Newman Law Group

Tustin Estate Planning Law Blog

Revocable trusts: Another way to transfer assets

When people think of passing on and leaving their legacy behind to their heirs, they usually think of wills. But a trust is another way for individuals to transfer assets. Revocable trusts allow the maker to change the terms of the trust as well. A trust, properly established, allows a person a few extra advantages over using a will. Recently, one author shared some of those advantages in a news article that individuals in California may find interesting. 

The main advantage of using a trust versus a will is the opportunity to avoid probate. With a trust, the heirs do not have to wait to undergo the lengthy and sometimes costly process of probate. The successor trustees are able to use the funds in the trust immediately without going through the court procedures. 

A checklist can help with estate administration

Many people hold to the philosophy that it is easier to manage a task when it is broken down into manageable chunks. An estate administration checklist can serve the task of helping a person break down the larger task of estate planning into tasks that are more readily achieved. A person can choose not to be overwhelmed by estate planning once he or she is familiar with all the parts, and additionally may choose to reach out for help. Persons in California who are considering how to manage their estate may benefit from the following information. 

Sometimes, the very first step is just to gather all the information. Some people have called this step in estate planning the "master directory." It means writing down all the information that could be relevant to a person's estate -- assets, liabilities, accounts, passwords and more. Another simple task that many folks already have handled is the designation of beneficiaries. After that, some people consider drafting a will, and if a person has minor children, it is appropriate to consider naming guardians for those children.

Power of attorney an important tool to help adult children

Parents want to ensure that they are able to provide their child with the best assistance and care that they can attain. Sending the child away to college, parents may think that providing school supplies and a stipend will cover everything, but issues can spring up that call for another type of support, the durable power of attorney. By having a power of attorney in place for their 18-year-old child, parents in California can intervene and offer support during a medical emergency or a financial issue. 

The power of attorney is often thought of as a tool for responsible people to care for older, disabled or otherwise vulnerable people. The power of attorney allows a person to make medical or financial decisions on behalf of another person. Should a medical emergency arise for their adult child out of state, a parent may incorrectly assume that they will be given information about their child, but if that child is over 18, the health information is protected by a federal law known as HIPPA, and cannot be given out. 

Are electronic wills coming to California?

As people reach the end of their lives, they often start to think about how to pass along their legacies and how they want to leave their mark on the world. For hundreds of years, the last chance for a person to make their mark on humanity has been through their last will and testament. Traditionally, wills have been recorded in writing, but with new technology comes new options. Currently, one startup company is trying to bring wills into the electronic age. Will people in California soon be making e-wills? 

The e-will startup company is located in Florida but has plans to expand out to other states in the near future. The company, Willing, wants to make wills more accessible by not only allowing the will to be created online, but by allowing it to be notarized and witnessed online as well. A recorded video chat session between the person making the will and a notary or attorney will serve in place of the usual in-person meeting. The wills can be created for a nominal sum and will be held in the cloud for an annual fee. 

Protecting assets means up-to-date beneficiary designations

An individual can spend one's entire life building a legacy, assuming it will ultimately be given to the family and friends that he or she loves the most. Unfortunately, assumptions and failure to maintain the details of that legacy mean that it is at risk should the person die with the wrong beneficiary designations on important life insurance documents and investments. Protecting assets includes creating a will as well as keeping important documents up to date. A recent news article shares horror stories as well as strategies for avoiding a beneficiary mix-up that people in California may find interesting. 

Some of the true tales include a pair of stepsons excluded from the inheritance of their father due to the fact that there was no named beneficiary after the death of his wife. The inheritance then fell to the next of kin; however, since the stepsons weren't the man's actual children, a court decided that the true next of kin were the siblings of the deceased man. In another case, two other children were denied pension benefits and life insurance after their father died. Even though the father and mother were divorced, and she had given up rights to pension and life insurance in the divorce agreement, the beneficiary designation was never changed, and therefore she got the money instead of the two children. 

Trust preparation now can simplify finances later

Is there a way to streamline the distribution of finances after death and also keep the information private? Yes, one important element of estate planning is the revocable trust. California residents who undergo trust preparation now can avoid lengthy probate of wills and having their will become part of the public record. 

A revocable trust offers flexibility, since revocable means capable of being canceled. If a person anticipates changing his or her mind about their estate or having their circumstances change between the time a trust is created and when it will be used, the revocable trust is a more flexible option than a will. The revocable trust also sidesteps the probate process that wills must undergo, which can take many months in the court system. A successor trustee will be appointed upon the death of the original trustee, and financial decisions can be made immediately. 

Have the conversation about health care directives

Life is filled with awkward conversations. From the birds and the bees to end-of-life wishes, it can be hard to make the time to talk about tough issues. But when people are able to talk about the important things in life, it can go that much more smoothly when the inevitable bumps and upsets happen. That's why a recent news article urges people in California and other states to have the conversation with their family about health care directives

The article encourages people to start talking about their end-of-life care concerns early and often. They should share their wishes with family, friends and physicians in order to increase the likelihood that their wishes will be honored when the time comes to make sudden decisions regarding health care. Another important part of this process is creating the advance health care directive. 

Proper trust preparation now pays off in the long term

When it comes to estate planning in California, many individuals may mistakenly believe that once they have prepared a last will and testament, they are all set. However, there are actually a variety of estate planning tools that can provide benefits and options to meet each individual's specific needs, not the least of which is a revocable trust. With the help of a knowledgeable attorney to make trust preparation less complicated, trusts can prove extremely useful in estate planning.

Wills are important, and most individuals should have one. They act as an official statement to the court to explicitly communicate a deceased individual's wishes as to how his or her assets should be passed on to beneficiaries. However, wills are still subject to the probate process, meaning that the estate will be required to go through the probate process, typically with the aid of a lawyer, before heirs are able to receive any inheritance.

What are the tax issues re the inheritance of a 401(k) plan?

In California as well as nationwide, it is not unusual for an heir to be the named beneficiary of a 401(k)-retirement plan. One positive factor of inheriting a retirement plan is that the beneficiary usually does not have to wait for the decedent's estate to be probated to receive the retirement funds. If one's inheritance includes a significant 401(k), complex rules and regulations may require a consultation with one's estate planning attorney and, in some cases, with a tax expert.

There may be various options that can be exercised with respect to how one handles the receipt of the plan balance. Those options can have a significant tax effect. They will differ based on whether the beneficiary is a surviving spouse or not. Depending on whether the plan is a traditional one or a Roth plan, the beneficiary may have to pay taxes on the amount received.

Estate planning may use health savings accounts in some cases

Health Savings Accounts, or HSAs, are increasingly used in California and nationwide. At the end of 2016, there were about 20 million of these accounts in operation, which was a 20 percent rise from the year before. There are big tax benefits that may motivate some people to open an HSA as part of an estate planning program, but these are usually persons who are relatively healthy and wealthier than most.

These accounts work by putting money into the account pre-tax, the money then grows tax-free and the distribution of the money is also tax-free if it is used for qualified medical expenses. For many, a high deductible health plan, combined with an HSA, is the only health benefit that their employer offers. To own an HSA, one must be enrolled in a high deductible health plan.