Single Adult? Why You Need Estate Planning

If you aren’t married, you may think an estate plan is unnecessary. To the contrary, estate planning is a responsible way to make sure that those you love, who have already suffered your loss, are less encumbered with other issues due to your passing, regardless of your marital status, age or economic bracket.

Here are Q&As addressing some of the most common concerns:

Q. Overall, why does a single person need estate planning?

When you take the time to create a thorough estate plan, your loved ones will avoid probate, and therefore be spared attorney’s fees and court fees. A trustee in charge of your living trust will oversee all of your last wishes, instead of leaving a judge to distribute your property through probate. 

Most adults accumulate assets as they age (including cash, retirement plan, investments, personal property, real estate, etc.).  Who will get those assets when you die?  And who will take care of your funeral arrangements?

Q. What if I have minimal assets?

Even if you don’t own much, if you were to die without an estate plan your property could go through the probate process and potentially be awarded to a beneficiary you never would have chosen.

Q. What happens if I’m disabled or have an end-of-life situation?

Estate planning also involves planning for the possibility of incapacity or disability. By creating an advance health care directive,  you can let your physicians and family members know how you would like to be treated in medical situations when you cannot necessarily make the decisions for yourself.

Q. Who will manage my finances if I cannot?

A general power of attorney allows the person you appoint to act on your behalf and is often included in an estate plan to ensure that someone is present to handle your financial matters. This may mean handling your insurance, business transactions, settling claims, and/or employing professional assistance.

Q. Do I need a will or a living trust, or both?

A will is a legal document detailing an individual wishes after they die. A living or revocable trust does not require going through probate; if your assets are properly titled, they would pass directly to your spouse upon incapacity or death, without the need for any court intervention. As for a will, your attorney can advise whether to include both it and a living trust in your estate plan, which can allow you to take advantage of each tool’s benefits. The use of a living trust is less clear-cut, so discuss the pros/cons and your specific situation with your attorney.

Q. How does estate planning help my heirs with taxes and expenses?

With proper estate planning, it can help minimize taxes and expenses associated with transferring your assets after your death, avoiding the costly probate process.

Q. What if I have children?

Take the time to think about who will willingly take on the roles and responsibility of raising your children in your absence. A guardian has the responsibility to protect the physical and emotional interests of your children. A trustee has the responsibility of protecting the assets within the trust that you created.

Q. How can I ensure that my pet is cared for?

While you cannot leave money to pets, you can still ensure they are properly cared for with estate planning, such as leaving your pet to someone in your will or setting up a pet trust, which ensures money is specifically designated for pet care.

Q. What if I want to leave assets to charities?

A charitable trust is an option which allows you to direct your assets toward philanthropic causes while reaping potential tax benefits.

Q. What if I want to take care of my grandchildren?

See our article “Taking Care of Grandchildren through Your Estate” which discusses a range of issues that can help you.

Specialized Estate Planning for Single Adults

Taking the time and effort to create an estate plan is one of the most thoughtful steps you can take for your family and loved ones.  Meet with the skilled estate planning attorneys at Mortensen & Reinheimer, PC to discuss your needs and concerns.  Please contact Mortensen & Reinheimer, PC at (714) 384-6053 to make an appointment, or use our online contact form. Our website is http://www.ocestateplanning.net.

About the author:
Tamsen R. Reinheimer, Attorney, is a Certified Specialist in Estate Planning, Trust & Probate Law (The State Bar of California Board of Legal Specialization). She has significant experience in all aspects of estate planning, trust administration, and probate. Contact Tamsen at tamsen@ocestateplanning.net.

 

Shady Documentation? Key Signs for Trust Litigation

Typically, beneficiaries approach the administration of a trust with optimism and belief that the trustee will fairly and adequately perform required duties. Unfortunately, that doesn’t always happen.  Questions may regarding what were the trustor’s wishes and desires (the person who created the trust), as opposed to the trustee’s supplanted wishes and desires. To that end, a trustee may manipulate documents or refuse to provide documents, which if uncovered, would serve to prove malfeasance.

Do you have suspicions that documents provided by the trustee are untrustworthy?  Are some documents missing or possibly altered?  If confirmed, such actions are likely due to a “breach of trust” violation.

In a previous article, “Breach of Fiduciary Duty,” we discussed key duties of a trustee, such as loyalty, no self-dealing, impartiality, disclosure, etc.  A trustee “is required to act in the highest good faith towards his/her beneficiary and may not obtain any advantage by the slightest misrepresentation. Concealment, threat, or adverse pressure of any kind is unlawful as long as the fiduciary relationship exists,” and any violation of these duties constitutes a wrong against the beneficiaries.

Examples of Shady Documentation

Below is a short list of shady documentation “red flags” (click here for the complete article, including “real world examples”).  Recognizing these signs might help you to determine whether to seek legal counsel to protect your interests.  Typically, these examples involve a family member or friend trustee, as opposed to a private professional.

• Do you suspect destruction of trust documents?
• Are there questionable changes or amendments?
• Is there a lack of transparency by the trustee?
• Are there clear signs of unfair or unequitable trust distribution?
• Does the trustee want to change the trust, saying it doesn’t reflect the trustor’s verbal instructions?
• Do documents suddenly appear?
• Has the trustee hidden or changed certain accounting records?
• Are statements for investments missing?
• Are some documents original and others are photocopies?
• Do some documents look like they have been altered?
• Are pages missing?
• Is the trustee on their 2^nd or 3^rd attorney?

When is litigation necessary in trust disputes?

There seems to be no end to the types of schemes a trustee will implore to benefit themselves. While trusts are typically designed to prevent unnecessary disputes, it doesn’t stop some trustees from trying to achieve illegal gain.  When suspicious circumstances surround an amendment of a trust, anyone who has standing (i.e., the trustee, beneficiaries or heirs) can contest the trust’s terms.  When disputes cannot be resolved between the trustee and beneficiaries, informally or when contesting the terms of the trust is necessary, litigation is the next step.

If you have concerns about your trust or trustee, our attorneys have the expertise and experience to handle your trust matter skillfully and efficiently. Please contact Mortensen & Reinheimer, PC at (714) 384-6053 to make an appointment, or use our online contact form. Our website is http://www.ocestateplanning.net.

About the author:
Noah B. Herbold, Attorney, is a Certified Specialist in Estate Planning, Trust & Probate Law (The State Bar of California Board of Legal Specialization). His primary focus is assisting clients with litigated matters such as: Trust Contests, Breach of Trust, Fiduciary Appointment and/or Removal, Asset Ownership, Beneficiary Rights, Determination of Heirship, Elder Financial Abuse, Property Disputes, and Conservatorships. Contact Noah at noah@ocestateplanning.net.

TIME FOR A MID-YEAR CHECK-UP!

TIME FOR A MID-YEAR CHECK-UP!

TIME FOR A MID-YEAR CHECK-UP!

Taxation on Sale of Rental Properties

Taxation on Sale of Rental Properties

Estate Planning for Newlyweds:

The Essentials

As life settles down after the big day, reality settles in for day-to-day practical issues.  Included in these should be preparing an appropriate estate plan, which is a responsible step in the unfortunate event that one spouse becomes incapacitated or passes away.  Here are essentials to consider:

Meet with a skilled estate planning attorney – Discuss your goals, such as providing for loved ones, mitigating or avoiding probate, minimizing taxes, providing for the orderly asset distribution and stewardship, protecting assets, and planning for incapacity.

Compile documentation – This process will help not just in estate planning but also in other processes you’ll encounter. Centralize (digitally and in print) your marriage certificate, birth certificates, citizenship documentation, social security cards, passports, armed forces IDs, prenuptial and postnuptial documents, and documents for your children.

Gather asset information – Your attorney should provide an asset questionnaire, including: trust deeds of home(s) and rental properties, vehicle titles, and other valuable personal property, banking, retirement, life insurance, and other financial accounts.  Be sure to discuss “Community vs. Separate Property” and “Common Law States” with your attorney, as it applies to your situation.

Review beneficiaries – As you set up new bank accounts, it is important to consider how you list beneficiaries; there are myriad ways to title your assets once you’re married, such as joint-tenancy and Tenants-in-common.  Review all accounts to reflect your spouse as the new beneficiary or transfer on death designation (checking/savings, investments, retirement/pensions, property titles, etc.).

Retirement plan – The distribution of your retirement plan and IRA accounts should be thoroughly considered. If you designate your spouse as the beneficiary, he or she has the advantage of being able to roll over your IRA and take minimum distributions, which is an excellent means of support for your spouse during retirement years.  However, in this case, your spouse may designate new beneficiaries after your death, and any balance in the retirement funds may not go to your children. If you designate your children as beneficiaries, you deprive your spouse of any use of the funds in your plan during his or her lifetime, but ensure that your children will inherit your retirement funds. 

Create wills and trust –  A will is a legal document detailing what an individual wants to happen after they die. This includes their final wishes regarding their remains as well as how they want their money, assets, and property to be distributed (e.g., your spouse named as the primary beneficiary).  It should be noted that if your estate plan consists of a will alone, you are spouse will likely have to go to court if you become incapacitated or upon your death.  Instead, a living or revocable trust does not require going through probate; if your assets are properly titled, they would pass directly to your spouse upon incapacity or death, without the need for any court intervention.

Powers of attorney –  A power of attorney (POA) is a document that allows you to appoint someone to manage your money, property, and medical decisions if you become unable to do so yourself. There are several types of POAs for different situations, so always speak to a lawyer to determine the best option for your situation.

Advance medical directive – This allows a person to dictate how they wish to be cared for in a life-or-death situation.  It lets your physician, family, and friends know your health care preferences, including the types of special treatment you want or don’t want at the end of life; diagnostic testing; approval or disapproval or certain surgical procedures; the location of your primary care facility; medications to avoid; whether or not to attempt cardiopulmonary resuscitation; and organ donation.

Pre- and post-marital agreements – These agreements help protect each party and streamline the process for their families, in the event of a divorce or after they have passed.  Also, such agreements will help ensure that your assets are taken care of in case something unforeseen happens to you.

Second marriage – Merging two families and finances inevitably brings additional challenges. Think through every scenario, addressing issues such as death of either spouse, stepchildren, future children, in-laws, aging grandparents, etc. See “Estate Planning for Blended Families” for details.

Life Insurance – Adequate life insurance can help prevent a surviving spouse’s already difficult situation from becoming worse. Your estate planning attorney should be consulted in the process, such as identifying opportunities to change insurance policies to minimize taxation.

Specialized Estate Planning for Newlyweds

Taking the time and effort to create an estate plan is one of the most thoughtful steps you can take for your family and loved ones.  The attorneys at Mortensen & Reinheimer, PC thoroughly understand the estate planning needs of newlyweds. Please contact Mortensen & Reinheimer, PC at (714) 384-6053 to make an appointment, or use our online contact form. Our website is http://www.ocestateplanning.net.

About the author:
Tamsen R. Reinheimer, Attorney, is a Certified Specialist in Estate Planning, Trust & Probate Law (The State Bar of California Board of Legal Specialization). She has significant experience in all aspects of estate planning, trust administration, and probate. Contact Tamsen at tamsen@ocestateplanning.net.

Do You Own Business Holdings?

How to Make it Easier for your Survivors

If you or our spouse own a business, it is important to fully address ownership and taxation issues in your estate plan.  This is a complex area but we’ll address some of the more common concerns.

What Should an Estate Plan for Business Owners Include?

An individual’s estate plan should include wills, will substitutes, trusts, power of attorney, medical directives, and tax considerations.

Business owners will also want to discuss these items with their estate planning attorney:

• Trusts – A trust can help business owners to minimize tax consequences and pass on assets outside of probate.  It can also address management issues such as the process for appointing a successor and requiring shareholders’ consent in order to take certain actions.  Also, consider whether it should be revocable (can be changed, altered or even terminated completely during your lifetime) or irrevocable (permanent); if you were to transfer business assets to an irrevocable trust, you could not take them back out.
• Financial Power of Attorney – This can help to ensure continued business operations if you are unable to run it yourself.
• Insurance – A life insurance policy can help to ensure your family has liquidity (a source of income) if they lose access to the company’s funds when you pass away.  “Key person insurance” is designed to protect a business from losses in the event of death.  Consider buying both short-term and long-term disability insurance if you’re concerned about getting hurt or developing a debilitating illness.

Who Gets It?

As with other assets in your estate plan, deciding what will happen to your business is crucial for your heirs.  Some considerations:

• Buy-sell agreement – A buy-sell agreement is a contract that specifies how the ownership portions of a business may be reassigned upon death or retirement.  It also should determine the valuation method.  Depending on the documentation and specific circumstances, your heirs may decide to buy out the co-owners or sell it to them.
• Fully-owned business – If you own 100% of your business, it makes ownership transfer easier:
  • Selling the business: Depending on the situation, either the trustee or a person who inherits the business will have the right to sell it.
  • Retaining the business within the family: There are a number of items that should be clarified in advance, in order to ease the transition and avoid family squabbles.  These include:
    • Fairness in distribution – While the perception might be that “fair” clearly means an equal split of all assets to beneficiaries, this isn’t necessarily the case. In some circumstances, fair/equitable distribution (unequal distribution) better suits the trustor’s goals.  For example, a business might have substantial assets (i.e., valuable if sold) but poor cash flow (in which case, the heir may be forced to sell the business in order to have a similar a cash distribution as compared to other heirs).
    • Multiple owners – Some business owners want to split ownership, such as half to the spouse and half to the children. In this case, it is important to consider who will be in charge of your business; some or all of your family members may not be appropriate selections but perhaps there is a key employee or business colleague that could help run the business.
    • Support for surviving spouse – If your spouse will rely upon income from the business, it is important to set up a long-term structure to support those needs (whether that means keeping the business as a going concern or selling it and managing the proceeds). 

What is Succession Planning?

In order to ensure a smooth transition of ownership and management in case of incapacity or death, a “succession plan” should be considered in conjunction with your estate plan.  This will help in preventing disruptions to company operations, minimizing potential estate taxes, and providing financial security for heirs or chosen successors.

Succession planning involves how your business will be continued after your death.  This might include management structure, tax planning, operational plans, financing (especially if you have a personal guarantee for bank loans/lines of credit), etc. It typically, but not always, addresses ownership.  Without this planning, your heirs can become absorbed with figuring out bank loans, outstanding accounts receivable, different business divisions or entities, real estate holdings, or various partnership arrangements.  Succession plans are typically developed with your CPA firm in conjunction with your estate planning attorney.

On the other hand, estate planning determines who gets ownership of your property when you die.  If you own a corporation, stock in that corporation can be distributed to heirs, while if you own a sole proprietorship, your business assets are personal property and will be distributed according to your estate plan.

Specialized Estate Planning Expertise for Business Owners

As a business owner, taking the time and effort to create an estate plan is one of the most thoughtful steps you can take for your family and loved ones.  For many families, the less decisions that are left for your heirs, the better it is for all concerned.

If you need legal expertise in addressing your specific estate planning needs, please contact Mortensen & Reinheimer, PC at (714) 384-6053 to make an appointment, or use our online contact form. Our website is http://www.ocestateplanning.net.

About the author:
Tamsen R. Reinheimer, Attorney, is a Certified Specialist in Estate Planning, Trust & Probate Law (The State Bar of California Board of Legal Specialization). She has significant experience in all aspects of estate planning, trust administration, and probate. Contact Tamsen at tamsen@ocestateplanning.net.