The Top 6 Estate Planning Myths Debunked

Put simply, a Living Trust ensures that once you’re gone your final wishes will be known and properly implemented. What surprises many young people and elders alike is how many families can benefit from having a Living Trust.

Below I debunk six of the most common myths about Living Trusts.

  1. Estate Plans don’t need updating. There are dozens of reasons your Living Trust could become invalid or outdated over time. For example, your asset schedule could be out of date, there could be changes in family status, financial status, name changes, dead executors or beneficiaries, new grandchildren and many more changes that can affect your estate plan. It’s a good idea to review your Trust with an Estate Planning attorney every five years.
  2. Estate Plans are only for rich people. A Living Trust is much more than a plan for how to divvy up your estate, it leaves instructions for loved ones on who will be responsible for taking care of minor children, who will take care of your affairs should you become incapacitated and who will get your prized possessions. A Living Trust can even protect your assets from nursing home expenses and protect your heirs from creditors. It’s also a good idea to leave instructions to survivors about how you want your social media accounts managed and by whom. As you can see, nearly everyone can benefit from a Living Trust, not just rich people.
  3. Estate Planning is to be done as part of your retirement plan. Many of the clients we meet for the first time are preparing their Living Trust as part of their retirement plan. Waiting this long can be a huge mistake for your family! The best time to create your first living trust is when you first start a family, as a trust is the best way to protect your children in case of your incapacity or death.
  4. Estate Planning is only for old people. As I stated in #3, Living Trusts safeguard young families should the unthinkable happen. Think of a living trust as your voice after you’ve passed away or become unable to make decisions for your children, finances or your own healthcare. Having a valid Living Trust in place will prevent your loved ones from having to make difficult decisions – guessing at your intentions- should something happen to you. It also can prevent lengthy, drawn out, expensive and contentious court battles over things like custody, debt, inheritance, etc. Most people don’t actually want a young person to control a lot of money – with a trust you can appoint a responsible person or bank to manage the finances of your children (or grandchildren) until they are older and more responsible.
  5. Estate Plans, Trusts and Wills are expensive to set up and maintain. Living Trust estate plans are normally set up for a modest, fixed fee. There is no annual maintenance fee. This cost is nominal compared to the cost of probate. Probate is the process surviving family members and loved ones must go through to settle your estate in court in the absence of a valid estate plan. This process can take years and can cost tens of thousands of dollars. In some circumstances trusts can also reduce or eliminate capital gains taxes, gift taxes, and offer other protection for your assets.
  6. Trusts don’t come in pretty colors (true story!). Living trusts aren’t pretty, quick, fast or as easy as some online estate planning services would lead you to believe. A Trust is perhaps the single most important legal document you will every create. Do you really want to leave that to chance, working with a faceless chat box on an estate planning website, a paralegal or other non-attorney? Sure it may seem like a good idea to save a few bucks, but in the end, it could cause years of hardship, expense and legal battles for your surviving loved ones. Don’t be fooled by showy online resources that over-promise and under-deliver. Hire an attorney who is a State Bar Certified Specialist in trusts.

If you have questions about getting started with a Living Trust, Estate Plan or Will in California or would like your existing plan reviewed contact us to schedule a consultation.

10 Warning Signs Your Trust Won’t Work the Way You Intend

As an Estate Planning and Trust Attorney who’s been helping families preserve their legacies and avoid probate for over twenty-five years, I’ve seen it all; family squabbles turned to drawn-out legal battles; grieving children having to deal with lengthy and costly probate and surviving spouses left with the results of a bad or outdated Trust.
I cannot stress enough the importance of not just having a Trust, but having one that’s accurate, up to date and valid. If you or a loved one has Living Trust, these 10 warning signs that it may not work as you expect are a must read:
1. The Trust names dead beneficiaries or trustees – you can’t just write a Trust (or Will) and never look at it again! We have seen many trusts that name beneficiaries who have died and the owners of the trust never made updates. To Do: Look at your trust now and make sure all the beneficiaries and trustees and alive and well. This is also a good time to confirm that your trustees are still willing and able to act for you.
2. There is no “pour over” Will – a Living Trust Estate Plan should always include a back-up Will that directs all your assets to your Trust in case something is left out. The backup Will may still require probate, but at least the assets will go into the trust, and be available to your designated beneficiaries. This also allows for any special provisions or restrictions in your trust to take effect.Reviewing an old estate plan
3. The Trust has a bad asset schedule – one key to a smooth Trust administration is a current, signed and dated asset schedule for the trust. This allows your successor trustee to know what assets are in the trust. This also helps avoid a full probate for assets that are listed in your Trust, but not actually owned by the Trust. A complete asset schedule is not enough by itself – your Trust must also be on title to your real estate, bank accounts and investments (but usually not tax-deferred retirement accounts). To do: Look at your Trust now and be sure all your assets are listed!
4. The Trust is not funded – assets (real estate, bank accounts, stocks, bonds, mutual funds, etc.), that are left out of your Trust may have to go through probate, and may not even go to the same beneficiaries if you don’t have a “pour over” Will. In our experience, when the time comes to administer the trust, we find that most Trusts are missing assets. We have seen many more empty trusts than full ones!
5. The Trustees don’t get along – if you have appointed co-trustees and they cannot work well together, administering a trust can be a nightmare. Even if they work well together, if they live far apart this can be challenging.

6. The Trustees are incompetent – not everyone is competent to handle your affairs. Be sure to select successor trustees who understand how to manage assets, sell property, etc. If you have picked someone who is very good at this, but they become ill, aged, or move away, they may not be competent to handle your trust. Trustees should also be United States citizens. Executors of Wills are required to be citizens.
7. The family can’t find the Trust, or doesn’t know it exists – your Trust (or Will) won’t help your family if they cannot find it when you die. Locking it up in a safe deposit box can be just as good is hiding it away, as banks may require a probate court order to transfer the contents of the safe deposit box! To do: call your successor trustee (or Executor) and let them know where they can find your Estate Plan and be sure they can access it!
8. The Trust is in an old A-B format – older trusts, especially “AB” format trusts, may no longer work well due to changes in the law. If your trust was done before 2012, you may have some work to do. To do: if your trust was created before 2012 contact your Estate Planning Trust attorney and schedule a review.
9. The Trust wasn’t created by an attorney – sorry, if you did your own trust, went to an online Estate Plan Trust service, had a document preparer or other unskilled labor help you, it is probably not going to work the way you would wish.
10. The Trust isn’t signed – We have seen trusts, Wills and powers of attorney that were not signed, witnessed and/or notarized properly, causing the documents to fail. One of the jobs of an estate planning attorney is to make sure this does not happen! To do: Go find your Trust right now and make sure it’s signed! Please!
The death of a loved one is hard enough without inheriting a legal mess. Please, look at your Trust (or Will) now, make sure it is up to date and still makes sense, and contact us if you need a review, or even a second opinion. We’re here to help!

I’m Young and Don’t Have Many Assets, Do I Need an Estate Plan?

I have bad news for you: young people die. Death, unfortunately, isn’t reserved for the elderly. While we tend to think of Estate Plans, Wills and Trusts as things for old people, it’s just as important for young people – especially young parents – to plan for their death too. You may think, “well I don’t have any assets, why would I need an Estate Plan?”

Here is why:

  1. Who will oversee making medical decisions for you, if you can’t? A healthcare directive is set up now, to make sure, if the time comes that you can’t make your own decisions about your healthcare, your wishes are known and someone is designated to act and speak on your behalf. This can save your surviving loved ones a lot of heartache and stress about making difficult decisions.
  2. Who will oversee your financial affairs?
    young father daughter having fun
    With an Estate Plan, you will assign an Agent or Trustee to manage your final financial affairs. This should be someone you trust and who is responsible enough and willing to carry out your final wishes. Their duties would include paying your bills when you are sick, collecting all your assets, paying off your debts (through your estate), determining the value of your holdings, distributing assets and if necessary, hiring an attorney.
  3. Who will care for your minor children? For young families, this may be the single biggest reason for an Estate Plan. If one parent dies, the surviving parent will raise the children (unless they are physically or emotionally unable). But what if you both die? In that case, the court will appoint a guardian, without knowing your wishes. If you want to ensure your crazy father-in-law doesn’t get your children, you will need a plan that clearly states WHO will get guardianship of your children
  4. What happens to your savings and investments? Make sure you have beneficiaries designated on your retirement and investment accounts. And make sure they are current! In a Forbes article, Young People need Estate Plans too, they advised, “add beneficiaries to your bank account, by asking the bank for a POD (payable on death) form. A will can take a while for the court to process, but with beneficiaries, your heirs just need to show up with a death certificate and some form of ID and they can get immediate access to your accounts.” However, this does NOT work if you heirs are under 18, and even at the legal age of 18, they may be poor money managers. A trust will solve this problem by holding money for your children, to take care of them until they are older and, hopefully, more responsible.
  5. Life Insurance may be your biggest asset. Even if you don’t have a big estate, it’s crucial to have a life insurance policy large enough to pay off your debts, educate your children, and provide living expenses for those you leave behind. Often your living trust will be the beneficiary of your life insurance policies.
  6. young lady with cell phone smilngWho gets your prized possessions? In times of duress, people can become angry and bitter. Save parents, siblings, children and your spouse from having to fight over your sentimental belongings. Put in writing who gets what. You will save them from a lot of stress by doing so.
  7. What will happen to your Social Media accounts? In the grand scheme of things, this may not seem like a big deal. But imagine your social media accounts ending up in the hands of a bitter child or an estranged spouse, upon your death. You wouldn’t want just anyone posting on your behalf while you’re alive – and you certainly wouldn’t want just anyone “speaking” and posting on your behalf when you’re gone. Make a list of your accounts, logins and passwords and make it clear who you want to handle those accounts – and how you want them handled – when you no longer can. While you’re at it, provide online banking information to your spouse, agent, executor and/or successor trustees as well.

Tragedy can strike anyone, at any time. Be sure your family is protected. Get your Trust or Estate Plan in order today. Contact us for no-obligation consultation. We’re here to help.

To Disinherit or Not: Alternatives to Cutting a Loved One from Your Will

As an Estate Planning Attorney, I’ve seen more than my fair share of familial challenges. I’ve had clients dealing with everything from chronic illness and sudden death to troubled children, estranged spouses and greedy siblings. I can’t count how many times a frustrated parent, sibling or spouse has plopped in a chair in my office, demanding that we disinherit someone out of anger and frustration. Usually, it’s because they don’t know other options are available.

Cutting someone out of your Will completely isn’t your only option!

The fact is, there are other ways to deal with errant relatives and disinheriting all together could be saved as a last resort:

Something to Lose

For the real troublemakers, your best option may be to leave them something that will be taken away if they contest your estate, instead of leaving them nothing at all. This will also satisfy the requirement that they are at least mentioned in your Estate Plan and give them a choice: take something or risk everything.Unhappy older man and son

Something to Earn

You can also make heirs earn their inheritance – even after you’re gone! This can be anything from requiring college graduation to successful drug testing before the money is doled out.

Restricted Inheritances

Some people take longer to grow up and get their act together. You can make an heir wait until they are 30 (or 60 if that what it takes!) or give them multiple chances by staging distributions in increments every 1-5 years. You can also Will a restricted annual or monthly payment (similar to a pension).

Limited Use Inheritances

Some kids should never get any money at all, but you can still leave them money to cover medical expenses, education, purchase of a home, etc. This money will stay in a Trust and be distributed by your executor.

If none of these options work for your unique situation, you still have every right to exclude any family member from your Trust or Will. It’s 100% your choice and don’t let anyone tell you otherwise. If you would like to discuss this – or any other Trust or Will question, contact us now to schedule a consultation.

How Does Life Insurance Work with a Trust?

It’s easy to think Life Insurance and Trusts as two completely different things: one protects your family in case of death, and the other distributes your estate upon your death. Planning ahead is wise when you want to protect your family’s financial future, and it is commendable if you have already established a Trust as well as obtained life insurance. You may have heard that you can or should include life insurance into your plans. But how? Put simply, in most cases you should name your Trust as the beneficiary of your life insurance and here are four reasons why:

1.) Better Control and Management of Your Named Beneficiary. With a trust you have taken the time to create a legal document that is binding and assures your assets will be distributed the way you want. By naming your Trust as beneficiary of your life insurance, you will always have a viable beneficiary to receive the funds. Even if one beneficiary were to pass away, the trust would have already stated the next succeeding beneficiary, together with any special provisions that you want to make for these beneficiaries.

2.) wills and life insurance Not having to worry about the settlement of your estate. As time changes so do financial situations. For example, a realistic scenario that has occurred many times over, is when a Trustee needs funds in order to settle the estate but has no resources to do so. It is easy to imagine the added stress this causes grieving family members. Naming your Trust as beneficiary of your life insurance insures that your trustee will have funds to pay your bills, attend to your funeral and final disposition, and manage your estate until it can be distributed.

3.) Protecting beneficiaries who are minors. Too many people name young children as life insurance beneficiaries without considering the consequences. If the children are under 18, a Court supervised Guardianship is required. This is not the best way to provide for the children. Then a child turns 18, the money is turned over without restriction. This is worse. Naming your trust as beneficiary will eliminate court intervention and avoid younger beneficiaries squandering their inheritance. Most Trusts provide for the care, support, maintenance and education of children as needed, with distribution at a later age, such as 25 or 30.

4.) Protection Against Creditors or Unwanted Beneficiaries. If life insurance pays directly to heirs who have financial problems, health or medical issues, or even incarcerated creditors, the government may be able to claim the money. A trust may protect your heirs, and the proceeds of your life insurance, from creditors and the government!

In addition, it’s noteworthy to mention that naming your Trust, a document that you update throughout your life, protects your life insurance from accidentally falling in the lap of an ex-spouse or someone else you would like to avoid.

Warning: there are also sometimes good reasons not to include life insurance in your trust. This involves more complicated estates when life insurance is used to pay estate taxes or fund a business transition. Don’t change the beneficiaries of these kinds of policies, or of policies not actually owned by you, without consulting your attorney!

Do you have questions about your own Life Insurance or Living Trust? Give us a call now for an Estate Plan Review or Consultation.

The Simple Truths About Disinheriting a Family Member From Your Will

There are three certainties in life: death, taxes and someone who can’t wait until you die. Inheritance refers to giving property to an individual upon your death. To disinherit means refusing to leave your property to a would-be heir. For most people, the term “disinherit” is a dirty, cruel word. For you, it may not be a dirty world, but a way to express your final wishes.

Reasons to Disinherit
The reasons to disinherit a family member are extremely personal and range from emotional to business decisions. Some common reasons people disinherit include:

1. Estrangemedisinheriting a childnt between you and a family member
2. Protecting the interest of your birth children over your stepchildren
3. Allocating money and assets to a deserving family member
4. The family member received your money and assets while you are alive
5. You believe your relative only wants your money

Disinheritance Factors to Consider
The threat of disinheriting a spouse or child seems powerful (especially when you see the dramatization portrayed on a television and movie). However, disinheriting immediate family members isn’t always as easy as a subplot in a movie or television series. If you are thinking about disinheriting a child or spouse from your will, you have to do more than just leave their name from the document.

In California, you can’t disinherit a spouse unless:
• You clearly and intentionally explain your decision in your will
• You include evidence that you left property and assets to your spouse outside your will or trust. This evidence must be included in the will.
• Your spouse waived rights to inherit from you in a valid, signed agreement such as a pre-nuptial agreement.disinheriting a spouse

In California, you are permitted to disinherit your children or any other family members from your will as long as your wishes are clearly stated. 

The most efficient way to handle disinheriting someone is to leave a small amount of money to the disinherited relative and include a no contest clause to prevent them from challenging the will.

If you’re struggling with this difficult decision, contact the Law Offices of Joel A. Harris, we can help you make the right decision for you – and your family. You’ve worked too hard to leave your family’s future to chance.

5 Important Reasons to Review Your Estate Plan

Despite the world still having 100% mortality rate, planning for the inevitable is rarely something we look forward to. No one wants to think about their own mortality – and our families can be even worse; choosing to bury their heads in the sand rather than think about losing us.

Senior couple doing the income tax declaration online

That’s why many put off estate planning – or worse – never get to it at all.  And for those who do it, oftentimes, it gets done, you think it’s over and you shove it in a drawer and never think about it again. Sound familiar?

Not reviewing your estate plan on a regular basis can be almost as bad as not having one at all. Changes in your family, finances, investments, and laws can make the best laid estate plans, wills, and trusts, moot. Leaving your family with exactly what you wanted to avoid; questions, confusion – and worse, lengthy and costly probate.

Here are 5 reasons you need to review your estate plan:

1.   Family changes. It may be obvious that if you get a divorce, lose a spouse or child, or adopt a child (or disinherit one) that an estate plan review is in order. But did you know that this also applies to your children and other heirs?  If THEY get married, change their names, get a divorce, adopt children, or have any other changes in their family, it might be a good idea to take a look at your plan and see if any changes need to be made. This is also true in the case of incapacitation of a spouse (yours or your heirs’).

2. Changes in income. Whether it’s retirement, bankruptcy, inheriting money, winning the lottery (nice problem to have!), buying investment property (especially if it’s out of state), this is a huge reason to get your plan reviewed.  If it’s not included in your plan it opens your family up to expensive probate and other problems once you’re gone. 

3.  Changing state of residency. Trust and estate planning laws can vary by state – especiSenior couple in love during retirement - Happy elderly conceptally if moving from a common law to a community property state. So if you move be sure to contact your estate planning attorney for a review. 

4.  Changes in the law. You can’t possibly know every law and how it    affects your estate plan, and you especially aren’t expected to keep up  on changes in the law! A good estate planning attorney will do that for  you – and should contact you for an estate plan review if changes in the  law affect you.  We update our clients by email.  If you would like to add  yourself or your friends and family to the list, please click here.

5.  If you’re in doubt. If you are ever in doubt about anything, it’s best to check with your estate planning attorney to find out if you need to review your plan. It’s always better to be safe than sorry.