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Legal Protection for Your College Freshman

Legal Protection for Your College Freshman

Besides Top Ramen, there are two essential legal documents your high school graduate needs to have in place.

Two Key Legal Documents

It may be hard to believe your child heading off to college really is an adult, but they’ve officially crossed that threshold into adulthood.  It’s an exciting time.  And it’s a very legally vulnerable time because now your child does not have a default backup for important medical and financial decisions the way you and your spouse do.  Even between spouses though, I think every adult should have these two key legal documents.

Health Care

Your child’s medical information is legally protected, and it may be difficult or even illegal for medical providers to share information with you in case something happens to your child. When congress passed The Health Insurance Portability and Accountability Act in 1996 (HIPAA) one of their goals was to protect patient privacy.  Because the penalties for violating the rule can be steep, doctors and hospital administrators are very cautious when releasing medical information.  As a parent that can present a very frustrating and frightening situation in a hospital emergency room.  Your child may not be in a position to give consent, and you don’t have time to go get a court order (an “emergency” action by the court could still take a week or more for a “temporary” order) not to mention the cost of filing fees and attorney assistance. To avoid all of that, your child (now adult) should prepare an Advance Health Care Directive to appoint the person they want to represent them if they are unable to speak for themselves.


The second document is called a Durable Power of Attorney, and it gives the appointed agent the ability to handle all financial matters.  While most college age children don’t have a lot to manage, the Power of Attorney can be a good safeguard against a potentially devastating impact of an event that leaves them incapacitated.  Imagine a car accident has left your child incapacitated – can you step in and handle all the important legal and financial matters that will ensue?

It can save you thousands by avoiding the need to obtain a conservatorship of the estate. You may think, well, my child just has a small bank account, what is the big deal?  The big deal is everything that is not in a bank account: handling insurance claims, lawsuits, lawyers, lenders, and the IRS.  Your bank paperwork won’t help with any of those people – you’ll need a conservatorship or a power of attorney to act on your child’s behalf.

So, in between all the notebooks and highlighters, slip two important legal documents.  Welcome to the adult world, kid.


Accidentally Hiding Your Assets From Your Kids

Accidentally Hiding Your Assets From Your Kids

Most people I work with haven’t revealed a lot about their estate to their children.  And usually, there is no good reason to let your children know all the details about your financial matters.  But take a moment and step back – if something were to happen to you, how would your child, your successor trustee, your executor, know where to start?

If you have a trust in place, the first place to look is the trust property exhibit.  But that may not address life insurance policies, retirement benefits, and potentially assets acquired since the trust was created. 

You may intend that your children get “everything” when you’re gone, but unless there is a map to guide your children to where “everything” is, they may spend many frustrating hours searching through your house and paperwork to try and figure out what is there. 

How big of a problem is this?  In 2015, the Legislative Analyst’s Office estimated that California took in $400 million in income off of unclaimed assets.  They estimated that unclaimed property had become the fifth largest source of income for the state. 

Your children could lose a valuable life insurance policy because they had no idea it was there and didn’t get the premiums paid while you were incapacitated.

A bank account may just sit because there is nothing at home to indicate you have an account there.

To avoid these problems create, and more importantly, maintain, a list of where things are.  Opening a new bank account?  Add it to the list.  Closing an account?  Update the list.  Company changing names?  Update the list.  Oh, and make sure your children know where the list is. 

If you think you might have unclaimed property, search the state's Unclaimed Asset Database.

A Tale of Caution Involving a Holographic Will

A Tale of Caution Involving a Holographic Will

My dad always said that wisdom is learning from other people’s mistakes – it’s cheaper than learning from your own mistakes.  Here is a classic example to learn from: the estate of Estelle Elsa Manwell, from El Dorado County.  Ms. Manwell was well to do – according to court documents she owned real estate in Contra Costa and El Dorado County worth $1,238,848. Ms. Manwell must have known that she did not have much time to live because she signed a handwritten will just days before she passed away.  This handwritten, or “holographic” will left her estate to her 5 living children, but stated, “I do not want any of my property sold outside of my family for a minimum of 20 years.”  The will also neglected to nominate an executor or mention whether the executor would be required to carry a bond. Ms. Manwell's will left a few problems for her children.

No executor

Because by statute the executor is paid the same as the attorney (though some may choose to waive this fee) the position can have an enviable financial bonus for an heir.  For an estate of $1 million, the executor can collect $23,000.  The court records indicate that the children of Ms. Manwell fought over who would be executor.  This fight could have been avoided by simply naming the executor in the will.  Now the family relationships will have to recover from what was said and done in a public (and expensive) forum.

No trust

The attorney’s fees and executor fees could have all been avoided by creating a trust, allowing the assets to pass to the heirs without going through probate.  That amounts to nearly $50,000 in expenses, not to mention the months, and potentially years it will take for the court to process this hand-crafted document.

Tying beneficiaries hands

Sometimes restraining the beneficiaries is for their own good, and serves as a way of protecting them from creditors or their own foolish choices.  But in this case, the children (likely all in their 40’s or older) will be forced to stay on title together on assets with which they can do nothing until 20 years later, minimum.  These five children, who have just finished fighting over who will be the executor, will have to manage multiple properties in several counties – together.  I have a feeling only the lawyers will appreciate this arrangement. Managing real estate can be time-consuming and costly.  Managing with multiple owners with their own unique perspective, and potentially antagonistic attitudes towards each other is a recipe for waste.  Sometimes a client has a sentimental attachment towards particular items, like a home wrapped with memories of family events, holidays, and birthdays.  I try to remind clients that their children have their own fond memories, but also have their own lives to lead.  Tying their hands and preventing them from making necessary decisions could ultimately hurt their children in the long run.  Better to create a structure that will make it easy for the children to carry out your wishes, but gives them necessary options.

Haste makes waste

In summary, by leaving these planning decisions to the very last minute, Ms. Manwell left behind a situation that will cost her children financially and emotionally over a long period of time.  All of these things could have been avoided by careful advanced planning.

Protecting Mom’s Future – Estate Planning for the Surviving Spouse

Protecting Mom’s Future – Estate Planning for the Surviving Spouse

According to the Census Bureau, 56% of surviving spouses over age 65 are women.  When it comes to estate planning for the surviving spouse, you can use your trust to give them extra protection.


Some couples prefer the simplicity of having everything go to the surviving spouse outright.  If that is your preference, and you have an older trust, it is worth having it reviewed.  The default option not that long ago was to set everyone up with an “A-B” trust, splitting the trust in two at the death of the first spouse.  The estate tax reason for doing that has disappeared, leaving you free to update the trust to simplify things for your surviving spouse.  But before you pick up the phone to make that change, read on.

Surviving Spouse’s Protection Trust

The trouble with the simple direct option is that if your surviving spouse can do anything she wants with the money, so can all her creditors and predators.  So instead, we put the deceased spouse's part of the estate into a separate irrevocable trust.


With a separate trust, you can include a co-trustee.  The co-trustee is there as a safeguard against creditors trying to reach the money.  But what happens when mom is ready to buy a new car, and the co-trustee says, “no”?  Mom gets to say two important words to the co-trustee, “You’re fired” and go find a new co-trustee.

The co-trustee gets to act as the “bad guy” and say no to all the creditors and predators that are trying to reach mom’s money.

Protecting the Kids Too

If mom finds a new special guy, the Protection Trust can be set up to protect that portion of the estate for the couple’s children.  For example, the trust can expand the definition of “remarriage” to include spending the night with someone.  Following that the trust can be set up to protect the principle for the duration of the relationship, or end that portion of the trust, and distribute the balance to the children.

Families have different goals and priorities, and as the options above illustrate, not everyone will want the same thing for their family situation.  It’s important to know what kind of plan you have, and have a conversation with your attorney about what your goals for the future look like.


7 Costly Mistakes When Planning For A Special Needs Child

7 Costly Mistakes When Planning For A Special Needs Child

Children with disabilities can benefit greatly from advanced planning on the part of their parents.  Conversely, if the parents fail to plan for their special needs child’s future, that child could find themselves without resources and without assistance.  Here are seven costly mistakes to avoid when planning your estate for your special needs child.

Mistake #1: Ignoring your child’s special needs when creating your estate plan

Children with special needs often depend on services and benefits provided through the state, such as SSI or Medicaid.  A will or trust that doesn’t take the child’s special needs into account will probably make the child ineligible for these essential services.

Mistake #2: Disinheriting your special needs child

Some parents, aware of the eligibility issue decide to disinherit their special needs child.  While protecting their special needs child’s eligibility, this leaves the child without any additional assistance or resources – things that you as a parent are currently providing.

Mistake #3: Relying on your other children to use their money for your child with special needs

Sometimes parents will give their special needs child’s share to another, with the hope that that person will use the funds for the special needs child.  Unfortunately, this “solution” won’t help your child if you become incapacitated, or after you are gone.  The “extra” share becomes “their” money, and there is no structure and no accountability for how it is spent.

Mistake #4: Procrastinating

Some mistakes can be more costly than others.  A special needs child won’t have the resources others have to fall back upon.  No one can guarantee another day, so it is important to plan early.

Mistake #5: Preventing others from contributing to the trust

The distinct advantage of creating a specific special needs trust now is that when friends and relatives plan their estate, they can make gifts to the trust.  They don’t have to make any special needs planning, because you have already done so in a way that they can participate and support.

Mistake #6: Failing to protect a special needs child from predators

Giving your special needs child money through a will, even a will that has special needs provisions, gives the public all the information they need about your child and precisely how much money is available.  Because a will goes through probate it is a matter of public record, available for all to see.

Mistake #7: Using a “generic” special needs trust that doesn’t fit

Your child is an individual with unique needs.  Some generic terms for special needs trusts are unnecessarily inflexible.  Sometimes the default language protects eligibility, but doesn’t provide enough flexibility to meet the child’s specific needs.  You’ll want to talk to your estate planning attorney about the kind of services your child is currently receiving and discuss what services they are likely to have in the future.

Control Your Assets in a Trust

Control Your Assets in a Trust

One of the questions I get all the time is, should I put _________ (name an asset) into my trust?  The answer, of course, is that it depends on the asset, but generally speaking, everything you own should be transferred to the trust.  Which leads to the follow-up question: do I lose control of my assets when I put them into my trust?

Why Put Your Assets Into A Trust

If your goal is to avoid probate and you’ve created a trust to accomplish that goal, you need to understand one thing.  Assets owned by the trust avoid probate.  Assets not owned by the trust are exposed to probate.

Now that you understand the importance of your trust owning your assets, who controls your assets?

Who Is In Charge of My Trust?

When you create your trust, naturally you put yourself in charge of your trust.  And you also chose who will be in charge after you, and maybe even who will be in charge after that person.  The person in charge of the trust and the assets inside the trust is called the Trustee.  When you created the trust, you made the decision about who the successor trustee will be and when they step into your shoes as trustee.  Though who the trustee is will change as time goes by, you made the decisions when you created the trust.

Who Gets to Benefit From My Trust?

While you're alive, you're the beneficiary of your trust, and after your gone, your surviving spouse is typically the sole beneficiary of the trust.  After you and your spouse are gone, then you get to spell out in your trust exactly who gets your estate, when they get it, and under what circumstances.

It’s Your Trust

As the creators of the trust, you are completely in charge of what goes into, and what comes out of your trust.  And because it’s a revocable trust, you can completely change the trust itself, including getting rid of it completely should you so choose.  It’s all up to you.

Total Control

A trust gives you the ability to spell out exactly who gets what and when.  Now that is total control over your assets!

5 Types of Living Trusts You Need to Know About

5 Types of Living Trusts You Need to Know About

Not all living trusts are the same.  And I’m not talking about quality either, though that is a major factor too.  I’m talking about the difference between minivans, pickups, and sports cars.  There are five major types of trusts that we use every day in our practice for different situations.

Probate Avoidance Trust

This is the basic, direct distribution trust that is the typical trust people are introduced to when they learn about wills vs. trusts.  This trust takes a no-nonsense, keep-it-simple approach to dividing all the assets between the beneficiaries and having accomplished its purpose, ride off heroically into the sunset.

Personal Asset Trust

What if your beneficiaries’ inheritance could be protected against lawsuits, creditors, and even divorcing spouses?  With Estate Plan Pros’ “Personal Asset Trust” you can provide dramatically increased protection for your beneficiaries against these financial risks.  Read more about the Personal Asset Trust here.

Surviving Spouse Asset Protection Option

If you have children from another relationship that you’re including as beneficiaries, what happens when you’re not the surviving spouse?  What happens to your assets?  We can set up the trust to split in half at the death of the first spouse so that portion becomes an asset protection trust, and locks in the beneficiaries for your half of the estate.

Beneficiary Protection Trust

Some beneficiaries should not control their inheritance, or at the very least need some assistance managing their inheritance.  A beneficiary might have significant disabilities that qualify them for government assisted programs like SSI, SSDI, Medi-Cal, or might have significant substance abuse issues, or event simply major financial problems.  For these beneficiaries a Special Needs Trust or Spendthrift Trust can be set up to manage the inheritance for the beneficiary’s lifetime.  This allows the beneficiary to receive the benefits of the inheritance without the burden or responsibility of managing the funds.

Retirement Trust

Retirement assets such as IRA’s, 401k’s and all their variations can often be the most significant asset that will be passed on to the next generation.  Yet without prudent planning beneficiaries can accidentally or intentionally destroy the stretch-out of the inherited retirement plan.  Additionally, the recent U.S. Supreme Court case, Clark vs Rameker, held that any asset protection you enjoy for your own retirement plan does not pass on to your beneficiaries.  The Stand Alone Retirement Trust addresses both of these problems by helping ensure a proper rollover of the asset and giving your beneficiaries the option of using the retirement account as a protected asset.  You can read more about the Stand Alone Retirement Trust here.


Every family is different, and their estate plan is going to reflect those differences of personalities and needs of beneficiaries.  While these five broad categories describe the most common options, there other strategies and options that your estate planning attorney can review with you.

Buried in Paperwork?  Suffolk County Probate & Family Court Dysfunction Causes Chaos

Buried in Paperwork? Suffolk County Probate & Family Court Dysfunction Causes Chaos

Missing files.  Unprocessed checks totaling several hundred thousand dollars in filing fees.  A procedural and paperwork mess that saw pleadings as far back as 2015 not docketed or scanned.  The legal system is complicated enough, but when clerks behind the counter can’t handle the paperwork, the system doesn’t function.  And unfortunately, that is exactly what happened in the Suffolk County Probate & Family Court in Massachusetts.

It was apparently an office already in trouble, the prior Register in charge of the office lost her seat after allegedly assaulting an employee after a holiday party.  In 2014, with a new Register, the situation didn’t improve.  The court brought in a temporary manager in October 2016 who found fifty bins of files scattered throughout the office.  They estimated that an average of 20-30 cases went missing on any given day.

In California, the court system went through a rough patch when the statewide budget cuts hit.  Things have improved, and overall thankfully, our local Sacramento office runs well.

Usually, when I discuss the probate process, and the reasons why you should avoid it, I assume a functional court.  Unfortunately, this story illustrates that isn’t always a safe assumption.

Source: Severe dysfunction alleged in Suffolk Probate, Boston Globe, March 17, 2017


If Your Trust Is the Beneficiary of Your IRA, It Could Cost Your Kids a Boatload

If Your Trust Is the Beneficiary of Your IRA, It Could Cost Your Kids a Boatload

If you have the wrong kind of trust, naming it as the beneficiary of your retirement account could cost your kids a lot in extra taxes.  How?  It happened because you’ve just forced your heirs to report the entire amount as income.

When you inherit a retirement account, several things change immediately.  The first is that the account will look at the new owner to re-calculate the measuring life on the account.  If they can see a person, they’ll use that person’s age.  This is called the “stretch out rule”.   But, if they just see an entity like most trusts that have no age, there is no stretch out, and the beneficiary will be forced to close out the IRA account and take the income tax hit.  If you have an ordinary trust, naming it as the beneficiary kills the possibility of a stretch-out.

The second big change when you inherit a retirement account is that there is no longer any early access penalty.  You could withdraw the entire amount, or something less, and the only consequence is that you will owe income tax on the distribution.  This is why the US Supreme Court in  Clark v. Ramiker decided that creditor protection laws do not protect inherited retirement accounts.

What about the right kind of trust?

The right kind of trust is specifically designed to handle retirement accounts, and meet the four requirements of a see-through trust outlined by the IRS.  A retirement trust allows you to preserve the stretch out for your beneficiaries, and put into place the plan and asset protection a trust can create.

Using this kind of trust, you can:

  • Help keep the IRA in the family, by avoiding having a child name his or her spouse as a beneficiary, and seeing the money go to that new spouse’s children
  • Protect the asset in case of a divorce
  • Manage the account for beneficiaries who are young children, elderly or disabled
  • Give direction and security for a beneficiary with poor money management skills

Unless you have the right kind of trust, don’t send your retirement funds there.  But do consider the benefits to your children of using the right kind of trust for your retirement funds.

Michael Jackson’s Intent or Opportunists – Court Sends Ex Business Partners Packing

Michael Jackson’s Intent or Opportunists – Court Sends Ex Business Partners Packing

It's 2006, Michael Jackson and his partners are meeting in a hotel.  Jackson promises his partners shares in his company for their loyalty.  Flash forward to today, and the business partners were in court, trying to get their agreement enforced against the estate.

The court had no problem sending them home empty-handed.  The problem?  Besides waiting 5 years after Michal Jackson’s death to file a claim against the estate, there was no writing backing up the agreement.

If you are making promises to your heirs, be sure to put those promises in writing.  If you don’t, you could be setting up future court fights as heirs try to reconcile what you told them with what you actually did.