Don’t Shy Away From Estate Planning – Estate Planning is for Everyone

The time is now: Especially during the pandemic when travel is limited and access to a loved one in a medical facility is restricted, estate planning is critical. It starts with an advance health care directive that can be obtained from the doctor or by a simple Google search. Without an advance health care directive, how will the people you love have the authority they need, and the instructions they will crave, to care for you?

It doesn’t matter what you have, it is about who you love: Estate planning is not always about money and usually those with less have more reason to get a plan in place. A failure to plan may mean that loved ones will be tied up in the court system wasting money seeking permission to take care of you or seeking permission and instruction on the distribution of your assets.

Money can’t get in the way: If you truly cannot afford an attorney (and please only work with an attorney who dedicates their practice to estate planning, not a lawyer who thinks it is an easy “profit center” for the law practice,) there are options for low-cost estate planning:
First, the state of California provides statutory forms for advance health care, durable power of attorney, and statutory wills. While these are not always the ideal solution, they are better than California’s default estate plan of (1) conservatorship, (2) distribution of your assets according to the “table of consanguinity”, according to the wishes of a judge who does not know you and (3) the placement of minor children where it is necessary and convenient.
Next: there are many terrific low-cost solutions for estate planning in the Bay Area.

Open Door Legal in San Francisco is the country’s first system of universal access to legal help.

HERA (Housing and Economic Rights Advocates) Their website says it all: “The is a racial and gender wealth gap in our country. HERA provides full service estate planning services on a sliding scale to help you keep what you have and protect yourself and family.”

The Bay Area Legal Incubator in Oakland is a community of solo attorneys dedicated to providing affordable legal services and promoting social justice. BALI provides lawyers with the support they need to start a successful solo practice, and in exchange, the lawyers provide access to legal services at lower costs, often on a sliding scale.

Five Considerations When Selecting a Guardian for Your Children

There is no question that having children changes everything – and estate planning is no exception. If you and your spouse pass away or become legally incapacitated, and arrangements were never made in the event of such an emergency, your minor child or children will have to be placed with a new family. Not surprisingly, such a drastic change can be a disruptive process for minor children – even if they are placed with members of your family. If you choose a guardian for your child in your will or other estate plan documents this difficult time can go much more smoothly.

Who Makes a Good Guardian?

A guardian for your minor child “steps into” your shoes in the event you can no longer care for him or her. No one wants this to happen, but when a parent becomes incapacitated or dies, the minor child left behind will need care. Because a guardian plays such an important role in your family’s life, there are several factors to consider when choosing someone to take on this role:

  1. Shared values. It is best to choose someone who has a common level of religious belief. For example, if you are not the religious type you may have objections to someone who would expect your child to join and regularly attend church.
  2. Parenting style. Whether you run a tight ship at home or prefer a laissez-faire approach to raising children, choosing someone who will continue in your style is likely the best fit.
  3. Involvement. Someone who travels all the time will not be able to regularly show up to your kids’ soccer games, gymnastics meets, band concerts, and live theater performances – an important part of being a guardian to your children.
  4. Energy level. Having the stamina to be able to keep up with your child – especially during the younger years – is an important factor.
  5. Other children. While a potential guardian who already has children should not be a deal-breaker, you should consider how adding more children into the family will affect the dynamic, particularly when it comes to the ages of the kids. 

Other Factors to Consider

In the same manner that you can choose different individuals to manage the estate’s finances and your minor children’s day-to-day needs, you can also choose more than one guardian for your kids. You may want to assign one guardian per child, depending on your family’s circumstances. That being said, setting up guardianship this way may result in your children being separated from one another, which is usually not a good outcome. Choosing someone who has the resources to care for your children – even if you have left money behind for their care – should also be a factor to consider. Finally, choosing someone who is young enough to be able to care for your child through his or her adulthood, as well as someone who is in good enough health to withstand the challenges of raising a child, are important factors that should be taken into account.

Once you have made a decision on who will be your child’s guardian, contact me. We can draft the documents you need in order to make this legally binding, as well as create an estate plan that suits your family’s needs and will protect your loved ones in the event you are no longer able to do so yourself.

[2/18/21 Zoom Meeting] Slouching Towards Huntsville – Effective Representation of Clients Who are Victims

Slouching Towards Huntsville – Effective Representation of Clients Who are Victims
Speaker: Richard J. Palenchar, Esq, Palenchar Law Firm APC

This presentation will cover:

  1. CA Penal Code § 679.01(b); TX Code of Criminal Proc. Art. 56.01 (1) – Debunking Victimhood
  2. CA Constitution Art. 1 § 28 (b) – Victims’ Bill of Rights
  3. The Unbearable Trial – 2” – Implicit Bias – Victim Impact Statement
  4. Related Civil Proceedings – Dangerous Condition – Criminal Activity
  5. Suffering & Psychological Resilience – Survivor’s Guilt
  6. Forgiving the Dead Man Walking
  7. Slouching towards Huntsville
  8. Kindnesses – Big and Small
  9. Resources

Please note this video is not offered for MCLE credit. We are only authorized to give credit to those who attend at the time of the presentation.

Common Misconceptions About Marital Trust Assets

Estate planning is complicated. California’s community property laws are complicated. It is easy to get confused because the rule is often contrary to what common sense indicates.

Generally, every penny you earn from labor during marriage is a shared penny. Assets you had before you married, inheritance and gifts you receive while married, and certain personal injury awards received during marriage are separate property.

Many believe that keeping their wages in a separate bank account means that they have separate property. Without a pre or post-nuptial agreement, they do not. Many believe that if they owned real estate before marriage that it remains theirs, even if they are using marital assets to pay down the mortgage. It is complicated.

Also important is understanding the effect of transferring an asset to a marital trust. A marital trust provides tax planning flexibility for a surviving spouse (if it is drafted properly) and avoids probate. It does not have any effect on the “characterization” of a property – how a court would allocate that asset in the event of divorce or a post-death dispute.

Common Misconceptions About Marital Trusts  

Many believe that transferring an asset to a joint revocable trust magically transforms each asset transferred into a marital asset. This is incorrect. Transferring an asset to a trust avoids probate, maintains privacy, provides control from the grave over how those assets will be distributed, and may provide asset protection for beneficiaries of irrevocable trusts eventually created after a grantor’s (trust creator’s) death.

Transferring assets to a marital trust does not mean they automatically become marital assets.

Here is some of the language contained in my revocable trusts.

(A) Community Property

Any community property transferred to the trust will retain its character as community property during our lives, to the same extent as if it had not been transferred to the trust.

(B) Separate Property

Separate property transferred to the trust will retain its character as separate property. The separate property of either of us, including the property’s income and proceeds from the property’s sale or exchange, will remain separate property. Each of us has the unrestricted right to remove all or any part of our separate property at any time.

(C) Marital Property Agreement Controls

If we have entered into or in the future enter into a marital property agreement, the terms of that agreement will control the characterization of property titled in the name of the trust.

Sometimes, clients are happy to have one trust that disposes of both their separate and their community property. Some clients prefer to have separate share trusts for their separate assets and prefer to work with a different attorney so that they do not need to discuss their preferences for trustees and beneficiaries.

How Do You Support Your Divorcing Clients?

Divorce is a hot topic lately. As couples emerged from quarantine in China in March, divorce rates spiked – and there no reason to assume the results will be any different here in California.

Assisting a divorcing client means assembling the right team of professionals. It is critical to assist a divorcing client in risk mitigation. They need individual umbrella insurance. They likely need a CDFA, a new financial advisor, or a money coach. They may need a realtor who specializes in divorcing clients. They absolutely and without a doubt need an estate planning attorney.

Generally speaking, before a divorce is filed, the parties can revoke their marital trust – following the rules and procedures set out in that particular trust. But once a divorce petition is filed with the court, the parties cannot revoke or amend that trust, they cannot take any assets out of a marital trust still in existence without a court order.

None of this means that a new estate plan cannot be created. A client must create a new durable power of attorney, advance health care directive, and guardianship nomination form. They can also create a new will and an individual trust for the distribution of their assets and the protection of their loved ones, specifically excluding their soon-to-be ex from control and inheritance.

How can we, as professionals, assist a divorcing client? By helping them spot the issues and act on them.

Considerations for a Successful Transition to Single Life for a Client

1.  Incapacity planning is critical. All of my clients know the story of Khloe Kardashian and Lamar Odom. Their divorce had not yet been finalized when he was temporarily incapacitated and in a coma. It appears that Khloe was still his health care proxy, and likely his agent under a durable power of attorney and the co-trustee of their marital trust. Would your client want their soon-to-be ex-spouse in charge of deciding whether they live or die and contemplating which outcome benefits them most? It is critical to create a new advance health care directive and durable power of attorney that gives someone they trust authority and instructions and specifically excludes their spouse from acting on their behalf in any matter.

2.  Create a new revocable trust. There is nothing stopping a divorcing client from creating a new revocable trust, and this is urgent if the client has young children or others who rely on the client for support. While one cannot transfer marital assets to an individual trust without a court order, this does not mean a client is helpless. A client might be able to use their separate property assets, such as post-separation wages, to purchase a life insurance policy to fund their individual trust for the benefit of their children. The individual trust should also list all of the assets a client believes they will obtain in the divorce on the schedules of the trust. Should the client pass away before or after the divorce is final but before they are able to transfer those assets to the trust, then a good estate planning attorney can petition the court on their behalf.

3.  The Importance of Independent Counsel. The attorney preparing an individual trust should NOT be the same attorney preparing the soon-to-be ex-spouse’s individual trust. I am aware that some attorneys do this (typically when they drafted the original marital trust). They ask their clients to sign conflict waivers. However, an estate planning attorney should not simply draft a document. An estate planning attorney is a counselor and an advocate for their client and must be wholly loyal to their client. If divorcing clients have the same estate planning lawyer, then how could that lawyer possibly be completely loyal to either client when. by definition, the clients are in conflict? For example, how could an estate planning attorney, considering the risk to their client should their ex pass away while support payments were still due, recommend to spouse A to have their family law attorney demand control over a substantial life insurance policy over spouse B (and have B pay for it) if that attorney also represents spouse B?

4.  Real Estate: Severing Joint Tenancies, Working with Realtors, Mortgage Considerations:

  • If a client holds title to real estate as joint tenants, if they die before the divorce is finalized then their soon-to-be ex will inherit the client’s half of the property. A client should speak with their family law attorney about the possibility of “severing” a joint tenancy, and with an estate planning attorney about creating an estate plan that will keep their share of the property out of their ex-spouse’s hands.
  • If the client anticipates that the real estate will be sold as part of the divorce decree, then it is also critical to ensure that they work with a realtor who understands the ethics and special circumstances of working with divorcing clients – such as restraining orders, sabotaging a sale, and wasting an asset.
  • If the client thinks they will be in the market for a new home it is critical that they work with an experienced mortgage broker with a proven track record of working with divorcing clients. They can provide excellent insight to a divorce attorney and a CDFA on how to structure a settlement to best present a client to a lender.

5.  Consider Insurance.  Your client is about to be single, which means they will be living in a one salary home. If they were unable to work, how would they cope? It is critical to investigate whether disability insurance is affordable and practical. Also, it is likely that their auto, home/renters, and umbrella policies are held jointly with the spouse. It is time to call an agent and obtain policies on the client’s own behalf to mitigate risk and protect their assets.

Do It Now: Name a Guardian for Your Child(ren)

We know it’s hard. Thinking about someone else raising your children can stop you in your tracks. It feels crushing and too horrific to consider. But you must. If you don’t, a stranger will determine who raises your children if something happens to you – your children’s guardian could be a relative you despise or even a stranger you’ve never met.

No one will ever be you or parent exactly like you, but more than likely, there is someone you know that could do a decent job providing for your children’s general welfare, education, and medical needs if you are no longer available to do so. Parents with minor children need to name someone to raise them (a guardian) in the event both parents should die before the child becomes an adult. While the likelihood of that actually happening is slim, the consequences of not naming a guardian are more than intense.

If no guardian is named in your will, a judge – a stranger who does not know you, your child, or your relatives and friends – will decide who will raise your child. Anyone can ask to be considered, and the judge will select the person he or she deems most appropriate. Families tend to fight over children, especially if there’s money involved – and worse – no one may be willing to take your child; if that happens, the judge will place your child in foster care. On the other hand, if you name a guardian, the judge will likely support your choice.

How to Choose a Guardian

Your children’s guardian can be a relative or friend. Here are the factors our clients have considered when selecting guardians (and backup guardians). 

  • How well the children and potential guardian know and enjoy each other
  • Parenting style, moral values, educational level, health practices, religious/spiritual beliefs
  • Location – if the guardian lives far away, your children would have to move from a familiar school, friends, and neighborhood
  • The age and health of the guardian-candidates:
  • Grandparents may have the time, but they may or may not have the energy to keep up with a toddler or teenager.
  • An older guardian may become ill and/or even die before a child is grown, so there would be a double loss.
  • A younger guardian, especially a sibling, may be concentrating on finishing college or starting a career.
  • Emotional preparedness:
    • Someone who is single or who doesn’t want children may resent having to care for your children.
  • Someone with a houseful of their own children may or may not want more around.

WARNING: Serving as guardian and raising your children is a big deal; don’t spring such a responsibility on anyone. Ask your top candidates if they would be willing to serve, and name at least one alternate in case the first choice becomes unable to serve.

Who’s in Charge of the Money

Raising your children should not be a financial burden for the guardian, and a candidate’s lack of finances should not be the deciding factor. You will need to provide enough money (from assets and/or life insurance) to provide for your children. Some parents also earmark funds to help the guardian buy a larger car or add to their existing home, so there’s plenty of room for extra children.

Factors to consider:

  • Naming a separate person to handle the money can be a good idea. That person would be the trustee in charge of the assets, but not the guardian of the children, responsible for the day-to-day raising of the children.
  • However, having the same person raise the children and handle the money can make things simpler because the guardian would not have to ask someone else for money.
  • But the best person to raise the children may not be the best person to handle the money and it may be tempting for them to use this money for their own purposes.

Let’s Continue this Conversation

I know it’s not easy, but don’t let that stop you. I’m happy to talk this through with you and legally document your wishes. Know that you can change your mind and select a different guardian anytime you’d like. The chances of needing the guardian to actually step in are usually slim (I always hope this is the one nomination that’s never actually needed); but, you’re a parent and your job is to provide for and protect your children, so let’s do this. Contact me now for an appointment and we’ll get your children protected.

What is the Difference Between Guardians and Trustees?

Should Your Child’s Guardian and Trustee Be the Same Person?

If you have overheard any discussion about estate planning, you have likely heard the words “guardian” or “trustee” tossed around in the conversation. When it comes to estate planning, who will be ultimately in charge of your minor child is an important decision that requires the consideration of many factors. Although there is no substitute for you as a parent, a guardian is essentially someone who steps in as a parent, assuming the parental role and raising the child through adulthood. A trustee, on the other hand, is in charge of managing the financial legacy that has been left behind for the minor. As a parent, you need to take into account the characteristics needed for each role.

Who Makes a Good Guardian?

When choosing a guardian, the top factor to consider is who is the best person that will love and raise your child in a manner that you would. This would include religious beliefs, parenting style, interest in extracurricular activities, energy level, and whether or not he or she has children already. Keep in mind that a guardian will provide day-to-day love, care, and support for your child. While the guardian you choose may be great with your children, he or she may not be great with money. For this reason, it may make sense to place the financial management of your minor child’s funds in the hands of someone else.

Who Makes a Good Trustee?

Not surprisingly, when choosing a trustee the most important characteristic is that he or she is great with finances. Specifically, the trustee must be able to manage the funds in accordance with your intent and instructions that are left in your trust. Consider whether he or she will honor your wishes. Likewise, should you choose to grant your successor trustee discretion in making financial decisions regarding the management of funds left behind you should ensure the individual’s decisions will be aligned with your intent. In short, you want to choose a successor trustee who will act in your minor child’s best interest within the limits you have set forth in your estate plan documents. If you choose two different people for the role of guardian and trustee, make sure to consider how the two get along as they will likely have to work together throughout your minor’s childhood and possibly into adulthood.

Seek Help to Make a Decision

While estate planning can be daunting, it does not have to be. Contact a knowledgeable estate planning attorney to help guide you through this process. We can explain your options and advise you on the best plan that will follow your wishes while at the same time meeting your family’s needs. 

Characteristics Of A Good Successor Trustee

Choosing the right successor trustee is critical. Clients often believe that a family member or friend who works in finance or the law is the perfect option, but they fail to take into consideration the interpersonal dynamics that are often the biggest part of a successor trustee’s job. Managing beneficiary expectations with administrative duties is not always an easy task. Clients may also seek to use the trust as a way to force “togetherness” by naming all of their children as co-trustees. This is often a recipe for disaster as childhood dynamics are often triggered at the loss of a parent. Honestly evaluating the interpersonal dynamics among the successor trustee, the beneficiaries, and the guardians of minor children is a critical component of an estate planning attorney’s work. Estate planning is not having a client fill out some forms and then sign some documents. It takes hours of conversation to understand who the clients truly love, trust, and can count on to respect their wishes and serve with grace if called upon to do so.

he De Fonte Law PC Successor Trustee Manual contains checklists and guidelines for the successor trustee of a revocable trust, including a surviving spouse. It can be used with any trust and is not specific to trusts drafted by De Fonte Law PC. This manual explains the duties and power of a successor trustee and provides handy checklists and tips for a successful trust administration. There is also a chapter entitled Tips on Working Successfully With An Attorney and Other Professional Advisors.

This manual will be provided to all new clients beginning in September 2020. Prior clients can purchase the manual for $200 and for non-clients the cost is $365.

Who Should Be Your Successor Trustee?

If you have a revocable living trust, you probably named yourself as trustee so you can continue to manage your own financial affairs, but eventually, someone will need to step in for you when you are no longer able to act due to incapacity or after your death. Your successor trustee plays an important role in the effective execution of your estate plan.

The Key Takeaways:

  • Because successor trustees have a lot of responsibility, they should be chosen carefully.
  • Successor trustees can be your adult children, other relatives, a trusted friend, or a corporate or professional trustee.

Responsibilities of A Successor Trustee

At Incapacity: If you become incapacitated, your successor will step in and take full control of your trust for you – making financial decisions involving trust assets, even selling or refinancing assets, and other tasks related to your trust’s assets. Since your trustee can only manage assets that the trust owns, it’s vitally important that you fully fund your trust. Your successor may also be involved in paying bills and helping to ensure you get the care you need.

After Death: After you die, your successor acts similar to an executor of an estate. The successor takes an inventory of your assets, pays your final bills, sells assets if necessary, has your final tax returns prepared, and distributes your assets according to the instructions in your trust. Like incapacity, the successor trustee is limited to managing assets that are owned by the trust, so fully funding your trust is vitally important.

Your successor trustee typically acts without court supervision, which is why your affairs can be handled privately and efficiently – and probably one of the reasons you have a living trust in the first place. But this also means it will be up to your successor to get things started and keep them moving along.

An Important Consideration

Your successor will be able to do anything you could with your trust assets, as long as it does not conflict with the instructions in your trust document and does not breach fiduciary duty.

It isn’t necessary for the successor trustee to know exactly what to do and when, because your attorney, CPA, and other advisors can help guide him or her, but it is important that you name someone who is responsible and conscientious.

Who Can Be Successor Trustees

Successor trustees can be your adult children, other relatives, a trusted friend, or a professional or corporate trustee (bank trust department or trust company). If you choose an individual, you should name more than one in case your first choice is unable or unwilling to act.

What You Need to Know:

Your successor trustee should be someone you know and trust, someone whose judgment you respect and who will also respect your wishes.

When choosing a successor, keep in mind the type and amount of assets in your trust and the complexity of the provisions in your trust document. For example, if you plan to keep assets in your trust after you die for your beneficiaries, your successor would have more responsibilities for a longer period of time than if your assets will be distributed all at once.

  • Consider the qualifications of your candidates, including personalities, financial or business experience, and time available due to their own family or career demands. Taking over as a trustee for someone can take a substantial amount of time and requires a certain amount of business sense.
  • Be sure to ask the people you are considering if they would want this responsibility. Don’t put them on the spot and just assume they want to do this.
  • Trustees should be paid for their work; your trust document should provide for fair and reasonable compensation.

Rest assured, I can help you select, educate, and advise your successor trustees. You are not alone. If you have any questions or concerns, please feel free to contact me.

[2/4/21 Zoom Meeting] COVID 19 Legislative Updates – Consolidated Appropriation Act 2021 (more free money)

COVID 19 Legislative Updates – Consolidated Appropriation Act 2021 (more free money)
Speaker: RONALD S. MOSS, Eckhoff and Company Certified Public Accountants
  1. California grants of up to $25,000 for Covid affected businesses
  2. Payroll Paycheck Protection Loans: Round 1 and Round 2
  3. Loan Forgiveness Explained
  4. Employer Retention Credit
  5. Deferred payment of Social Security Taxes
  6. Flexible Spending Account relief
  7. Dependent Care Flexible Spending Account relief
  8. Employer Student Loan Repayment

Please note this video is not offered for MCLE credit. We are only authorized to give credit to those who attend at the time of the presentation.