lifetime and can be amended or terminated at any time by the trustor.  A trustor can modify the trust however he or she wishes, thus the Internal Revenue Service treats those assets as if the trustor still owned them.   The trustor reports any income generated by the trust assets on his or her personal income tax returns.

Perhaps the single most important benefit of a revocable living trust is the avoidance of probate.  Probate is the court-supervised process to settle all your financial matters after you die.  Why do you want to avoid it? Because it can be a costly and lengthy affair, often taking more than a year and usually costing tens of thousands of dollars in fees and costs. It is especially costly if you have to go through multiple probate proceedings, as is the case if you own real estate in multiple states.  Probate is also public, so anyone can see how your assets were divided and to whom.  All of your assets passing through a living trust bypass probate, thus passing to your beneficiaries sooner, privately, and with less expense. 

A living trust starts working for you the moment it is created.  If you become physically or mentally incapacitated, your successor trustee takes over the management of the assets in your trust, for your benefit.  A trust is not a substitute for a Durable Power of Attorney; it works in tandem to protect you in case of incapacity.  Your agent, under a durable power of attorney, manages your assets and affairs outside of the trust and assists in the transfer of property to the trust, when necessary.

Another benefit of a revocable living trust is privacy; you do not have to file the trust with the court.  A living trust is not a public document.  The only person (or people) privy to such information is the trustee (and often the successor trustee and beneficiaries.) 

Finally, a trust may continue past your death and go on protecting your children’s inheritance until they are well into adulthood.  A trust is an excellent tool for people with minor children or young adults who are potentially not mature enough to handle large sums of money outright.  You can transfer your children’s inheritance through the trust, and it can guide the spending habits of your children’s guardian and be distributed to your children over time. A trust can provide some protection over the trust’s assets from creditors, irresponsible spending and failed marriages. 

Do I Need One? 

Not everyone needs a living trust. We usually recommend a trust for clients who own real estate, have minor children, have dependents with special needs, or have significant assets.  A revocable living trust is not a universal estate planning solution, but it is a formidable tool.  In conjunction with other estate planning tools, it can protect you in the event of incapacity, and it can provide for the orderly distribution of your assets when you die.

If you would like to learn more about revocable living trusts and whether one is right for you, call Miles & Torres Associates for a free consultation at 415-496-9396.

 

Traditional IRAs and Estate Planning: A Few Golden Rules to Guide You in Naming Beneficiaries

By Loulena Miles

Miles & Torres Associates

Individual Retirement Accounts (IRAs) are an important part of most Americans’ life savings. In fact, about half of American families have an IRA account and among those, IRA plan assets were a clear majority of families’ total financial assets.

IRA’s popularity is mainly due to their built in tax advantages. Contributions to traditional IRAs lower your taxable income in the contribution year. That lowers your adjusted gross income, helping you qualify for other tax incentives you might not otherwise receive, such as the child tax credit or the student loan interest deduction.

Major tax advantages can also be available to an IRA’s inherited owners – if transferred carefully so as to comply with tax laws. A big tax advantage is commonly known as the “stretch” which allows a beneficiary to inherit an IRA asset and defer the distributions based on their own life expectancy. The assets continue to grow tax-deferred during the beneficiary’s lifetime – maximizing the amount that the beneficiary can invest. Note the “stretch” benefit is under Congressional scrutiny and may not always be available.

Nevertheless, confusion abounds on how best to transfer your IRA assets at your death, mainly because IRAs are governed by a complicated set of tax rules. If these rules are not followed, there can be fines and missed opportunities for future savings.  Therefore, the decision of how you transfer your IRA to your beneficiaries can be one of the most important estate planning decisions you can make. A good time to consider how you would want your IRA to transfer upon your death is when you set up your estate plan.

Many people choose to create a revocable living trust for the management of their assets when they are incapacitated and for when they pass away. However, deciding whether you name your trust as the beneficiary of your traditional IRA requires specialized knowledge and careful consideration. If a traditional IRA is transferred incorrectly it can potentially result in the loss of decades of tax deferred savings or unnecessary penalties for your beneficiaries.

Every IRA owner’s situation is different, necessitating specialized planning considerations, but there are a few general rules to know about IRAs that can kick start your thinking about who or what to name as your beneficiary. 

1.      Unless there is a compelling reason to name your trust as the beneficiary of your IRA, name individuals instead.

If you are married or intend for your IRA to pass to a chosen individual, or small group of chosen individuals, it is usually best to name your beneficiaries directly. The IRA will pass outside of probate and the transfer will be quick and relatively simple for your beneficiaries. Moreover, these beneficiaries can continue to hold the assets in inherited IRA accounts and reap tax deferred benefits for years, if not decades, depending on their life expectancy. Therefore, naming a trust as an IRA beneficiary is usually discouraged unless you have a strong reason to do so. Some reasons to name a trust as a beneficiary might include planning for the long-term care expenses of elderly IRA holders, protecting your assets from creditors after you die (IRAs have creditor protections for the original owner during their lifetime), reducing estate taxes (if you are one of the few who have more than five million in assets upon death), protecting beneficiaries with special needs who rely on public assistance for survival, and allowing for greater flexibility in managing the payouts for minors or young adults (and even then, you probably want to name the minor or young adult directly unless the IRA assets are quite substantial).  If any of these scenarios apply to you, it is best to talk to an estate planning attorney to evaluate your options.

2.      If you are married and want your spouse to inherit your entire IRA, it is usually best to name them outright as the beneficiary.

Spouses get preferential treatment when they inherit an IRA. Spouses have one option that nobody else has: rolling over inherited IRA assets into an IRA in their own name, and treating these assets as if they were their own. This may be a good choice if the surviving spouse doesn’t have an immediate need for the IRA assets and is looking to keep the money in a tax-advantaged account for as long as possible. Spouses also have the option of treating it as an inherited IRA and taking out the funds earlier than they otherwise would. The bottom line is that spouses have the most flexibility in how to manage the IRA assets if they are named directly as beneficiaries of the deceased spouse’s IRA. Also if you are married, you generally must name your spouse as the beneficiary of your IRA.  If you want someone else to inherit your IRA, you should get written consent from your spouse to name the other person. 

3.      If you name a minor as a beneficiary of your IRA, you might want to choose a guardian for management of the IRA assets.  If you don’t, one will be chosen for the beneficiary until he or she reaches the age of majority.

Unlike a spouse, minors (children under age 18) will not have the option of rolling IRA plan assets into IRA accounts in their own name. So children and all non-spouse beneficiaries generally have to begin taking minimum required distributions soon after they receive the inherited IRAs, based on their age. They will also have to pay the associated income taxes. Moreover, while they are under age 18, whoever is their guardian will have control over the management of the IRA assets.  One option is to name an adult individual of your choice to serve as a custodian for the IRA funds under the Uniform Transfer to Minors Act. This allows you to control who will manage the funds, instead of a parent, or whomever the court appoints as the child’s guardian. Another option is to name a trust as the beneficiary of the IRA and name the child as the beneficiary of the trust. If you are considering naming a turst, this should be done by an estate planning attorney because creating a trust for a minor requires some planning and forethought and there are potential drawbacks to naming a trust that should be considered.

4.      Know who your beneficiaries are and keep your beneficiary designations updated!

This is one golden rule that applies to absolutely everyone who owns an IRA account. You must check and double check your named beneficiaries every few years. Often when people do look, they are horrified to discover that their beneficiaries are not who they would currently want to inherit their assets. For example, it could be an ex-partner or a long-deceased family member, rather than their current partner or children. Whenever there is a major life change, it is time to consult and possibly update the beneficiary designations on these accounts. That means if you get married, divorced, have children, or more than 5 years have gone by since you last checked, it is time to look again.

5.      It is generally not a good idea to transfer title of your IRA account out of your name and into your trust during your lifetime.

The IRS has ruled that only an individual can own an IRA.  If you transfer an IRA to a trust, the IRS considers this a taxable distribution, just as though you cashed out your IRA. That means all of the money in the IRA is immediately taxable as ordinary income. Additionally, if you are not yet 59 1/2 years old, this is an early distribution and you have to pay an additional 10 percent penalty tax.  Moreover, your IRA funds are no longer in an IRA as far as the IRS is concerned, so the tax-deferred status of any future earnings is lost. If you want your IRA funds to be distributed through a trust, then you would name the trust as the beneficiary of your IRA. (This decision should only be made after consultation with an estate planning attorney, as described below).

6.      If you want to name your trust as a beneficiary of your IRA, see a lawyer or specialist.

Naming a trust as a beneficiary of an IRA is a complicated endeavor that should only be done with the utmost care. If you find that you have a compelling reason to do so, consider the following facts first. If your trust has multiple beneficiaries, the required minimum distributions generally must be based upon the life expectancy of the oldest beneficiary, leaving younger beneficiaries with less time for their assets to grow tax-deferred. Further, if you name an entity rather than a human being as a beneficiary in your trust (say a charity or nonprofit organization), no beneficiary of the trust will be able to qualify to stretch their distributions for tax deferred growth beyond the life expectancy of the original IRA participant. Finally, administering a long-term trust after the grantor passes away requires some expertise and time.   Only owners of IRAs with significant assets should consider naming a trust as a beneficiary.

If you’re still not sure who or what you should name as a beneficiary of your trust, call us for a free consultation.  Miles & Torres Associates 415-496-9396.

What is Probate and How to Avoid It

By Miguel Torres

Partner, Miles & Torres Associates

Probate is one of those legal processes shrouded in myth. It conjures images of a maze of bureaucratic hurdles and money flying out the window to pay for legal fees.  Well, the myths are not far from the truth.  Probate can take a long time and it is expensive!  Fortunately, there is an easy and affordable way to avoid it – set up your estate plan. 

Let’s start by defining the term “probate”.  It is the court-supervised process to settle all your financial matters after you die.  In California, a probate proceeding is required if you have more than $150,000 in assets passing through a will or if you die intestate (without a will or any estate plan).  During probate, assets are identified, inventoried and appraised.  Debts and taxes are paid, and then the remaining assets are distributed to the beneficiaries. 

Up to this point, it doesn’t sound so bad, right?  The process seems fair and there is a court involved to safeguard the process.  However, the first problem with probate is that it is a lengthy process.  It ties up property for months or even years depending on the size and complexity of the estate.  In California, it usually takes 8 – 12 months to complete a simple probate proceeding. 

The second problem with probate, it is expensive. The attorney and court fees quickly add up.  Probate fees are set by statute and they are based on the gross value of the assets being probated.  For example, if you own a home that is worth 1 million but your equity in the property is only $100,000 – the probate fees are based on the gross value of your home - one million dollars.  The fees are as follows:

4% of the first $100,000 of the gross value of the probate estate;

3% of the next $100,000;

2% of the next $800,000;

1% of the next $9 million.

Moreover, generally you have to multiply these fees by two, because the attorney and executor are each entitled to this percentage, plus you need to add in filing fees, appraisal fees, etc.

For a 1 million dollar estate (common when houses are involved), even with a sizable mortgage, fees can easily hover around $46,000 or more.  This is a lot of transactional costs that can be avoided with a fairly straightforward estate plan. 

Further, if you own property located in a state other than the state where you reside, a separate "ancillary" probate proceeding may need to be initiated in that state. 

There is no doubt that probate is time consuming and expensive so it makes sense to avoid it altogether by simply setting up an estate plan.  A revocable living trust, if funded with your valuable assets, usually allows you to avoid probate.  Beyond a trust, your estate plan may include beneficiary designations on accounts and other useful probate avoidance tools.  The less fees you pay, the more property your heirs will receive. 

Please call our office for a free consultation. We can look at your assets and determine which tools will best protect your estate from an unnecessary probate proceeding.

Let’s talk about Springing Powers of Attorney

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by Loulena Miles, California Estate Planning Attorney 
and Partner at Miles & Torres Associates

What in the heck is a “Springing” power of attorney (and why would I want one)?

You’d only need one hour of law school to learn that the profession is full of archaic old language that harkens back to the days of yore. As an attorney I am here to tell you that despite the off-putting language, you should be familiar with what a springing power of attorney is and what it can do for you and those you love. In fact, it is something that will be very helpful to you at some point in your life, and the option to have it springing may be very attractive once the term is clarified.

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Powers of Attorney are tools that enable another person (your agent or “attorney in fact”) to act on your behalf as if they were you. Thankfully they are also legally required to act in your best interest. You choose when these documents go into effect, either immediately after signing it, or when one or more doctors or trusted individuals certify that you are unable to make decisions.  These documents can allow people to buy and sell your home, pick up your medicine, sign releases from hospital care, apply for government benefits, and even withdraw funds from your accounts. Granted that may sound a little scary to give someone so much power over your life, so it is incredibly important to name someone who you trust implicitly.  The “springing” comes into play if you only want the document to be effective upon your incapacity.

So let’s get a few important terms straight – a durable power of attorney is a power of attorney that will last even if you no longer have the mental capacity to manage your own affairs.

A limited power of attorney can be designed to empower a person to act on your behalf for a limited purpose, or for a limited period of time i.e. you’re going on a trip around the world (you wish) and you want your ”agent” to be available to make decisions about your life while you are gone.

A springing power of attorney is a document that only “springs” into use if you are incapacitated (due to dementia or Alzheimer’s disease or if you are in a car accident and you don’t want things to fall apart while you are unable to make decisions, etc).

An advance healthcare directive is generally a springing power of attorney for healthcare decisions with some extra bells and whistles. Notably, an advance directive also gives your family and loved ones some critical information about how you would want your healthcare managed – this can really simplify things if difficult decisions have to be made and take the emotional burden off those that you love.  Depending on your needs at any particular time, we can recommend which power of attorney is right for you.

Those with aging family and friends should discuss having these documents drafted when times are good and the loved ones are still ‘with it’ mentally.  All seniors should have the opportunity to choose whom they would want to act on their behalf and help them do things when they lose physical and/or mental capacity. If a person loses capacity without these documents, a full court “conservatorship” process is often required – that can be stressful and time consuming, and may not reflect the person’s choice of who would be in charge.

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We generally recommend that everyone have at least a springing power of attorney and an advance healthcare directive drawn up at the same time that they complete their wills and trusts. These documents can be invaluable when they are needed, and your friends and family will thank you for your foresight to take care of these matters in advance.

 

 

How to Choose a Guardian for a Minor Child

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by Loulena Miles, California Estate Planning Attorney 
and Partner at Miles & Torres Associates

When we set out to put our estate plans in order, those of us who have minor children must make some tough decisions about who would care for our children if the unforeseeable happened to us and our children were left without parents. This is an understandably difficult topic, but it is one of the most important decisions that you can make when you plan your estate – and one that can have the most far-reaching consequences for those you love. 

The first consideration is who should be the child’s custodial guardian, that is who should raise the child.  Despite the fact that the court ultimately decides who becomes the guardian, the court will take the parent or parents’ wishes seriously if there is reliable documentation of the preferred choice for guardian. In the absence of documentation of the parent’s wishes, the court will usually choose a family member or person close to the child, who requests to be the guardian, and appears suitable after an investigation into their background. 

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The next consideration is whether that person should also be the child’s property guardian, that is, who should manage and grow the financial assets you leave to your child.  You can choose different people to serve as guardian of the person and guardian of the property. This is probably a good idea if the person whom you prefer to have physical custody of the child is not the best person to manage the child’s assets. You can leave a letter for the property guardian explaining what expenses that you would want covered, such as the child’s education or a rent increase for the additional housing need created by your child. Consider whether you need life insurance (or to supplement your life insurance) to cover your child’s expenses. 

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In order to start the process of selecting a guardian (and a couple of alternates), it is a good idea to make a broad list of potential candidates. This often includes blood relatives but you might also want to consider trusted friends of the family and other families or individuals who your child is close to. If you have multiple children, consider whether you would want to have the same person to be the guardian for all of your children or if you believe it would be better for them to live with separate guardians. When selecting a guardian or guardians for your children, it’s important to follow your instincts about possible choices. 

You should next think about the ideal qualities, values and attributes of your child’s guardian. Here is a list to get you thinking, just use it as a starting pointing to make your own list: cultural background, financial savvy, family ties (with your family and with their own if they are not a part of your family), location, faith, education, health, social networks, trustworthiness, resourcefulness.  Of course this is just a start but once you have your own list, think about the relative importance of each of these qualities. You’ll begin to see what matters the most to you in evaluating potential guardians.

No one can replace the loss of a parent, but an honest assessment will help you come to terms with the strengths and weaknesses of each possible guardian. It’s also important to consider whether the potential guardians are married or in stable households. Please carefully consider whether you would want to choose a couple as joint guardians.  If the marriage/relationship crumbles, it could leave a custody battle for your child to have to endure.  It might be preferable to choose the member of the couple that you feel is a more suitable guardian to be the named guardian. 

When you have narrowed it down to a few options, meet with the possible guardians and talk with them about whether they are willing or able to take on this responsibility. These conversations will help you with your decision. You might learn that the person has already agreed to be the guardian for another child if the circumstances arose, and feel uncomfortable taking on another obligation.  Or, perhaps they don’t feel that they have the financial means to adequately provide for your child without additional support. If your child has another parent, try to come to a consensus about the guardian and try to name the same person in each of your wills. 

Once you have selected the guardian (and alternates), document your desires and expectations for how you would want your child raised in a letter attached to your will. Specify your hopes for your child, including naming the values that are important to you. Include your reasons for choosing them, what you want them to know about your kids, your feelings about education and faith, and your wishes about their relationships with extended family. This letter should be amended with time as your child grows. In fact, you should consider revisiting your choice for guardian every five years or so as your children grow and your relationships change. 

You may not be able to plan ahead for every need your child may have, but if you create a legal framework for property inheritance and management, and choose a loving and competent guardian, then you have done the best you can and you can rest easy. 

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Please feel free to contact our firm Miles & Torres Associates for a free consultation about the estate planning tools that are right for you.

Make a Will or the State Decides: A Cautionary Tale

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By Miguel Torres of Miles & Torres Associates
November 19, 2014

Recently, a client came to see me to make a will -- she told me that her friend’s death prompted her decision to begin her estate planning. Her friend Thomas died without a will, and thus his assets and possessions were distributed to his parents, the same people that rarely saw him, never sent him birthday cards, or took an interest in his life. Although her experience was different, she wanted to
decide who would get her beloved dog Thea, her vinyl collection and most importantly, her computer and all the contents in it.

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Making a will should not be a complicated, distressing, or morbid process but rather an exercise in preparedness so you can concentrate on living. Many believe that a will is only necessary if they have children and/or large assets to leave to their families, but a will is not only for parents or the wealthy; it is a necessity for people who do not want the state deciding how to distribute their assets.

Many people think of wills in relation to bitter disinheritances or surprise windfalls, but those Dickensian events are far from the norm. Others believe that there is no need to write a will because they are young and healthy, but we all know that sometimes the finest die young. Writing a will does not mean that a person is about to die, it is simply preparing for unforeseen circumstances. Every person should have a will regardless of his or her age, or whether he or she has any other estate planning tools.

Without a will, the government decides who gets your assets, regardless of your wishes or the type of relationship you had with the potential beneficiaries. Generally this means your spouse; or if you are unmarried, your children or your parents. You worked very hard to accumulate your assets, you should decide who gets them when you pass away. A will in essence is a set of instructions on how to
distribute your assets; it spells out who gets your money and how much of it. Plus, in a will you can leave specific instructions for your burial or cremation. 

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If you die without a will and leave behind a spouse/domestic partner and children, your assets most likely will go to them. However if your
spouse/domestic partner dies before you, his or her relatives may receive some of your estate. It is also important to note that non-registered domestic partners and friends get nothing if you die without a will. If you want to leave something to your friend(s), stepchild, charity and/or your unregistered significant other, then
you need a will.

If you die without a will and have no living relatives, the state of
California is your beneficiary. That may not be so bad, but perhaps you would rather choose a friend or a charity of your choice to receive your money.

While some people may be okay with the state deciding how to distribute their assets after they die, parents have another important reason to draw up a will. If you have minor children, you need to decide who you would want to take care of your children if something happens to you and your child’s other parent. A will
gives you the opportunity to name a guardian for your minor children, and lets you create a system for supervision of any property you leave to your children. In a will you can nominate a person to take care of your children who are under 18. You can also nominate a person to manage the assets you leave to your minor children. It may be the same person that cares for them, but it does not have to be.

Importantly, a will helps you avert costly and nasty legal battles over child custody and assets. If you leave clear formal instructions about who should care for your children, and who gets your assets, then it is less likely that your family members will challenge or misinterpret your wishes. The last thing your family needs in a time of grief is to start a court battle –sometimes these legal battles can create family
rifts that are impossible to heal.                                                                                                         
Most of us hate to think about our own mortality, but fear of facing our own mortality should not be a reason to put off making a will. Once you make your will, you put it away in a safe place, and continue enjoying your life.

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