Getting Your Legal Affairs in Order Before You Receive a Fatal Diagnosis
Estate Planning is a Process, Not a Thing
~ Revocable Living Trust ~ Pour Over Will ~ Powers of Attorney ~ Trustee’s Certification of Trust ~
There are a few simple facts that many of us refuse to think about and accept. These facts don’t drive our behavior on a daily basis. We tend to push these facts out of our mind while we go on living our lives. These facts are not pleasant subjects. But quite simply, we must come to the startling realization that:
Fact 1: Death is inevitable.
Fact 2: We can’t take our property and assets with us after we pass away.
Why we procrastinate about estate planning: Researchers say, our brains do their best to keep us from dwelling on our inevitable demise. Studies have found that our brains shield us from the fear we observe by categorizing death as an unfortunate event that only happens to other people. The brain does not accept that death happens to us as well. We have this built in mechanism focused on working, commuting, corporate meetings, feeding our families, carpooling and living life. When the brain receives the information that links itself to death, this mechanism tells us it’s not reliable, so we shouldn’t believe it. Being shielded from thoughts of our future death protects our state of being and enables us to live in the present.
This mental protection may switch on in early life as our minds develop. However, from time to time, something happens, or something is said that makes us realize that death is inevitable. Then it is human nature to push the thought right out of our minds. That is why so many people procrastinate and fail to following through and finish their own personal estate planning decisions and the next steps required to complete the whole “process.”
But what if you have a diagnosis of a serious, fatal disease and your doctor calls you in after a recent test and looks you in the eye and says, “I’m sorry, there’s nothing more we can do. The best thing you can do is go home and get your affairs in order.” You probably that that is insensitive and you weren’t prepared for that news. It’s shocking and it turns your life upside down. You begin to go through the stages of grief and eventually end up in the stage of acceptance. Then it’s time to get to work. Or is it too late?
Affairs. The word “affairs” in the legal context refers to your relationships, business dealings, contracts, agreements, associations, concerns, issues, situations and matters that you encounter on an everyday basis. Think about all the bills you pay in a month and then think of the bills you pay in the context of a year. Think of your investments, checking, savings and money market accounts. Think of your insurance coverage – health, auto, life. Think of your retirement accounts and to whom that is going to be distributed and the taxes they will pay after your death. Think of your responsibilities related to your home – your mortgage or rental/lease payments, how title is held to your real estate, your home insurance, your maintenance contracts, electricity, water, cable/tv/internet/satellite, yard maintenance, housekeeping, food, household supplies. Think about all of the on-line accounts you have (don’t freak out yet) and all the emails you receive. Then think of your work, your job, your employee benefits if you are still employed and what will happen after you are no longer employed. That’s a lot to think about but you must dig in and start gathering copies of your paperwork to support each item - title, value, description, benefit etc.
Are you ready? Here’s what it means and what you’ll need to do to “get your affairs in order.”
What is Estate Planning?
First of all, the most important thing that you can do to get your affairs in order is to complete (or update) your estate planning documents. An “estate plan” is a set of coordinated legal documents which work together to accomplish your goals, personal decisions and wishes related to all of your legal, financial and business issues. If you own real estate in California, then you need a revocable living trust as part of your estate plan, not just a Will. A Will virtually guarantees probate and an estate planning goal should be to avoid probate at all costs. Following are the typical legal documents that an estate planning attorney will include in your set of customized and coordinated legal documents.
1. Revocable Living Trust,
2. Pour Over Will,
3. Durable Power of Attorney (financial for non-trust issues),
4. Advance Healthcare Directive & Durable Power of Attorney for Healthcare,
5. Nomination of Conservator,
6. Nomination of Guardian (if you have minor children),
7. Property Agreement if 2nd marriage and/or appropriate circumstances,
8. Schedule/Exhibit listing a description of all of your property and assets with account numbers, contact info for broker/title/bank or other custodian and current value,
9. Trust funding documentation with certification of trustee, deed(s) transferring your real estate into your trust, assignments of deeds of trust and your personal property, and instructions for transferring other assets into your revocable living trust such as investment accounts and bank accounts,
10. completed Beneficiary Designations for retirement plans, life insurance and annuities (if death benefits are included),
11. completed list of all digital assets, usernames and passwords; [yep, that’s a big one!],
12. writing your burial and funeral instructions, and
13. finishing any other estate planning documents related to your particular financial and personal situation. Do you have a business? (sole proprietorship, S corporation, C corporation, Limited Liability Company, General or Limited Partnership, Family Limited Partnership). Do you have intellectual property? Do you have a patent or copyright? The list goes on.
What does estate planning do for me? The goals of estate planning are to avoid at all costs the following probate court proceedings:
Avoid probate proceedings after your death,
Avoid conservatorship proceedings if you become physically and/or mentally incapacitated during your lifetime.
Avoid guardianship proceedings for your minor children (under 18 years of age) or children you want to give over $5,000.00 to from your estate.
Through the various coordinated legal documents, you will essentially be making the following basic decisions:
Name the person (or company) who will manage your real and personal property and assets and distribute them according to your trust and/or will and also naming alternates.
How your real and personal property and all of your assets will be collected, administered and distributed after your death - your legacy.
3. There are several different types of tax considerations, retirement plan options, and other issues related to your estate.
4. There are trustee decisions and the list goes on. Read the page about How to Choose a Successor Trustee.
5. If you have young or irresponsible children, then you’ll need to decide on continuing trusts for children, ages when they’ll receive distributions and restrictions, if any, on what they’ll have to achieve before they can receive major distributions of money or assets.
What’s so bad about probate? Probate proceedings are burdensome, expensive, time consuming, involve a tremendous amount of paperwork, and most of all, TEDIOUS and FRUSTRATAING. The statutory fees for probate proceedings are set by California statute and apply not only for your executor, but also for the executor’s attorney. There is a lot of paperwork to be processed and procedural requirements from beginning to end.
Probate could take over a year and a half before the Executor can close the estate, account to the court and the beneficiaries and finally distribute the assets to your beneficiaries. Here are examples of the statutory probate fees per probate code 10800 et seq.:
$300,000 estate = $18,000
$500,000 estate = $26,000
$750,000 estate = $36,000
$1,000,000 estate = $46,000
$1,500,000 estate = $56,000
$2,000,000 estate = $66,000
Estate planning “protects your assets” by saving the money, time, delays and frustrations that are incurred through probate, conservator and/or guardianship proceedings. It’s a loving thing to do for the people you care about who are going to be your beneficiaries. The court proceedings will most likely be required if you don’t plan ahead and have the legal documents in place to avoid these court proceedings.
There is a compelling resistance to completing estate planning and it comes from one’s fear of addressing their own mortality. When mortality is looking you in the face, wouldn’t it be better to spend time with your family and loved ones by celebrating life instead of doing estate planning during a very difficult time. Are you ready to begin estate planning?
The first step is to gather copies of the financial documents, compile some of your personal information, make some preliminary post-death distribution decisions and make your first appointment - please visit the Checklist page and send me an email to order your Financial and Personal Organizer.
Call 619-234-6534 to set up your first appointment.