January 2024 Newsletter

Philip Flanigan spoke about estate planning at our first bi-monthly meeting of the year on January 13th. Philip has been practicing law since 1986, specializing in estate planning, elder law, and Medi-Cal.

Why is Estate Planning Important?

Many people think of estate planning as a once-and-done deal, but many things can change as life happens. When the time comes, it is important for these changes to be reflected in estate plans so they can work as intended. Estate plans are important because they create an ideal situation for who administers the estate and what happens to assets after death. This is important if you care what happens to your assets, and dying without an estate plan means the State of California will plan your estate. This can be less ideal because the people who inherit assets will not be decided until after death. In a state-planned estate, assets rarely go to the state unless the state cannot find any close relations. Oftentimes, under a California-planned estate, the estate but to children, grandchildren, or other relatives. Not having an estate plan can result in other complications, such as fighting between the deceased’s children and other beneficiaries. Having an estate plan minimizes conflict and allows for more control in deciding what happens to an estate. One example of this is in the case of second marriages. This is because inheritance is not community property. There is a common misconception that marriage means community property. This mainly matters for divorce or death. Community property is the difference between having a 100% say in what happens to your assets vs. having only a 50% say. Not having an estate plan makes it complicated to leave assets to different people such as stepchildren.

Types of Estate Planning Documents

There are many types of documents in estate planning such as wills, living trusts, power of attorney, advanced healthcare directives, etc. These documents all do different things and work together to do what you need at the time of death or in cases of incapacitation. It is important to review estate plans on a regular basis, ideally every year (the beginning of the year is an excellent time to do this). It is important to ask yourself if anything has changed in the past year. Usually, the most significant change is the executor. This is because relationships change and sometimes the chosen people are unable to do their job when the time comes. 

Wills:

A will is a written expression of your intentions and desires regarding the disposition of your estate when you pass away. Wills go into effect when you die and give you choices in what happens to your assets, as well as choosing an executor. An executor is the person who gathers your assets, and pays bills and final expenses based on your will when you pass away. The downside of a will is, to enforce it, going to probate court is necessary. If there are beneficiaries who are minors at the time of your passing, a guardian must be named. Philip also recommended holding your assets in a trust until minor beneficiaries are at least 25-30 years old. This is because the insurance company probably will not give money to a seven-year-old.  Not holding assets in a trust can also result in the guardian going to court to receive permission to use the money. This can be costly and the court may not always agree with the guardian. It is also important to consider holding assets in a trust for longer than 18 years because 18-year-olds are not always good with money. 

There are two main types of wills. A holographic will is a completely handwritten, signed, and dated document. If the handwriting and competency can be proven, no witnesses are needed. A typewritten will must be signed and dated with two witnesses, and free of undue influence. A notary is just a verification of the signature and does not validate the will in probate court. The only thing that matters is the last will and testament. 

 Living Trusts:

A living trust transfers assets to a trust. After the death of the trustee, a successor trustee will take over, avoiding probate court because a signature can be obtained from the successor trustee. For a living trust to work as intended, the assets must be owned by the trust. For example, the deed of a house must be in the name of the trust for the house to be transferred to the successor trustee. Wills can work with living trusts to leave assets in the name of the trust in death. Philip recommended making a list of assets and who they are titled to and making sure the titles are in the name of the trust. A living trust avoids probate court, which can be both a good and a bad thing. A living trust allows for a signature to be gotten even after a trustee dies because there is always a successor trustee. The downside is that the trustee cannot be held accountable because it avoids probate. There are issues including trust litigation, people going to court to remove dishonest trustees, etc.

Advanced Healthcare Directives and Power of Attorney :

Advanced healthcare directives are generic documents that give someone the power to make healthcare decisions if you are incapacitated. On the other hand, a power of attorney is a broad document that gives an appointed person the power to handle business and financial affairs. Power of attorney documents should be updated every 3-4 years. It is important to consider who can handle business and financial affairs. A durable power of attorney continues even after incapacitation and includes special language for this to occur. This allows for control over the specifics of the situation because it allows for specificity, compared to the broad power granted by a power of attorney document. A durable power of attorney can also allow a person to make a trust and give away your assets. Banks can be suspicious of generic power of attorney documents, so having a durable power of attorney document is important. The agent in charge of a power of attorney must be a fiduciary, meaning they must act in the best interest of the person. 

“What To Do in the Event I Die” Documents:

Philip also talked about creating a “what to do in the event I die” document. This document should include a list of bank accounts, where they are, life insurance policies, car insurance, and where everything is kept. This document functions as a kind of treasure map to prepare trustees for when you die. This document can include everything from passwords to instructions for how to operate the sprinkler system. This makes it easy for the living to carry out your intentions. 

Estate planning and Incapacity

In estate planning, it is important to choose someone trustworthy to carry out your intentions. This is because there can be an abuse of power with power of attorney documents. Philip explained the importance of appointing someone who you think will share information in an open and honest way instead of someone who you think may get king or queen syndrome. It is important to have people who are willing and able to serve when the time comes. 

Medi-Cal Need-Based Programs and Long-Term Care

Medi-Cal can also be used for long-term care. All Californians are eligible for Medi-Cal. Medi-Cal only looks at income (SSI included). It is important to consider care needs for long-term care and where these needs can be met. Facilities are expensive without insurance and it is important to consider the cost of these services. Medi-Cal can help pay for care in assisted living facilities. Medi-Cal also has the In-Home Supportive Services (IHSS) program for in-house care, where 283 hours of care are covered if you qualify. There is no asset test for Medi-Cal; Medi-Cal will not take your house, and will only recover against an estate.