Newman Law Group

Tustin Estate Planning Law Blog

Power of attorney: What is it?

Estate planning is something that's been in the news in California a lot lately, especially with so many celebrities with sizable estates having recently passed away without having a will or trust in place. It may cause others to think they should establish a plan but the number of documents and the process itself can seem a little daunting. One term that is heard a lot but may not be understood is power of attorney.

A power of attorney document grants one person, sometimes identified as the attorney-in-fact, the authority to act on another's behalf. The person who grants the POA is sometimes identified as the principal. There are different types of POA documents.

Power of attorney should be carefully considered

Estate planning is not just for the rich and famous. However, the rich and famous are not immune to estate planning mistakes. From failing to have an estate plan to being exploited by the people to whom they granted power of attorney, they have taken missteps that others can learn from in California.

Granting a power of attorney is very important, but even more important may be the matter of to whom a power of attorney is given. People frequently choose family members, and while this often works out just fine, it can also lead to abuse in certain circumstances. One of the earliest and worst examples of this was the case of Brooke Astor. In her later years she suffered from Alzheimer's. She had granted power of attorney to her son and suffered financial abuse because of it.

Lack of a trust can result in probate

One does not need to be a celebrity in California to recognize that if a person has a sizable estate, that person should have an estate plan in place. The plan typically includes a will and appropriate trusts. If trusts are used in place of a will, this may allow the estate to be kept out of probate at the time of the author's passing and allow the details of the estate to remain private.

Aretha Franklin, the Queen of Soul, recently passed away and she apparently did not have a will or a trust in place at the time of her passing. The tax implications alone may be very complicated. If her estate exceeds the $11.18 million threshold for a single person, there could be a 40 percent tax due on the estate. An estate plan could have reduced the amount of the tax owed.

California, wills and child guardianship

More and more people are becoming aware of the need to establish an estate plan in California and are taking steps to do so. Establishing an estate plan is very important once a family grows to include children. Having wills enables parents to ensure the continued care of their children should the parents become incapacitated or die prematurely.

While the eventualities set up will normally provide for long-term care of the children, there may be a more immediate need that perhaps should be addressed. A recent article brought up this point and called it "micro estate planning." When parents pass, a court will look at their will and at the designated guardian instructions for the long-term care of their offspring. But what about immediate care?

Trust administration in estate planning and the opioid crisis

In 2017, opioid-related overdoses were the leading cause of death for Americans under 50, and 12 percent of families acknowledged that they have a drug-dependent relative. In California and elsewhere in the country, this is becoming an issue of significant concern for families putting together estate plans. While families want to provide for the well-being of their family members, they are aware of the pitfalls of giving money directly to a substance abuser. The answer may be a fund that is set up as a trust. The trust administration is also an important component.

Leaving a person assets that can easily be turned into cash can be problematic for a person suffering from addiction. The temptation to feed a habit, particularly at a time of grief and increased stress, may be hard to resist. Establishing a trust that provides for recovery costs can be beneficial. Costs for therapy, rehabilitation, doctor's bills and other expenses can be provided through a trust that does not provide cash directly to the addict. How the trust is administered may also impact the long-term success of the trust's intent.

Wills and trusts: What are the differences?

More and more people are becoming aware of the need to have an estate plan in place in order to protect their family and ensure that their final wishes are carried out in California. However, a plan can consist of a will, a living will and/or a trust. What should be included, wills or trusts, depends on certain factors.

Wills can take care of distributing assets that are held solely in the name of the author of the will as long as those assets don't exceed $150,000. An estate over that amount becomes subject to probate. A trust can be put in place to administer the assets that may eliminate the probate requirement, and it can also help maintain a family's privacy. When a will goes into probate, it becomes public information available through the court. A trust is kept private.

Should wills be simple or formal?

Estate planning need not be a difficult or overwhelming task. When people in California think about writing wills, they be at a loss as to where to begin. The question isn't so much what the estate plan should consist of but rather what is the right estate plan for the individual or individuals who are creating it.

Simple wills may suffice when there is likely to be no probate required. This would typically apply to estates with values below $150,000. The exception is when assets are going to a surviving spouse. Probate is not required in this instance regardless of the amount of the estate, though a spousal property petition may be required.

Estate planning need not be complicated

More and more people are recognizing the need to have an estate plan in place, even if they are at the beginning of their careers and adult lives in California. There are still almost 64 percent of Americans without a last will and testament. Estate planning can help ensure that a person's final wishes are carried out as he or she intends.

There are many possible pieces to an estate plan, but there are some basic documents that should be considered an integral part of any plan. These documents may consist of a last will and testament, a health care proxy and a power of attorney. These documents form a good basis for building an estate plan.

Protecting assets not subject to probate

There are many pieces to an estate plan in California. Many of these involve assets to be distributed to beneficiaries following a person's death. Some of these assets are subject to probate and some are not. Typically, the assets that have a named beneficiary are not subject to probate.

Assets that have a named beneficiary include items such as life insurance policies and retirement accounts. Other such accounts are transfer-on-death accounts and property that is held jointly with full rights of survivorship. These types of assets may not be subject to probate as the beneficiary or beneficiaries are named in the asset.

Including frequent flyer miles in estate planning

Estate planning can be a complex undertaking in California. In creating an estate plan, a person is determining who will inherit his or her accumulated assets after the person's death. Assets can include personal belongings, financial assets and real property, to name a few. Assets included in estate planning can also include frequent flier miles and loyalty rewards from credit cards.

When Anthony Bourdain recently passed away, some people were surprised at the relatively modest size of his estate. The bulk of the estate was left to his young daughter. His frequent flyer miles he left to his estranged wife to use as she feels he would have wished. Considering the number of miles he flew, this was probably not an insubstantial bequest.