Newman Law Group

Tustin Estate Planning Law Blog

Pick a power of attorney carefully

When an employer hires someone, efforts are made to pick the right person for the job. A power of attorney selection process can be similar. An individual will want to make sure that the chosen person has the skills and emotional maturity to handle important decisions for the person granting the power should the maker become incapacitated. In California, there are two types of power of attorney, medical and durable, and each has a specific duty. 

Some experts believe that a good basic guideline for determining whether a person is appropriate to be given POA is the "checkbook across the table" test. Would the person being selected be a trusted individual with the checkbook? Could that person be counted on to responsibly pay bills and handle the financial affairs? If the person can pass the checkbook test, then the role may be an appropriate one for that person. 

Pets can be included in wills

Pets are an important part of many families. Some individuals shudder to think that a pet would be abandoned or separated from everything it knows. That's why, in California, people may choose to include pets in their wills

Making a care plan for pets in the event of incapacitation or death can be part of a winning preparedness strategy. Experts recommend doing even simple things, like informing your family about your pets, designating an emergency caregiver, and posting emergency information in a visible place in the home as a way to ensure their happiness and safety. If a pet becomes displaced and is sent to a shelter, there are no guarantees that a designated caregiver will be able to retrieve the pet in case of emergency, unless there is a formal document in place. 

Charitable giving may help in reducing estate taxes

Charitable giving can be a philanthropic and strategic move for high-asset families. While the majority of California families do not have the net worth required for estate tax, those that do will face reduction of the estate due to taxation. Effective estate planning allots for strategies for reducing estate taxes, and charitable giving is one way that families can do that.

When an estate's worth exceeds $5.45 million, or $10.9 million per couple, they become subject to taxation. According to Time Magazine, this will not affect the lion's share of Americans, as 99.8 percent of households do not have access to this kind of wealth. Some have argued for eliminating the tax altogether, but others argue that this could have an effect on planned giving. If the tax is eliminated, individuals have no incentive to contribute large sums to charities, which are then able to do good in the world. 

Trust administration: Choosing a trustee

After a person dies, there are usually many tasks for those left behind to be completed. It is important to select a person that can handle the technical and time-consuming responsibilities of handling estates, including trust administration. Individuals often choose a trust instead of the more traditional will to manage their estate, and when a person uses a living trust, a successor trustee must be selected. In California, the successor may be one of several types of entities, including an adult child, family member, friend, bank or professional fiduciary. 

When a married couple creates a living trust, typically they manage it, and when one spouse dies or is unable to take care of their affairs, the second spouse will manage the trust. Once both spouses are deceased, officials will look to whomever has been appointed successor trustee to handle the remaining responsibilities. Many times families choose to name one or all of their children as the successor trustee. Trust administration can be a time-consuming activity, so if the appointed family member has a full-time job, a person may want to think of other options for the successor. 

Planning for more than distribution of estate assets

Sitting down for a serious family talk can be pretty intimidating. It's likely that nobody knows a person better than their family, but having frank conversations can be hard. Some families also like to smooth over the rough edges of life and prefer to talk about nice things. Avoidance isn't always a good answer. Some California residents may benefit from a practical strategy for talking to one's family about an estate plan for the division of estate assets and other end-of-life concerns. 

Experts have said that any conversation about money is actually a conversation about values. Estate planning is also the same way. It asks many questions like, is it better to have a long life or a comfortable one? Is it better to have an awkward conversation about a funeral now, or to leave tough decisions to remaining heirs after one's death? 

Updating wills can be vital for correct distribution of estate

Many people tend to neglect the little details of life, until all of a sudden, life springs upon them and they are caught unaware. Updating wills, trusts and other estate planning documents can sometimes fall in the procrastination category. But there are reasons for California residents to pay attention to updates on their estate planning documents. 

Marital and other life changes are the primary reason for a person to update their documents. In California, if a person remarries, and dies without changing the will to include their new spouse, the state will consider the new spouse to be entitled to a certain portion of the estate anyway, and will assume the change was overlooked by the deceased. Likewise, if a will gives certain gifts to a spouse, and the two later divorce, the state considers that spouse to have forfeited the rights to the gifts bequeathed in the will. This is why it is vital to update any estate documents with explicit wishes after a divorce or remarriage in this state.

Future goals covered with inclusive estate planning

When considering end-of-life plans, a person should not limit themselves to simply making a will. One's future goals and well-being depend on other types of estate planning documents also. In fact, a will can be considered a document made for other people, but powers of attorney, advance directives and revocable living trusts are focused on ensuring that the individual's needs are being met. California residents may find some relief when planning for the future when armed with this information. 

There are a few types of powers of attorney that are important to comprehensive estate planning. A medical power of attorney allows a designated individual to make important health decisions on another person's behalf should he or she become incapacitated. Then there is the power of attorney and durable power of attorney. Each of these designations allow a person to make financial decisions on another person's behalf, but only the durable power of attorney is effective if the individual becomes unable to participate in the decision-making process. 

Trusts aid in reducing estate taxes

As the old adage goes, there are only two constants in life -- death and taxes. Luckily, folks who understand this fact can look to the future and plan for both. Recent changes to the tax exempt income threshold have already helped many in California with reducing estate taxes. Strategic choices about gifting and distributing assets can help others to pay less tax.

In 2013, the income limits for estate tax exemption were raised to $5 million. The estate of any person who has passed away with an estate less than the $5 million limit is not responsible to pay estate taxes to the IRS. Those high-asset individuals are eligible for taxation at a rate of up to 40 percent, but only if their estate is more than $5.49 million. Married couples can count two shares, making the exemption $10.98 million.

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.