Jim Porter: Estate Planning 101 — part two (of five)
November 19, 2015
More often than not our parents' estates and financial affairs are not in order. Last week we explored how the kids' involvement in the family's estate planning can be beneficial.
Of course, on the illness or death of a parent, the lack of a current will or trust and inadequate life and medical insurance comes as a surprise – after it's too late to do anything about it.
'Everything Is Handled'
Resist the temptation to assume "everything is handled," and explore with your parents or family the basics of what needs to be done to protect the family from financial disaster, severe tax consequences, nursing home costs, ineligibility for Medicaid or Medi-Cal and other governmental assistance, and family disagreements after a parent's illness or death.
There's no magic list of what you need to know to avoid surprises in your parents' financial future, but here are a few things to consider discussing with Mom and Pop:
Health Care Directive
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An easy transition is to ask your parents whether they have a signed Power of Attorney for Advance Health Care or Health-Care Directive. Either of these documents ensures that proper health care decisions are made in case they become incapacitated (call or e-mail to firstname.lastname@example.org for a free form).
Questions, Questions: Is there a will or trust? Is it current? Has anyone died since the last will or has there been a divorce or have properties been sold? Still want the same executor to administer your estate? Have your parents' assets appreciated such that a trust might be advantageous? It doesn't take much to be able to benefit from a simple trust and avoid probate and taxes. Remember it doesn't do any good to lament after the fact how much of the estate went to the government. At the very least, encourage your parents to meet with an estate-planning lawyer, like Brian Hanley or certified specialist, Kelley Carroll.
If your parents (or you!) don't have a will, call a lawyer today (not tomorrow). If you have minimal assets and no children and want to save money, consider making a will yourself by checking out http://www.nolo.com or go to an office supply store. Don't just talk about it.
Where are your parents' estate-planning documents kept? Who has the key to the safe deposit box? Is there a safe deposit box? Where's the original will or trust?
What type of life and medical insurance do your parents have? Does it cover long-term care? Nursing home? In-home coverage? What are the limits?
Who's going to care for your parents? The burden on family care-givers can destroy the care-giver and the family.
What assets do your parents have, including cash, home, investment properties, investments, IRAs, Social Security, banking and savings accounts, retirement plans, and stocks and bonds? Who is on title to the real estate? Have you taken advantage of the California law that allows husband and wife marital properties to be held as "community property with right of survivorship," which can avoid probate and save on income taxes? I bet most of you haven't and it's a very simple process. (Call or e-mail and we will send you a Law Review on what needs to be done. No questions asked.)
Is there a complete list of business, financial and family records, with addresses, account executives, home care providers, accountants, estate planning lawyer, deeds, bank account numbers, stocks, promissory notes, insurance policies, Veteran's benefits, retirement plans, health records, and a home inventory? (Call or e-mail for a free asset list form.)
Are the beneficiaries on life insurance policies and 401(k) plans up to date? You would be surprised how many ex-spouses remain on policies.
Are your parents still driving and has anyone evaluated their driving skills? An unfortunate, under-insured accident is a good way to lose everything.
Do your parents have enough income for their support or will assets have to be sold? Can steps be taken today to qualify for Medicaid (or Medi-Cal, as we call it here in California)?
Check the Basics
Have you or your parents considered charitable trusts and other philanthropic plans that allow you to give to your favorite charity (with write-offs) rather than to the government — and still provide for the kids?
By the way, have you taken care of YOUR estate planning? If you don't have a will or trust, you deserve the consequences.
How would you feel if your assets went to your ex-spouse, to Uncle Sam or completely contrary to your wishes? (And don't answer that question with: "After I'm dead, I don't care.")
Next week we will discuss how to improve our communities with charitable giving and explore some of the steps that can be taken to protect the family's assets.
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