The Importance of Funding Your Trust & Periodically Reviewing Your Estate Plan

You signed your estate planning documents and placed the original documents in a safe place. You're done with your estate plan, right? Not quite…you'll want to ensure that if you've created a trust as part of your estate plan, that your trust has been properly funded with the appropriate assets. You'll also want to periodically review your estate plan to make sure it still comports with your wishes and that it takes into consideration changes that may occur in your personal or financial situation.

Funding Your Trust

Your trust will control the distribution of those assets which are held in the name of the trust. Title to your assets must be properly transferred to your trust in order to avoid probate. If an asset is not transferred into the trust, a probate proceeding may be required. Transferring real estate to a trust involves preparing a deed and accompanying documents transferring title to the trust. Some assets, such as life insurance policies and retirement benefit accounts, are contractual in nature and controlled by beneficiary designations. Careful coordination of beneficiary designations is required to make sure these assets will be distributed as you intended.

Events Triggering the Need to Review Your Estate Plan

There are many changes in your personal or financial circumstances that could have an impact on your estate plan. A few examples include:

• A change in your marital status (marriage, separation, or divorce)
• Death or incapacity of a fiduciary or beneficiary named in your documents
• A change in your health condition
• Retirement or job loss
• Receiving a substantial inheritance

San Diego Estate Planning, Probate and Trust Administration
Thank you for reading our blog. If you have any questions regarding estate planning, or need assistance with the administration of a trust or estate, contact the Casiano Law Firm for experienced advice and representation.

How Much Will it Cost You to Die Without an Estate Plan?

Occasionally we will meet with a potential client who questions whether the cost of estate planning is really justified. The answer to that question involves consideration of several different factors, including planning for the possibility of future incapacity, tax considerations, and whether probate administration will be required. This blog entry will focus on the cost of probating an estate in California. Generally speaking, if a person dies with assets titled in their name, subject to some exceptions for a very small estate, probate administration will be required.

Probate refers to the process where the court oversees the administration of a deceased person’s estate. The purpose of probate administration is to ensure that any final bills and expenses of the decedent are paid, including any taxes owed, and any claims by creditors settled. Probate is a costly, time consuming process. Probate fees in California are high, and generally fall into three categories:

• Court costs, including court fees, publication fees, surety bond fees, probate referee fees, certification and recording fees;
  
• The personal representative’s fee (the fee paid to the administrator of the estate for his or her services); and the
  
• Attorney’s fee for his or her services
  

The fees paid to the personal representative and the attorney are set by law and computed upon the gross value of the estate as follows:

• 4% on the first $100,000
  
• 3% on the next $100,000
  
• 2% on the next $800,000
  
• 1% on the next $9,000,000
  
• ½% on the next $15,000,000
  
• “reasonable” compensation on the excess over $25,000,000
  

It is important to note that the gross value of the estate is based upon the full value of the assets of the estate, not taking into account any mortgages, debt or other loans or encumbrances on the asset. For example, the deceased may have a home with a value of $1,000,000 and a mortgage of $975,000. The fee to probate the home would be based on the full value of $1,000,000, not the $25,000 net value of the property ($1,000,000-$975,000).

As you can see, failing to create an estate plan can be costly in terms of probate administration fees. Planning in advance will allow your beneficiaries to avoid both the cost and time delay associated with probate. If you have any questions regarding estate planning or probate, contact the Casiano Law Firm for advice and assistance.

Financial Powers of Attorney

A financial power of attorney is a document that authorizes someone (referred to as your “agent”) to act on your behalf. A financial power of attorney may be limited to a specific term or give your agent the authority to take only a certain specified action on your behalf (such as the power to complete a real estate transaction while you are away on vacation), or it may convey broad authority to your agent to act on your behalf. A financial power of attorney may be “durable” in nature, meaning it is not affected by your subsequent incapacity. It may also be “springing”, meaning it does not take affect until the occurrence of a specified event, such as a determination that you are no longer capable of managing your own financial affairs, or it may be immediately effective upon the signing of the document.

Do you need a financial power of attorney?

Many clients ask why they need a financial power of attorney. They assume that their spouse automatically has the authority to act on their behalf in the event they become incapacitated. However, this simply isn’t the case-your spouse will need to have the authority conveyed under a power of attorney, or be appointed as your conservator, in order to take certain actions on your behalf if you are incapacitated. Other clients assume that if they have a trust, they don’t need a financial power of attorney, since if they become incapacitated, their successor trustee will manage the assets held in the trust. While this is true, there are many actions that the successor trustee is not authorized to take on your behalf if you are incapacitated, such as signing your tax return, dealing with Social Security, Medicare, insurance, etc., and handling assets which are not held in the trust. For this reason, a financial power of attorney is advisable even if you hold all of your assets in your trust.

Who should you name as agent?

Careful consideration should be given to your choice of agent. Financial powers of attorney are important legal documents that can convey important powers to the named agent. You will want to name someone who is capable of managing money, who will make sound financial decisions, and who you trust will have your best interests in mind. Typically, if you have a trust, you will name the successor trustee of your trust as your agent on your financial power of attorney. Consult your estate planning attorney for further guidance on selecting an agent for your financial power of attorney.

Thanks for reading our blog. If you have questions, or need assistance with estate planning, contact the Casiano Law Firm for a complimentary telephone consultation with an experienced San Diego estate planning attorney.

Planning for Potential Incapacity

When most people think of estate planning, they think about who will manage their estate and how their assets will be distributed and divided upon their death. However, a comprehensive estate plan does more than just provide a plan in case of death; it also provides a plan in case you become incapacitated or disabled, whether as a result of an illness, injury or other event. Over the course of the next few blog entries, we will cover some of the estate planning documents that can be used to provide a plan for possible incapacity, including the use of advance health care directives, general durable powers of attorney, and trusts. In this month’s blog we will discuss conservatorships and how the necessity for a conservatorship proceeding can be avoided through advance estate planning.

Why Plan for Incapacity?

Statistics show that people are living longer, but at some point many people lose the ability to make financial and/or medical decisions on their own behalf. Our office is frequently contacted by family members or friends who are concerned about the well-being of a loved one. Sometimes the person has become incapacitated as a result of a stroke or an illness, such as Alzheimer’s or another form of dementia. In other instances a young person has been incapacitated as a result of an accident, head injury, or even an assault. Incapacity can strike at any time and at any age.

What Happens If You Don’t Plan Ahead?

Unfortunately, with many of the inquiries we receive, the incapacitated person has not executed an advance health care directive (or its predecessor, the durable power of attorney for health care), nor have they executed a general durable power of attorney for financial matters. Since the person is now incapacitated, they lack the legal capacity necessary to properly execute these estate planning documents. The only option at this point is to petition the court for conservatorship of the person and/or conservatorship of the estate.

What is a Conservatorship?

A conservatorship a court proceeding where a judge appoints a person or entity (referred to as the “conservator”) to handle the care and/or finances of a person who is determined by the judge to be unable to care for themselves or their finances (this person is referred to as the “conservatee”). There are two types of conservatorship proceedings in California: 1) conservatorship of the person; and 2) conservatorship of the estate.

A conservator of the person arranges for the conservatee’s care and makes decisions regarding the conservatee’s housing, health care, food, clothing, housekeeping, transportation and recreation. A conservator of the estate is in charge of handling the conservatee’s finances. The conservator of the estate makes an inventory of all of the conservatee’s assets, ensures that the conservatee’s taxes are filed and bills are paid, makes a plan to make certain the conservatee’s financial needs are met, invests assets, and maintains financial records. It is permissible and often common for the conservator of the estate to be the same individual or entity as the conservator of the person.

The imposition of a conservatorship removes a person’s right to make certain decisions for himself or herself; it is viewed as an option of last resort and is only granted by the court when there are not any less restrictive alternatives available. Conservatorships are often criticized as being expensive, time-consuming, inflexible and cumbersome.

Seek Experienced Legal Representation

If you need assistance with estate planning or a conservatorship proceeding, contact the Casiano Law Firm for a complimentary telephone consultation with an experienced San Diego elder law and estate planning attorney.

Report Finds California’s Long-Term Care Ombudsmen Are Unable to Stop Abuse

According to a new report, many cases of nursing home abuse and neglect are likely going unnoticed in California. The report attributes the problem to recent budget cuts as well as conflicting ombudsman duties and conflicting confidentiality laws.

On November 3, 2009, the California Senate Office of Oversight and Outcomes released the report revealing serious defects in California’s Long-Term Care Ombudsman program. California’s Elder Abuse Investigators: Ombudsmen Shackled by Conflicting Laws and Duties can be viewed here.

California’s ombudsmen were originally charged with advocating for the elderly in nursing homes and generally providing a watchdog presence. Today, their primary task is investigating claims of abuse and neglect within nursing homes. Where they used to collaborate with nursing homes and act as a liaison between management and residents, now they are placed in an adversarial role, which grants them less access to the inner-workings of the nursing homes they cover and makes them less effective advocates. Additionally, investigations are complex and time-consuming, so most ombudsmen no longer have time to make regular nursing home visits, establish any sort of regular presence, or provide advocacy services.

Unfortunately, ombudsmen also receive more complaints than they are able to investigate. Since last year’s massive state budget cut, the ombudsman program has been left with about half of the budget it previously had. It appears that individual ombudsmen are adjusting to the loss of resources by allowing some allegations of abuse to go uninvestigated. According to the report, ombudsmen forwarded 44 percent fewer complaints to outside agencies for enforcement since the budget was cut.

The report also states that, in many cases, ombudsmen have their hands tied when they try to pursue cases of alleged abuse. Typically, when ombudsmen investigate complaints and find one they believe to be well-founded, they are instructed to forward it to the appropriate outside agency for further investigation, protection, and potential prosecution. But many of these legitimate complaints are not being forwarded. A federal law prohibits ombudsmen from forwarding a complaint without a release of identity from the person who made the complaint. But many of the elderly making complaints refuse to release their names for fear of retaliation within their nursing home. In fact, according to the report, three quarters of people who made complaints refused to release their identities.

Elderly individuals who are subjected to abuse or neglect should not have to keep quiet in order to avoid further harm in the nursing homes where they live. If you or a loved one has been mistreated in a nursing home, contact The Casiano Law Firm for a confidential consultation.