The Heart of Estate Planning

Top 5 Estate Planning Tips for the Newly Divorced

arpanalaw — Sat, 16 Feb 2013 06:39:08 +0000

I’ve been asked several times recently why a person needs to update their estate planning while going through a divorce. So I thought I’d post the top 5 reasons why divorce is a crucial time to review and update your estate planning documents.

Tip #1: Update your will immediately.
This may not be top-of-mind, but updating your will is extremely important if you are going through a divorce. Having your assets go to your ex can be like adding insult to injury…and can tie up your estate for years to come.

Tip #2: Update your life insurance policy and retirement beneficiaries.
Actor Dennis Hopper was in the middle of a highly contentious divorce when he died. Since he didn’t change his life insurance policy beneficiaries, his ex received the proceeds. Be sure to name new beneficiaries on your life insurance and retirement accounts so your ex doesn’t inherit your assets.

Tip #3: Do not wait until the divorce is final.
Contrary to popular belief, you do not have to wait until your divorce is final to update your estate planning documents. If your divorce is likely to drag on for months or even years, you can still protect your assets from your ex by updating your estate plan.

Tip #4: Revisit your choice of executor and trustee.
While your ex may become the legal guardian of any minor children if you die, he or she should not necessarily be named as executor of your will or the trustee of your children’s inheritance.

Tip #5: Update your Advance health Care Directive.
If you do not want your ex making decisions about your health care, you will need to update your Advance health Care Directive. This also applies to any other documents that name your ex as a decision maker, such as a Financial Durable Power of Attorney.

If you’d like to learn more about estate planning and asset protection, call our office today to schedule a time for us to sit down and talk. We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call us today at 925-201-3408, and mention this article.

The Fiscal Cliff Tax Deal: For Most of Us, It’s a Wash

arpanalaw — Fri, 18 Jan 2013 06:34:58 +0000

The American Taxpayer Relief Act of 2012 that Congress passed on New Year’s Day extended the Bush era tax cuts, but the benefits of those cuts for most American taxpayers will be offset by a 2% increase in payroll tax.
According to the Tax Policy Center, a nonpartisan Washington research group, less than 1% of American households will see an increase in income taxes this year. Here are the specifics of what the bill that President Obama signed into law on January 2 entails:
Income tax
The Bush era tax cuts were extended permanently for individuals making less than $400,000 annually and married couples earning less than $450,000 annually. Those making over these amounts will see the top tax rate increase from 35% to 39.6%.
The personal exemption phase-out (PEP) and itemized deduction limits (Pease) were extended, with a cap of $250,000 for individuals and $300,000 for married couples.
Tax rates for capital gains and dividends increased 20% for individuals earning more than $400,000 per year and married couples with annual income of $450,000.
The alternative minimum tax (AMT) exemption increases to $50,600 for individuals and $78,750 for married taxpayers filing jointly, and is permanently adjusted for inflation.
The charitable IRA rollover has been extended for one year. This means that those over the age of 70 1/2 with traditional IRAs can funnel their required minimum distributions to an IRS-approved charity. Those who waited until December 2012 to take their required minimum distribution have until the end of January to transfer those funds to a charity for 2012, but cannot make the contribution directly. You must contact the financial institution holding your IRA and request the donation.
Several individual tax credits – including those for college tuition, child tax credit and earned income tax credit – have been extended for five years.
Estate and gift tax
Good news here. The individual federal estate tax exemption stays at $5 million per individual, adjusted for inflation. Over that, a top tax rate of 40% applies. The annual gift tax exclusion limit is $14,000 for 2013, with a lifetime gift tax exclusion of $5 million.
Payroll tax
As expected, payroll taxes will increase 2% in 2013. The rate goes from 4.2% to 6.2% on the employee portion of Social Security contributions.
If you’d like to learn more about how the new tax laws will affect you, call our office today to schedule a time for us to sit down and talk. We normally charge $500 for a Family Wealth Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call today and mention this article.

The Holidays Are A Great Time To Check In On Your Aging Parents

arpanalaw — Sat, 08 Dec 2012 06:15:58 +0000

The holidays are a traditional time for multiple generations to gather together, and are also a perfect opportunity for adult children to perform a reality check on how their aging parents are doing health-wise as well as assess financial and medical planning issues.

The American Association for Long-Term Care Insurance provides these tips:
Check your elderly relatives’ home for potential fall hazards (loose rugs, electrical cords, etc). If there is unopened mail or unpaid bills lying around, it may be a sign they are having difficulty coping with everyday living.

Check the pantry and refrigerator to ensure it is well stocked. If a parent has lost weight or there is spoiled food around, this is a sign that they may need some additional help around the house.

Make a list of all your parents’ medications and get the phone numbers of their primary care physicians.

Be sure you have the license plate numbers of all vehicles in case one is stolen or your parent goes missing.

Talk to your parents about advance health care directives. If they don’t have one, help them find a Personal Family Lawyer® to talk to about creating these and other important estate planning documents. You might even consider offering an Advance Health Care Directive as a gift to an aging parent.

If you’d like to learn more about wills, living trusts, advance health care directives, financial powers of attorney, or any other aspects of estate planning, call our office today to schedule a time for us to sit down and talk. We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call or email us today and mention this article.

In fact, if you make an appointment during the month of December for your own estate planning, we will review and update your parents’ plan at no additional charge, as our way of wishing you and your family happy and stress-free holidays.

When The Unthinkable Happens…

arpanalaw — Mon, 12 Sep 2011 23:31:07 +0000

It’s “Date Night” Friday…

The one night a week when you and your spouse spend time together…talk about the week…have a nice leisurely dinner…just the two of you.

You’ve lined up a babysitter…

You left money for the pizza delivery guy and a list of contact numbers on the refrigerator door…right under the magnet you bought in Yosemite last summer…

You’ve got everything taken care of…

Except what happens to your children if the unthinkable happens and you never make it back home.

If you have minor children and you’re severely injured or worse in an accident, the police may have no choice but to place your children with Child Protective Services if they don’t have information or documentation indicating who you would want to care for your children.

Once the immediate situation has passed, your children could then be at the mercy of the “system”. There is no way the State can know who would be the best choice as a guardian for your children.

So…what do you need to do?

First, Put Your Guardianship Wishes in Writing

Just telling your chosen guardian that you want them to take care of your children is not enough. What you “said” is not legally sufficient and you could be placing your children at the mercy of the foster care system for a long period of time. You need to have a plan in place, written instructions, and the proper legal documentation in order to ensure that your wishes are followed and that everyone knows what those wishes are.

Another misconception is that if you name a guardian in your Will, that’s all you have to do.

Wrong.

A guardianship provided for in a Will only takes effect after you die. If you become incapacitated but are still alive, it means nothing.

Proper Documentation for Guardianship

A good, solid guardianship plan will allow you to choose guardians either on a permanent or temporary basis and leave instructions for those guardians so they know exactly what you want them to do and under what circumstances.

You need to have at least these documents in place at all times if you have minor children:

1. Legal documentation naming a short term or temporary guardian in case you become incapacitated for a short period of time, or in the interim between your death and the time your permanent guardian can arrive. The best option for this guardianship is someone close by that can take immediate custody of your children and keep them out of the court system. Make sure that you talk to these individuals about your plans and that they are willing to serve as temporary guardians. Have their names at the top of a contact list that is available immediately in the event you are not able to communicate. And always make sure they have a copy of the documents naming them as temporary guardians.

2. Legal documents naming permanent guardians. The same information applies for this document as for temporary guardianship papers. Make sure you talk to the people you select and that they have copies of these documents to provide to the court.

3. Make sure you have written instructions for anyone taking care of your children so they know exactly what needs to be done if something happens to you. Make sure they know who to call. Even if you’re leaving your kids with the 16 year old kid next door to babysit on Friday night, make sure she or he knows what needs to be done if the worst happens. And always have written instructions in place for the person or persons you choose as a guardian to tell them how you want your children to be raised.

4. Always have a Medical Authorization and Power of Attorney for your children, especially if you’re sending them to Grandma’s on their own. These documents will allow the person taking care of your children in your absence to make medical decisions that could be a matter of life and death.

Really makes you think, doesn’t it?

Verbal agreements will not hold up in court, so if that is the only plan you’ve made for your children if the unthinkable happens, you could be placing them at the mercy of the foster care system without even realizing it.

If all this has made you realize you would like to get your documents in order to make sure that your children and your property are taken care of, call us to schedule your Family Wealth Planning Session today. We can identify what you need to do to plan for your family’s future and answer any questions you have about an effective estate plan. Our Family Wealth Planning Session is normally $500, but this month I’ve made space for the next two people who mention this article to have a complete planning session with me at no charge. Call today and mention this article. 925-201-3408.

Are You Ready for the Cost of Long-Term Care?

arpanalaw — Fri, 17 Jun 2011 01:06:35 +0000

You’re young…

You’re healthy…

You’re self-supporting…

The idea of actually needing long-term care couldn’t be further from your mind.

But what if that changed overnight?

An accident…

A sudden illness…

An unexpected diagnosis…

Any number of things can take away your health and your independence.

Chances are very good that your regular health care coverage won’t cover the expense of long-term care.

And add to that the fact that statistically if you live beyond the age of 65, you are likely to spend an average of 2.5 years in a nursing home.

Don’t wait until you’re older to plan for any of these possibilities.

Now is the time to plan and this is what you need to know:

What Exactly Is Long-Term Care?

Long-term care is a number of broad range supportive medical, personal and social care you need to take care of basic living for an extended period of time. The care can be given in your home or in a specialized nursing facility.

What Can You Expect to Pay?

Long-term care averages about $200/day. If you spend one year in a nursing home, that works out to about $73,000 a year. Now imagine what it will cost for that average 2.5 years you can expect to spend in a nursing home.

And contrary to popular belief, Medicare does not cover those expenses. Medicare will pay for 100 days of care to recover from a specific illness or injury. That’s it.

One of the best things you can do to plan ahead is to purchase long-term care insurance.

What To Look For In Long –Term Care Insurance

Make sure you pick a carrier that will be around awhile. You probably won’t need to use your policy until you’re at least in your 70’s but you want the carrier you’ve chosen to still be around when you do need them.
Pick the right elimination period. The elimination period is the time between when you start receiving care and when your benefits kick in. Usually the longer your elimination period, the lower your annual premium. Since Medicare pays at least part of the first 100 days, you might want to consider having your benefits start after that first 100 days has expired.
Consider your current age. Most people buy long-term care insurance in their 50’s while they’re still healthy. The older you are when you buy the coverage, the higher your premium.
Decide how long you want the policy to pay benefits. The longer the period it pays, the higher your premium. The most popular choice for the coverage period is 5 years because that covers the average 2.5 year stay and still gives you some “wiggle room” if you need coverage beyond that point.
Think about how much you want your policy to cover per day. Check around with local long-term care facilities and see how much they cost per day. The cost will vary according to the care provided and your location. If you want to remain in your home, plan for a higher daily cost.
Make sure your policy takes inflation into account. Just like everything else, the cost of long-term care will continue to rise and will probably cost considerably more when you actually need the coverage. On average you should plan for an increase of about 5% per year.

Long-term care insurance is a great way to protect your assets and make sure that you have the help you need when you get older. There are a lot of options out there when it comes to insurance providers, benefits and costs.

Let us help you make the right financial decision for you and your family.

Schedule your Family Wealth Planning Session today. Our Family Wealth Planning Session is normally $500.00, but this month I’ve made space for the next two people who mention this article to have a complete planning session with me at no charge. Call today and mention this article.

The Family Business Succession Plan – An Important Piece of the Estate Planning Puzzle

arpanalaw — Fri, 01 Apr 2011 21:18:04 +0000

Do you own a family business?

If so, you have plenty of company. More than 90% of U.S. businesses are family businesses. Out of the Fortune 500, 150 are family businesses.

Now, would you like to hear some really startling statistics?

Only 30% of family businesses will survive into the family’s second generation, 12% to the third generation and only 4% last to the fourth generation.

Scary statistics, aren’t they?

All the blood, sweat and tears you put into building the family business…just gone…..

Wondering how this happens?

The number one reason is lack of family business succession planning.

You can probably avoid many of the problems that can take your family business under with sound estate planning that takes family business succession plans into account.

Here are a few things you need to think about:

What Happens When You Give Up Control?
Plan your retirement around not having income from the business. That will keep your financial well-being separate from that of the business and it will be easier for you to turn over control of the company you built. It will make the company and you much healthier financially. Talk to your estate planning attorney and plan your retirement now so that you are no longer dependent upon the company for income when you retire.

Who Takes Over?
Does your entire family work in the business? Have you groomed one of your children to take over? How do the other siblings feel about that? Consider what will happen if you leave one child in charge of the business and others in charge of assets the company relies on. This can bring old childhood resentments to the forefront if siblings feel that one has been favored over the others. If all your assets are tied together and there is no harmony between the various controlling parties, your company and your family could be destroyed.

Have You Planned for a Management Transition?
Once you retire to play golf in Florida, who will manage the company? Will management consist wholly of family members or do you have employees in key positions who can take over? Have you discussed the possible management structure with your family? Make planning a smooth management transition a part of your estate planning process. The two are not totally separate processes if you own a family business.

How Do You Handle the Transfer of Assets?
This is an integral part of your estate plan and your family business succession plan. Will the transfer of assets take place with lifetime sales/gifts/transfers or will the ownership of the company be transferred only upon your death. You need to ensure that you have enough liquid assets left for you and your spouse to live on in retirement without putting the company into bankruptcy.

Many families just don’t want to deal with these issues. But dealing with issues as complex as these in a moment of crisis when you die or are rendered unable to make decisions by some illness or injury can mean disaster for your company. Taking them into account while everyone is able to focus on what is and isn’t important, and looking at the big picture for the survival of your family business, will make everyone’s life easier. A little painful introspection and thoughtful planning now will allow even your great- grandchildren to enjoy the fruits of your labor.

Call us to schedule your Family Wealth Planning Session today. Our Family Wealth Planning Session is normally $500.00 for a two-hour meeting, but this month I’ve made space for the next two people who mention this article to have a complete planning session with me at no charge. Call today and mention this article. 925-201-3408. Or send an email, mentioning the article, to arpana@arpanalaw.com. Either way, act soon to receive your free Family Wealth Planning Session.

The Kindness of Being Prepared

arpanalaw — Sat, 26 Mar 2011 21:48:14 +0000

Nursing homes…
Assisted living centers…
At-home assistance…
These are all options for medical care when we age and can no longer care for ourselves alone.
But there is one more approach for medical care for those facing a terminal illness – hospice care.
More than just a place to receive medical care for terminally ill patients, hospice really describes an approach to medical care for patients nearing the end of life.
The prospect of facing a terminal illness can be truly daunting for both you and your family members. Planning ahead for hospice care and making your wishes known can be one of the kindest things you can do for your family.
What Exactly Is Hospice Care?
Many people think of hospice as a place to go for care rather than a system of care. Hospice is more a shift in treatment to keep the patient comfortable rather than trying to cure their terminal illness.
Hospice care can be administered at assisted living centers, in nursing homes, hospice centers, etc., but 80% to 90% of hospice services are provided in the patient’s home. The technology is now available to allow health care professionals to treat the patient’s symptoms in the comfort of their own home. Some of the services provided by hospice include:
- Pain and symptom management
- Drugs, medical supplies and equipment
- Training for caregivers
- Arrangements for respite care when the family caregiver needs to be away
- Help with day-to-day chores and activities
- Counsel with end of life decisions
- Speech, physical and occupational therapy
And after the patient has died, hospice often offers counseling services to the loved ones left behind.
If I Choose Hospice Care, What Do I Need to Do?
If you elect to take advantage of hospice services, the kindest thing you can do for your family is to advise them of the decision. Then you need to make sure your estate planning documents are in order so that if you reach a point where you can no longer make decisions, your affairs are arranged so that your family knows exactly what to do.
Some of the documents you need to have in place are:
- Durable Power of Attorney for Financial Matters to give someone you trust legal authority to make decisions for you if you are no longer able to make them yourself. It also allows them to tend to your financial affairs, such as paying bills, paying taxes, handling real estate transactions, if you are no longer able to do so. If you fail to give someone authority to handle these matters and your health takes a sudden turn for the worse, you can lose access to valuable assets.
- Advance Health Care Directive allows someone to make medical decisions for you if you are no longer able to do so. You really need to have this document in place. Just because you have been married for 60 years, your spouse does not automatically have this decision making power. The law assumes that if you did not give this power to them, you did not want them to have it. Failing to appoint someone to make medical decisions and not telling them exactly what those decisions should be can cause your loved ones a great deal of undue stress, conflict and turmoil.
- Current Wills and Trusts are vital to ensuring that your estate is handled exactly as you would like. Make sure your will and any trust documents are up to date before you reach a point where you are no longer able to make decisions or make your wishes known. For example, what would happen if you were in hospice and your healthy spouse suddenly died. If you have a will that leaves everything to your spouse in the event of your death, you could have a problem and not be physically able to make the correction. Make sure your will is current as soon as you elect hospice care.
- Make sure your property is titled correctly. Review your property titles with a qualified estate planning attorney. If the titles to your real estate holdings are not done properly, your loved ones could spend months going through a costly probate process. It can also affect whether or not you can go into a nursing home if you can no longer be treated at home.
- Long Term Care is a subject you will have to research to determine what is available in your state. You may be eligible for benefits from federal or state programs. You will need to talk to a qualified estate planning attorney to see what’s available in your area and start the application process. Don’t try to go this alone. Enlist the aid of someone familiar with the process and you’ll save time and aggravation.
Hospice care can make the prospect of facing a terminal illness easier for everyone involved, especially if you plan well ahead of time. If you think you might want to take advantage of hospice care if or when the time comes, talk to your estate planning attorney and make sure you’ve laid the proper ground work. Planning ahead so that your loved ones aren’t faced with these choices when they’re already dealing with your illness can be one of the kindest things you can do for them.
Call us to schedule your Family Wealth Planning Session today. Our Family Wealth Planning Session is normally $500.00, but this month I’ve made space for the next two people who mention this article to have a complete planning session with me at no charge. Call today and mention this article.

Happy New Year To All!

arpanalaw — Tue, 04 Jan 2011 00:11:40 +0000

May 2011 bring your highest aspirations into being. May your joy know no bounds. May your loved ones thrive. May you grow and prosper without limit.

One item of advice for the New Year: don’t sit back and wait for it to all happen. Make it happen! Yes, our attitude is all-important, but after attitude and belief comes action. We change our attitude, we embrace positive beliefs, and then we take action consistent with that new attitude and those beliefs. It all works together, and in the end it’s the combination of all – attitude, belief and action – that create our reality, the day-to-day world we inhabit. Let’s make this year – 2011- be the year in which our attitudes and our beliefs become manifest in our actions, to create a peaceful, loving and prosperous world for all.

Imagine a world in which everyone has enough to eat, a warm and secure place to sleep, and the safety of living in a world without violence. Now let’s all create that world.

Happy New Year.

WISHING YOU THE HOPE, PEACE, AND JOY OF THE HOLIDAYS.

arpanalaw — Thu, 09 Dec 2010 22:56:16 +0000

Winter holidays (Christmas, winter solstice, Hannukah, Kwanzaa, whatever you choose to celebrate) can be a wonderful time to gather together with friends and family and keep each other warm through the long nights of winter. Even through the barrage of commercial messages our culture generates, we have held on to that deep sense of inner knowing that these holidays are special, and peaceful, and powerful.

The winter holidays are about the birth of Hope, of Peace, and of Joy. They are NOT about the spending of our hard-earned money to give useless gifts to people who most often don’t really want or appreciate more things they don’t need.

What we all agree on is that we need more hope, more joy, more peace.

So let’s come together this holiday season. Really. Not just talk, not just sentiment. Each and every one of us. Pray for peace in whatever tradition you follow. Pray for peace, meditate for peace, surrender to peace. With our prayers will be born hope in our hearts, and out of that hope will grow a deep and quiet joy that will take us to a new level of awareness of the Peace that passes all understanding, that is right here in our hearts, right here in our midst, all the time, if we just have the eyes to see and the ears to hear it.

Look and listen. Experience the hope, joy, and peace of this season, within your own heart, and know that this is the most precious gift you can give to the world.

Happy and peaceful holidays to each and every one of you.

Should You Have a Living Trust? Or Is A Will Enough?

arpanalaw — Tue, 06 Apr 2010 04:57:13 +0000

The sister of a friend wanted to know why she and her husband should have a trust instead of just simple wills. These are very well-educated people, with good jobs, homeowners, with some retirement savings. Their children are grown and they have a few grandchildren. The total value of their joint estate at present is estimated to be around $1.5 million. I wrote a reply to their questions, and then realized my reply was my next blog post. The question is one I am asked so frequently, and the answer, at least in my mind, is so clear. Both from a financial standpoint, as well as an ease of administration standpoint, a living trust estate plan meets so many people’s needs so much better than passing property through a will through the probate process. Here is my answer to my friends, on why they should have a living trust instead of just a will:

First, off, as between spouses, with or without a trust, there is no probate on the death of the first spouse as to any jointly-owned (community or joint tenancy) property. The surviving spouse just gets it all, without any administration. However, if either spouse has separate (as opposed to community) property, there is a “simple” probate procedure for that property to transfer to the surviving spouse. Even a very simple spousal probate will cost $5,000 or upwards (I just finished one of these for a client whose husband left all his separate property to her in his will. It cost her close to $6,000, and I’m a pretty inexpensive lawyer!).

On the second death, if there is no trust, all property passing to heirs does go through probate on an estate of this size, except for life insurance proceeds and other accounts that have named beneficiaries. The size of estate not requiring probate is minimal ($100,000 maximum gross estate value, only $30,000 of which can be real estate). Fees for “regular” probate are based on a sliding scale percentage of the total gross value of the estate (not taking into account any mortgages or loans on property). For an estate with a gross value of around $1,500,000.00, probate will cost your heirs around $25,000.00 in attorney’s fees, plus filing fees and real property appraisal fees, for close to another $1,000.00.

A revocable living trust estate plan for a married couple should cost you around $2,000.00 to $2,500.00 to set up and fund. That cost should include grant deeds to transfer your real property into the trust, and also should get you each a will (still needed to cover those minimal assets that don’t go into a trust, and deal with things like cremation vs. burial, etc.), a Financial Durable Power of Attorney, and an Advance Health Care Directive. That is a LOT less money to spend, for a lot more protection. It will completely bypass the probate courts, and on the death of the surviving spouse, your successor trustee can just transfer the property out of the trust to your designated beneficiaries. Also, trusts are private documents. Probate filings are public record. Everything filed in a probate proceeding is available for anyone to find and scrutinize, as opposed to trust documents, which are not recorded or filed anywhere.

Another advantage of having a trust is that, if you become incapacitated, your successor trustee can immediately begin to act as trustee and manage your assets on your behalf. This is especially helpful for the surviving spouse, as well as for single people.

Another issue is federal estate taxation. As of this year, there is no need to be concerned about federal estate taxes, as the tax is repealed for this one year only. However, in 2011 the federal estate tax threshold is scheduled to return to $1 million per person. That’s gross estate, not taking into account any debt on the property. That means anything over $1 million will be taxed at a top rate of 55%. Even if your total estate is less than that right now, if property values again start to rise, it could go over that threshold very easily. The marital trust can preserve the estate tax exemption of the first spouse to die, until the second death, effectively doubling your exemption, creating a tax exemption of $2 million on the second death, instead of $1 million.

People have been speculating for years about what the legislature will do with the estate tax. So far, the legislature has defied all speculations. So, while many people still speculate about how the legislature is going to change the federal estate tax exemption, and based on that speculation give advice about what kind of estate plan to create, the fact remains that this is how it stands now, until it is changed by the legislature, and there is presently no bill before them to change it.

The bottom line is, having a living trust estate plan will save you and your family a lot of time and money, and allow you and your family some security and peace of mind regarding how your estate will be transferred on your death. That’s worth a lot, in my opinion.