Why Would A Married Couple Need an Estate Plan?

A friend of ours recently contacted us with a question that comes up frequently enough that we wanted to share it with you:

We are married and everything that we own is held jointly/as community property. We own a house, but we don’t have any kids and we don’t have debt. Do we need a will? Do we need a trust? Why?”

To the first question: Yes. You need a will whether you have a trust or not. (Click here to read our post explaining what a will does. And click here to read about intestacy.)

To the second question: Yes. Because….

1. Incapacity. Incapacity doesn’t just mean “coma,” (although that counts too). It could be that you went into surgery and had a bad reaction to the anesthesia so you can’t quite function as you ordinarily would. Or, it could be dementia. It could be temporary, it could be permanent. But a will doesn’t let you address incapacity situations. A trust allows you to plan for incapacity. It allows you to plan for who will take care of your assets and use your assets for your benefit when you are still living. Just because your spouse is on title doesn’t mean your spouse has all the necessary authority to care for you in the event of your incapacity. (Click here to read our previous post explaining incapacity.)

2. Contingency planning. Wills do not address all contingencies. But trusts allow for lapses and contingency planning. What if your spouse becomes incapacitated after you do? What if your intended beneficiary is still a minor (younger than 18 years old)? What if your intended beneficiary has a substance abuse or gambling issue later on? What if your intended beneficiary has special needs and requires means-tested government assistance? What if your beneficiary predeceases you? These issues can be planned for in a trust in advance.

3. Probate. You’ve probably heard the term “probate” with some negative connotation. (Click here to read our previous post explaining probate.) If you have a trust, you avoid probate. Probate takes about 18-24 months; it’s a public proceeding; and it’s expensive.

So even if you are married and hold everything jointly, that may only ensure that your spouse receives your assets upon your death. But so many other scenarios can occur. We might recommend you consider a trust given your situation and desires. All of our recommendations depend on your specific family and estate planning goals. To ascertain what is best for you we would need to meet with you, in a free consultation, to understand your goals, assess and explain your options, and provide you with a recommendation tailored to your situation. Call or email us today.

What Does Shafae Law Do?

After we posted about the opening of our new Los Angeles office last week, we received a lot of questions about what we actually do. So here’s a list of what we do and what we don’t do.

We do:

• Establish trusts that protect your assets from the probate process and help ensure you benefit from current tax laws

• Transfer your home into your trust

• Help guide you on how to move your other assets into your trust

• Draft wills that name guardians for children and give away your things (or to make sure your things end up in your trust)

• Create documents (called Powers of Attorney) that give someone the right to act in your shoes in case you get sick, can’t do it yourself, or don’t want to do it yourself (e.g. call the bank or your health insurance company to find out what kind of coverage you need)

SIDE NOTE: A forthcoming blog post will explain this in more detail, but even your spouse needs a power of attorney to be able to do these things on your behalf; being married isn’t enough to give your spouse the legal authority to act on your behalf

• Create documents that give someone the right to determine health care decisions when you are unable to do so (e.g. if you are in a coma and there’s a decision to be made about whether to proceed to surgery or not)

• Review and update existing estate planning documents

• Advise on tax implications that impact your estate planning wishes

• Administer a trust for someone who has passed away

• Facilitate the probate process for someone who has passed away

We don’t do:

• Financial planning, like telling you where to invest your money

• Real estate transactions, like helping advise on the housing market or conducting a purchase/sales transaction

• Tax controversies (disputing the IRS) or file tax paperwork for you

• Litigation. We do not handle legal disputes

Not sure if we do or don’t do what you need? We offer free consultations. Contact us today!

Announcing the Launch of our Los Angeles Office!

Shafae Law is proud to announce that we have officially opened a Los Angeles office (12100 Wilshire Blvd., Suite 800, Los Angeles, CA 90025). Led by Natasha L. Carroll-Ferrary, the main office is located in West Los Angeles; and we have access to satellite offices all throughout the Southern California region. Our Los Angeles location will be providing the same breadth and depth of estate planning and estate administration services as our Northern California office.

Shafae Law specializes in all aspects of estate and tax planning, as well as post-mortem and estate administration. We guide you and your loved ones through the estate planning process to meet your needs and achieve your goals. We provide trust and estate administration services that carry out the terms of a trust expeditiously, or ensure a timely probate process is completed. We want you and your family to have the peace of mind that you are in good hands.

Equally as important, we are transparent about our fees, and charge clients on a flat-fee basis only. We do not have an hourly rate, and we do not charge for communications, emails, or in-person consultations. We do not want our clients looking at a clock; we want you to take your time with us so you feel comfortable and confident.

Please contact us to set up a free consultation and find out whether our services are right for you.

What is... Intestacy?

This is part of an on-going series of blog posts titled the "What Is..." series, where we attempt to explain, in simple terms, common estate planning terms and concepts. To read other posts in this series, click here.

Simply put, intestacy is the word to describe what happens to your property when you die without a will. Intestacy is the state’s default method of determining your beneficiaries. This default is determined by the state in which you reside at the time you die (not the location of your death, say, if you die on vacation). If you reside in California when you die, and you don’t have a will, then the State of California has decided that your property goes to your surviving spouse (if you have one), if not, then to your children (if you have any), if not, then to your parents (if they’re still alive), if not, then to your siblings, then to your nieces/nephews, then to your uncles/aunts, then to your cousins, and on and on and on until someone in your family receives your property.

What if you literally have no other family by the time you die? Well, in that case, if you have no living relatives, the State of California will become the beneficiary.

Some people might look at the above and think,  “Yes! That’s what I would want anyway! So why do I need a will?” A will is more than just how you are giving away your things. It’s used for selecting a guardian for your minor children. It’s also where you would nominate the person who would handle closing all of your final affairs. This person is called an executor. Think of  the person paying for final bills (like an outstanding credit card bill or electric bill), who determines what to do with all of your knick-knacks, and other affairs of a personal nature. If you have a living trust, a will is necessary to ensure that all of the assets you never got around to transferring into your trust end up in your trust (called a “pour over will”).

If you die intestate (remember, that means without a will), none of your friends, girlfriend or boyfriend, or favorite charities will receive anything. Those people aren’t considered your relatives in the default scenario. Also, once your property passes on to someone else, you have no control what happens to it after that. Your property is now a part of that person’s estate and not yours. So, for example, if you wanted your things to go to your nieces/nephews but not to your siblings, you don’t get to control that if you die intestate. Intestacy goes in the order described above only.

The good news is that intestacy is a completely preventable situation! During your life you can create an estate plan (definitely a will and maybe a trust, depending on your situation) that will ensure that your assets go to the people or organizations you want them to go to. You also get to choose who gets to handle all of your final affairs, and to provide to them clear instructions.  

To determine what kind of estate plan you and your family needs, please contact us for a free initial consultation.

Everyone Needs an Estate Plan (Example 4)

Estate planning is much more than just death planning and giving away your stuff after you die. It’s also about planning for circumstances that you may not have anticipated. 

This post is the third installment in our "Everyone Needs and Estate Plan" series. If you missed Examples 2 & 3, click here to read it.

Example 4: You’re young (but over 18), single, and healthy. You decide that since you don’t have kids, and you haven’t made your first million--yet--that you don’t need an estate plan. On your way to work, someone is texting while driving, doesn't see you, and rams right into you. You're severely injured, and the paramedics are called to the scene. You’re taken to the hospital, and you lay there incapacitated. You're still alive, but you lack the ability to make your own decisions or to handle your own affairs. We’re essentially in Example 1, except that you don’t have a spouse here. Your parents and siblings fly in from out of town, and they want to be involved with your care, they want to alert your boss as to what happened, and they also want to sue the negligent driver who caused your injuries. Unfortunately, all they are given is the bad news that they have to go to court to obtain the appropriate legal authority to handle any of your affairs on your behalf.

You're an adult. No one can make decisions for you... except you. Even though your relatives are here--your parents, at that--and they likely have your best interests in mind, no one has the legal authority to handle your affairs for you absent your permission (power of attorney) or court order (conservatorship).

Hyperbole aside, estate planning is about crisis planning before there is a crisis. Once a crisis occurs--be it a bad reaction to medication, or plain bad luck--it’s often too late to have the proper tools in place to face that crisis head-on. In all likelihood you’ll need to spend a great deal of time and money acquiring the right tools to deal with the crisis. It means more stress on top of an already stressful situation for your loved ones.

As you can see, estate planning has little to do with your net worth or your age. It is important for everyone at any age. If you’re over 18 years of age, you absolutely need an estate plan. If you have a family, especially minor children, that need for an estate plan merely increases. To determine what kind of estate plan you and your family needs, please contact us for a free initial consultation.

Everyone Needs an Estate Plan (Examples 2 & 3)

Estate planning is much more than just death planning and giving away your stuff after you die. It’s also about planning for circumstances that you may not have anticipated. 

This post is the second installment in our "Everyone Needs and Estate Plan" series. If you missed Example 1, click here to read it.

Example 2: You are married, and you have a couple of children. Now imagine that you and your spouse divorce. Neither of you have done any estate planning. If you or your now ex-spouse remarry and die before his or her new spouse, you could have unintentionally just cut your kids out of his or her inheritance. Without proper planning, by default, your estate goes to your surviving spouse, the person you were married to when you died. In this example, the surviving spouse happened to be someone who is not the parent of your children. At least some of the assets you may have intended on going to your children are now in the hands of someone unrelated to your children.

Example 3: Same facts as Example 2, except neither of you remarry, and instead you both tragically die. Your children are still minors (under the age of 18) and lack the legal authority to make legally-binding decisions on their own (enrolling them in school, going on field trips, renting an apartment, making financial transactions, etc.). Because you did zero estate planning, we now have two orphans who need legal guardians. Well, you never got around to telling the world who that should be in a legal document. So whoever thinks they should be your children’s parents goes off to court, and hopefully the court makes a good decision. That's probably not the way you want it to play out.

Check back next week for another example of why everyone needs an estate plan. If you would like a free one-hour consultation to discuss your estate planning goals, do not hesitate to contact us.

Everyone Needs an Estate Plan (Example 1)

Estate planning is much more than just death planning and giving away your stuff after you die. It’s really about choosing decision makers for those moments when you cannot make your own decisions. Sure, you cannot make your own decisions after you have died. But there are several other times when you can end up incapacitated (meaning, you cannot legally make your own decisions) and yet still be very much alive. Without proper planning, you may leave your loved ones stuck in a tough place if you ever become incapacitated.

Over the next few weeks, we're going to walk through a few examples.

Example 1: Imagine that you and your spouse have decided to take your young kids skiing. As you’re taking photos of the little ones having a blast, you don’t realize that you’re headed right for a tree. Before you know it, you collide with the tree, you’re out cold, and you’re rushed to the hospital.

The good news is that you’re still alive. The bad news is that you’re now incapacitated. You’re unable to make your own medical and financial decisions. This could last for hours (medication), days (coma), or a lifetime (permanent brain damage). It’s now up to someone else to make those decisions for you.

Your spouse decides that he or she is going to step in and make decisions for you, including handling your finances, dealing with the insurance company, dealing with your boss, and maybe suing the ski resort. Unfortunately, you didn’t do any estate planning, so your spouse now has to go to court and have a judge issue an order that allows your spouse to make those decisions for you. This is the key: Your spouse can’t do any of the above without the appropriate authority.

You see, just because you’re married doesn’t give your spouse the legal authority to make decisions on your behalf. You have to give your spouse (or someone else) that power before you become incapacitated. This is commonly done in a power of attorney.

The same principle applies if you have children over the age of 18. Unless your child has given you the legal authority to make decisions on his or her behalf (for example, via a power of attorney), you need a court order to have that legal authority. And getting a court order when your child or loved one is incapacitated can be stressful and overwhelming, not to mention expensive. This is why it’s important to plan ahead.

Check back next week for another example of why everyone needs an estate plan. If you would like a free one-hour consultation to discuss your estate planning goals, do not hesitate to contact us.