Archive for June, 2016

Estate and Planning Documents Matter

In all the confusion of life, the “paper work” often gets set aside for “later.” But what if “later” happens now? Are you prepared?

Parts of the Estate: The things that make up a good plan, in our view, include:

  • Wills
  • Living Trusts
  • Living Wills / Medical Directives
  • Letters of Instruction
  • Durable Power of Attorney – Health Care
  • Durable Power of Attorney – Assets
  • Beneficiary Designations for Insurance and Retirement Accounts
  • Titling of Assets

While a detailed review of each part is beyond the scope of this blog post, we do want to make comment about wills, trusts and beneficiary designations.

Wills are often misunderstood. These are simply tools for the transfer of property from the deceased to the living survivors. They also designate guardianship of minor children. But a will is also subject to probate which is a court-supervised process that makes sure the assets go to the person(s) to whom they are intended.

Living trusts are designed to act as though you are still alive. These are tools that act in your place and direct the affairs of the estate. In conjunction with a will, a trust does not require court supervision since it is acting as if it were a living entity. This way the assets are controlled and distributed based on the wishes of the decedent.

Beneficiary designations are where many problems arise if everything else is in order. For example, if Jamie wants cousin Beth to be the beneficiary of her life insurance but Tom, her ex-spouse, is still listed as the recipient, the courts will more likely defer to the life insurance policy’s designated beneficiary in the absence of any other documentation to the contrary. That is regardless whether Jamie names Beth as the beneficiary in her trust. Typically how you title an asset is how the property will be distributed regardless of the wording in a trust documents.

So the lesson is – make sure everything is titled correctly and that the will, the trust and the beneficiary designations all match. You may think of this as a story in which all the characters and parts need to be following the same plot line.

For those going through separation in California, it is important to take notice that as of June 2009, the California Family Code, §2024 was amended to warn people of the traps and pitfalls that are often overlooked.

As of this writing, the section reads as follows. While these sound redundant, the first paragraph of each section applies to the rights of a spouse to your assets. The second paragraph refers to your rights to your spouse’s assets.

(a) A petition for dissolution of marriage, nullity of marriage, or legal separation of the parties, or a joint petition for summary dissolution of marriage, shall contain the following notice:

“Dissolution or annulment of your marriage may automatically cancel your spouse’s rights under your will, trust, retirement benefit plan, power of attorney, pay on death bank account, transfer on death vehicle registration, survivorship rights to any property owned in joint tenancy, and any other similar thing. It does not automatically cancel your spouse’s rights as beneficiary of your life insurance policy. If these are not the results that you want, you must change your will, trust, account agreement, or other similar document to reflect your actual wishes.

Dissolution or annulment of your marriage may also automatically cancel your rights under your spouse’s will, trust, retirement benefit plan, power of attorney, pay on death bank account, transfer on death vehicle registration, and survivorship rights to any property owned in joint tenancy, and any other similar thing. It does not automatically cancel your rights as beneficiary of your spouse’s life insurance policy.

You should review these matters, as well as any credit cards, other credit accounts, insurance policies, retirement benefit plans, and credit reports to determine whether they should be changed or whether you should take any other actions in view of the dissolution or annulment of your marriage, or your legal separation. However, some changes may require the agreement of your spouse or a court order (see Part 3 (commencing with Section 231) of Division 2 of the Family Code).”

(b) A judgment for dissolution of marriage, for nullity of marriage, or for legal separation of the parties shall contain the following notice:

“Dissolution or annulment of your marriage may automatically cancel your spouse’s rights under your will, trust, retirement benefit plan, power of attorney, pay on death bank account, transfer on death vehicle registration, survivorship rights to any property owned in joint tenancy, and any other similar thing. It does not automatically cancel your spouse’s rights as beneficiary of your life insurance policy. If these are not the results that you want, you must change your will, trust, account agreement, or other similar document to reflect your actual wishes.

Dissolution or annulment of your marriage may also automatically cancel your rights under your spouse’s will, trust, retirement benefit plan, power of attorney, pay on death bank account, transfer on death vehicle registration, survivorship rights to any property owned in joint tenancy, and any other similar thing. It does not automatically cancel your rights as beneficiary of your spouse’s life insurance policy.

You should review these matters, as well as any credit cards, other credit accounts, insurance policies, retirement benefit plans, and credit reports to determine whether they should be changed or whether you should take any other actions in view of the dissolution or annulment of your marriage, or your legal separation.”

Make sure you plans are in order…especially when there is a significant change in your circumstances.

 

By: Armand & Robbin D’Alo