MONTHLY FEATURED ARTICLE
Each month we feature an article by a respected industry leader from a variety of fields relating to senior living, general home and lifestyle issues or other topics of interest and value. This month, we are highlighting
information about estate planning with tips that may benefit seniors looking to increase the effectiveness of their estate plan.
A special thanks to David Barnier for contributing this months article on Estate Planning. Mr. Barnier is a highly respected San Diego attorney widely known for his efforts in assisting seniors with estate planning, long term care planning (including Medicare and Veterans benefits counseling), as well as being a regular weekly contributor/guest on the Senior Security Radio show on KOGO AM600.
Your 2012 New Year’s Resolution—An “Estate Plan Checkup”
By
David J. Barnier, Esq.
If you have an estate plan with a properly funded living trust, a will, powers of attorney for finances and health care, etc., then you have provided for your family both a certain and efficient means of handling your affairs should you require assistance during your lifetime or should you pass away. Good for you.
For any person who passes away while owning property in southern California, probate (and the associated costs and delays) will be required unless a living trust has been properly established and funded. If you do not yet have a professionally prepared estate plan including a living trust, your family will still be able to manage your affairs if you become incompetent and your family will still receive your assets if you pass away. However, without an estate plan, a few problems arise. Without an estate plan, the cost of addressing these issues will be significantly higher and the time necessary to accomplish these goals with be substantially increased. If you do not designate distribution terms or persons to manage your assets, the ultimate distribution of your assets will be dictated by law, which may not be consistent with your desires.
Most estate planning attorneys would be happy to meet with you at no cost to discuss estate planning issues (and to propose an action plan that you might or might not retain the attorney to implement, for a fee). Take advantage of the opportunity to meet with one of these attorneys so that you understand the benefits of an estate plan for you and your family.
Back to those of you who have an estate plan set up already. Again, kudos to you for taking responsibility for setting up your estate plan. If more than a year has passed since your last “estate plan checkup” with an attorney, there are many recent changes to the law and some practical issues that require your attention.
The Out-Dated “AB” Trust
Prior to a few years ago, the estate tax laws that affected taxes owed when a person passed away caused many attorneys to rightfully suggest to married couples that they establish an “AB” trust, also commonly referred to as a “bypass trust” or one of a handful of other names. Such trusts accomplished the goal of avoiding estate tax for estates with a total value that might approach $1,000,000 by the time both spouses had passed away. To accomplish this goal, AB trusts force the surviving spouse to create an irrevocable trust when the first spouse passes away. While such an irrevocable trust is beneficial when tens or even hundreds of thousands of dollars of estate tax might be avoided, these irrevocable trust cause unnecessary and costly headaches for a surviving spouse when estate tax is not a concern.
One year ago, on January 1, 2011, Congress did married couples a favor by establishing laws that allowed married couples to implement the same estate tax avoiding strategies associated with an AB trust without the necessity of setting up an irrevocable trust. This change in the law as well as the opportunity to make the irrevocable trust optional via a “disclaimer trust” dictate that for most married couples, an AB trust is inappropriate due to the burden it places on the surviving spouse.
Any married couple should meet with an estate planning attorney to make sure that their living trust is customized to their circumstances and does not have an out-dated AB trust term. A married couple without any estate plan should likewise discuss the benefits of an estate plan with an estate planning attorney. The benefit to the family will be immeasurable—ask anyone who has been required to go through the Probate Court process.
Evolving Family Circumstances Require Attention
Marriage. Divorce. A new child. A child growing older. A family member moving to another city. A death in the family. Each of these events is likely to necessitate a change to the structure of an estate plan. What if a young grandchild is to receive an inheritance? How will the inheritance be held for the grandchild? Who will be in charge? What expenses of the grandchild will be paid on behalf of the grandchild?
The legal structure of an estate plan might be set up perfectly, but the “personal” terms of the estate plan might deserve revisions depending on events since the estate plan was set up (or most recently modified).
Most families could not accurately identify the entire “personal” terms of their estate plan on demand. Who will receive assets? Who will be in charge? Except for the most straightforward terms, most terms deserve a yearly checkup to make sure that the terms remain appropriate.
By definition, an estate plan provides only peace of mind to the persons who establish the estate plan. By the time an estate plan is implemented, the person(s) who established the estate plan will either have passed away or become incompetent. A meeting with an attorney each year to confirm that the estate plan is up to date renews the peace of mind of the person(s) who established the estate plan. Just as most estate planning attorneys will meet at no cost to discuss establish an estate plan, many attorneys will also provide a free estate plan check-up.
Evolving Estate Laws Require Attention
Over the past few years there have been other, more subtle changes in the law that might render one or more aspects of an estate plan to be out of compliance with laws. For example, medical records authorization laws under the Health Insurance Portability and Accountability Act now require specific language to be stated in writing to authorize family members to communicate with doctors regarding a patient who is not able to communicate. Similarly, the past few years have seen changes to the rules affecting eligibility for health care benefits for seniors, including the rules associated with Medi-Cal, which pays 100% of nursing home expenses for those who qualify. A married couple with a house and $100,000 in the bank can qualify to have 100% of nursing home expenses paid through Medi-Cal and the house and the cash can be protected for the family if estate plan documents are properly drafted and compliant with recent changes in the law.
Educate yourself. Give yourself the peace of mind that is the primary benefit to you of your estate plan. You can accomplish this in a one-hour meeting with an estate planning attorney, and you are likely to find an attorney who will not charge you for this meeting. If something happens to you and your estate plan is not current, the increased expense and burden on your family members will be significant.
David J. Barnier is a San Diego native who earned his undergraduate degree from the University of California at Berkeley and his law degree from the University of Southern California. He lives with his wife, Michelle, in Kensington, and has worked in Mission Valley with his current law firm partners since 2001. Mr. Barnier is a monthly guest on the Senior Security Radio Show airing on KOGO AM600 on Saturday mornings at 6:30 a.m. Mr. Barnier offers free estate plan consultations and can be reached at 619-682-4842 or at djb@barkerolmsted.com.
