Estate Planning is not just for the wealthy. Just about everyone needs estate planning in some form or another. Nevertheless, so many people express wishes verbally to their families, but don’t follow through with the proper legal planning necessary to carry on family values, keep the peace in their families and provide financial security for their loved ones after they are gone.
We help our clients plan for the unexpected in life. We understand you want peace of mind in knowing that you minor children will be raised by those you choose and that your children will not inherit too much money too soon. We have all seen the devastating consequences of improper or no planning.
California is not a probate friendly state. Due to backed-up court calendars, the process can take 12-24 months. If that weren’t enough, the Executor of an estate that is being probated must account to the court for all that they do. The fees are not cheap either. On average, you are looking at 3-5% of the estate fair market value to the attorney and Executor. All the while, this is a public action as well. Most clients that we meet with understand that this is something that they are just not willing to make their children go through.
For most of our clients, we recommend a revocable living trust as the base centerpiece of their estate plan. Every one of our clients is unique. No two families will share the same history or specific needs. One family may wonder “will a portion of my estate end up in the hands of my son-in-law or daughter-in-law if my child ever divorces”? Another client may be concerned that if they were to predecease their spouse, will that spouse remarry and their child get cut out of the trust as a beneficiary. Another client might be concerned about burdening their children to settle their estate down the road or how an estate tax will be paid from their estate. What we do is coach our clients by giving them not only the latest technical advice in estate planning law, but also provide our experience in what works best for families and what can potentially cause problems down the road.
Estate planning is so much more than just leaving stuff to people. It’s about protecting the people that we love. As an example, did you know that you can protect your spouse and your children from creditors, lawsuits and future divorcing spouses? Most people don’t know this is possible or to even ask questions about it. In the estate planning world, we do this through the use of what is sometimes referred to as a “Bypass” Trust (or a QTIP Trust) for the Surviving Spouse and through creditor protection Continuing Trusts for minor or adult children. With the right type of trustee in place (a disinterested or third-party trustee), you can enjoy asset protection for your spouse and children by allowing the trustee to shut the funnel off to the trust until the creditor issue has gone away.
In addition to having a revocable trust at the center of your estate plan, you need to have really good incapacity documents. The documents you need to have are the Power of Attorney for finances, the Advance Health Care Directive and the HIPAA Authorization for Release of Medical Information.
The Power of Attorney sounds simple enough, but did you know that if this document is not properly drafted or there are provisions missing from it, it could not only cause your family a lot of headaches but cost you a lot of money. There are many examples, but I will highlight one here. If your Power of Attorney is missing disclaimer provisions, your Power of Attorney agent could miss out on an opportunity to save your family a lot of money. A disclaimer is like a coupon that says “skip me and let it go to the next person listed”. Why is this something that could be important? Well, if you had a decent sized estate, you may not want to inherit more money that would get taxed upon your death. If you become incapacitated and unable to sign documents, you are going to want your Power of Attorney agent to at least have the option to say “let’s let this money skip you and go to your kids or who ever the next in line to inherit it”. We have seen many clients with larger sized estates who would much rather that money just skip them and go to their kids directly provided it doesn’t trigger the Generation-Skipping Transfer Tax. The lesson to learn from this is that if you have an estate that is already in potential danger of being subject to the Federal Estate Tax, why would you want to make that problem even larger by piling on more money to your estate? Making sure certain critical provisions are in your Power of Attorney document could save your family valuable tax dollars and create flexibility in your plan.
The other two critical documents are the Advance Health Care Directive and the HIPAA Authorization. You need to designate who you want to be in charge of making health care decisions for you in the event you are unable to make those decisions yourself. We all remember what happen to Teri Shivo in Florida a few years back. After succumbing to a vegetative like state, there was an out and out war between her parents and her husband regarding what medical treatment to continue to provide to Teri. Teri had no health care directive that expressed her intent not to prolong her life or to prolong it. This guidance is critical to provide for your family or even potentially the court should the need arise. The HIPAA Authorization gives your health care agents, your successor trustees and your attorney the ability to talk to your primary care physician in order to determine your capacity to sign documents and obtain information about you medically. It too is something not to be overlooked or forgotten in your estate plan.
In order to better serve our clients and provide a plain English legal education to the public, I have written a book to help you understand the essential steps in the estate planning process and what things you need to be considering when making these important decisions. A few examples are (1) how to choose the right guardian for your children if you have minor children; (2) how to “asset protect” your child’s inheritance from their creditors, predators and divorcing spouses; (3) active steps you can take to reduce or eliminate estate taxes; and (4) planning for what happens to your assets when the first spouse passes when you are married. My book titled "Secrets of Great Estate Planning, Sixth Edition" (2025). To request a copy, click here.
