California Estate Planning Practice Blog

Ready for 2013? How About Updating Your Estate Plan?

Thinking about updating your estate plan? Here are some key numbers that were finalized from the American Taxpayer Relief Act passed into law January 2, 2013:

Estate and Gift Tax Lifetime Exemption set a 5 million indexed for inflation: 2013 Gift and Estate Exemption is $5,250,000.

The annual gift tax exclusion indexed for inflation is $14,000 for 2013.

Estate plans can last forever, but they are not always quite timeless. If you have changes in your family -- let's review and update your estate plan.

*Did you have a marriage, divorce or birth in your immediate family?

*Do you have a current Advance Healthcare Directive that has standard waivers and releases to ensure that your loved ones can access your medical information?

*Is your power of attorney comprehensive enough to cover all the what ifs?

The best time to update your estate plan is when you are too busy to think about it. It means you are alive and well. We need our estate planning clients to be alive and well at the time of execution.

Contact your local estate planning attorney today and schedule a review.

Estate Planning Documents A La Carte?

Estate planning when it is all set and done is often a variety of documents prepared in accordance to your wishes and financial situation that work in conjunction with each other to accomplish a variety of objectives.

Sometimes you may only need one or two documents prepared as a stop-gap measure before you are able to deal with the larger estate planning concerns for your family.

Obviously, the largest barrier to estate planning for most Americans involves money. Most Americans don't have enough money in their checking account to write a check for a grand or two to an attorney for estate planning documents without budgeting for it.

One way to get around this is to ask your attorney if he or she would be willing to prepare estate planning documents a la carte.

Here are some ways this can work:

• You are leaving for a two week trip to Europe. You want to name someone to manage your financial affairs while you are out of the country. And, better yet, you want this power to be effective for only the month of October. A Durable Power of Attorney with an expiration date of midnight, October 31, 2006, would accomplish this. [An expiration date of midnight, October 31 would truly be a witching hour.]
  
• You find yourself communicating with a loved one's doctor for a recent medical condition. Your loved one is having a hard time understanding their treatment options and want you to get involved. Your loved one can appoint you as their agent in their Advance Health Care Directive. This Advance Health Care Directive can be effective immediately.
  
• You have a minor child. You and your spouse are worried about who would be named guardian for your minor child if something happens to you and your spouse at the same time. You can draft a Will with testamentary trust provisions to nominate guardians for your child and put it place a trust to be formed if you and your spouse passed away.

One document alone does not make a proper estate plan, but it is important to realize that each document has different objectives and can be prepared independently.

Most attorneys charge a flat fee to prepare these kinds of documents. The flat fee is usually equivalent to one hour of the attorney's normal hourly rate.

Can I Be Barred From Handling My Own Affairs?

The law requires that you have sufficient mental capacity to handle your own affairs. This includes making medical decisions for yourself and to entering into contracts for example.

To ensure that your affairs will be handled the way you want if you lose capacity, whether permanently or temporarily, you can prepare a power of attorney for finances. A durable power of attorney can be effective immediately and continue through your incapacity. You can also prepare a power of attorney that is effective upon your incapacity as determined by two medical doctors or the court.

You can also prepare a power of attorney for healthcare, which is now called an advance health care directive. This document allows you to appoint someone to make medical decisions for you in the event you are unable to do so.

If you prepare a revocable Living Trust, you can name a successor trustee to manage your trust assets in the event of your incapacity. Most people transfer title of their home into their trust so your successor trustee would be able to manage all aspects of your home for you.

If you have not made any arrangements such as I have described above, the court may appoint a conservator to act on your behalf. Nearly anyone can petition the court to become your conservator if they can show that you no longer have capacity to manage your affairs.  I hope I don't have to say that this is the worst case scenario.

Cute Story About A Pair of Elderly Clients.

I received a phone call today from a couple in their early eighties. Nice couple actually. I spoke to her and then he got on the phone. They wanted a durable power of attorney prepared.

They assured me that they already had their Wills and a Living Trust already prepared. I believe them as their property tax bill says that the owner of their property is their Living Trust.

She asked me how much it would be to have me prepare a Durable Power of Attorney. I gave them my best quote based on their referral source. I said $75 for two Durable Powers of Attorney and included two free notarizations of their signature ... and ... that I would make a home visit.

Home visit? Whoa!

Yeah, they lived one block over from me.  But that's not the cute part of the story.

The lady said to me over the phone in a high voice: SEVENTY FIVE DOLLARS????

After a pause on my end... I truly didn't know what to say -- so I said, " is that too high or too low?"  They were nice on the phone and I had to jump start the conversation again somehow.

She replied, "too high ... I should only pay $5 for a power of attorney."

That made me laugh! I said, you know what, I will prepare one for you for a lesser amount of money and we'll call it even. She agreed. The husband agreed later that they could have afforded to pay me more, but then I just said no -- just give me a referral to even it out someday. And we shook hands on that.

I am still smiling thinking about them. They made my day -- hard hagglers, them two.

Taxes and Durable Powers of Attorney.

I wrote about Durable Powers of Attorney a while ago. Read it here.

It is now tax season.  I have had a slew of clients ask me [well, not a slew, but more than a few to make mentioning it here useful to others] how to prepare or complete tax returns for their aging parents.

My answer is you really can't unless you have a Durable Power of Attorney allowing you to take care of your parents' taxes.  Having a Durable Power of Attorney in place for your aging parents is always a good idea.

But be careful. Your parents may not want to name you to manage their financial affairs while they are still able. Or they may have someone else in mind. If so, their wishes need to be respected.

At any rate, encourage your parents to seek the advice of an attorney or paralegal service to have proper Durable Powers of Attorney prepared.

So Your Kid is 18 Years Old Now. Hmm.

Congratulations Mom. Congratulations Dad. You've successfully raised a young 'un to majority. So what happens now? I am not sure... college hopefully... and more good things hopefully.

But did you know that if your kid has turned 18 years old, you may no longer be in charge of their livelihood? If you need to access their medical records or assist with their financial management, you can't just step in as Mom or Dad to handle their affairs. You could face a roadblock.

The roadblock of majority.

Did you ever think that maybe your kid needs an Advance Health Care Directive so that they can memorialize how they feel about end of life decisions? And appoint an agent to make medical decisions for them? You betcha! Terri Schiavo was only 26 when she entered into her comatose state.

And the same thing for a Durable Power of Attorney. If your kid is away at college, on the television show Survivor or just plain not ready to be a full fledged adult -- a Durable Power of Attorney to name an agent (say, you) to manage their financial affairs might be a very good idea.

This is really interesting, isn't it? But think about it. Society may very well treat these 18 year old as full fledged adults and if you think you should still take on the Mom or Dad roles that you've grown accustomed to -- consider some basic estate planning for your 18 year olds.

Choosing Your Attorney in Fact for your Durable Power of Attorney

Leanna Hamill, an attorney in Massachusetts has posted a nice checklist of considerations for selecting your attorney-in-fact or agent under your durable power of attorney. Read it  here .

A durable power of attorney is a document that allows you to select someone else to manage your financial affairs if you are unable to do so. The person you name to make such financial decisions for you is called an attorney-in-fact or agent.

A durable power of attorney can be effective immediately or effective upon your incapacity. 

If it is effective upon your incapacity, it is called a springing durable power of attorney. You can choose how it becomes effective upon your incapacity -- whether a medical doctor needs to sign off or if a court must decide.

If your durable power of attorney does not have the word "durable" in the document title -- that means it is only effective during your capacity. Durable means that the document is effective during your incapacity whether temporary or permanent.

A durable power of attorney was also used to designate a health care agent to make health care decisions for you. If you have a durable power attorney for health care prepared and signed by you before 1992, it has expired and needs to be replaced by an advance health care directive in California.