Be Aware of Probate

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Probate is the legal process that happens after a person dies without a proper estate plan. The court accepts the deceased’s last will, and then the executor can carry out the instructions for the deceased’s estate. However, first he or she must pay any debts and sell assets before distributing any remaining property to the heirs.

If the deceased doesn’t have a will, the probate court will appoint an administrator to manage the probate process, and the court will supervise the process. The Million Acres article entitled asks, “Probate Explained: What Is Probate, and How Does It Work?”

When the will is proven to be legal, the probate judge will grant the executor legal rights to carry out the instructions in the will.

When there’s no will, the probate process can be complicated, because there’s no paper trail that shows what assets belong to what heirs. Tracking down heirs can also be challenging, especially if there’s no surviving spouse and the next of kin is located in a different state or outside the U.S.

Many executors will partner with a probate attorney to help them through the probate process, as well as to assist in filing the required paperwork, notifying creditors, filing taxes and distributing assets. The deceased’s assets must first be located and then formally appraised to determine their value.  Creditors must also be notified after death within a specified period of time.

After the creditors, taxes and fees have been paid on behalf of the estate, any leftover money or assets are distributed to the heirs.

The probate process can be lengthy. Things that can lengthen the process include the state when the deceased was a resident, whether there is a will and whether it is contested by the heirs. The more detailed the will, the simpler the probate process.

The probate process can be expensive, because of court filing fees, creditor notice fees, appraisal fees, tax preparation and filing fees and attorney fees. All of these fees are subtracted from the proceeds of the estate.

Estate planning with a qualified estate planning or elder law attorney involves taking the proper actions to avoid probate. This can reduce the burden for the surviving heir(s) and reduce costs, fees and taxes. Ask your attorney about some of the steps you can take before death to avoid probate.

Reference: Million Acres (Jan. 17, 2020) “Probate Explained: What Is Probate, and How Does It Work?”

The High Cost of Medicare Mistakes

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A 68-year-old woman knew that she had to sign up at age 65 for Medicare Part A for hospital care and Part B for outpatient care, since she did not have employer-provided health insurance from an employer with 20 or more employees. She knew also that if she did not have health insurance from an employer and didn’t sign up immediately, she’d face a penalty with higher Part B and Part D premiums for the rest of her life when eventually she did sign up, reports Forbes in the article “Beware Medicare’s Part B Premium Penalty And Surcharge Traps.”

Here’s where it got sticky: she thought that Medicare provided an eight-month special enrollment period after one job ended to apply penalty-free. She is employed on a sporadic basis, so she thought she had a window of time. Between the ages of 65 and 68, she had several jobs with large employers and was never out of work for more than eight months.

She was out of work for 25 months total between ages 65 and 68, when she was not enrolled in Medicare. She thought that since she was never out of work for more than eight months, she didn’t have to sign up until she officially stopped working and would then enroll penalty-free in traditional Medicare Parts A, B, and D.

She had read information on the Medicare website and her interpretation of the information was wrong. It was a costly mistake.

In determining whether you need to permanently pay a Medicare Part B penalty, Medicare counts up all the months between age 65 and the month you first enroll in Part B, even if you have a job with a large employer with no gaps in employment for more than eight months.

She got hit with a 20% lifetime Medicare Part B premium penalty. For every 12 months that you’re not covered by Medicare B after reaching 65 and before you enroll, the penalty is an additional 10%. And making things worse, she was hit with a Medicare Part B penalty based on the cumulative (not consecutive, which is an important difference) 25 months that she went without credible prescription drug coverage.

This is the sort of problem that does not self-resolve or get better over time. In this case, another mistake in timing is going to hurt her. She sold some assets and realized a capital gain in 2018, which increased her Modified Adjusted Gross Income (MAGI). In 2020, she’s going to have to pay the Income Related Monthly Adjustment Amount (IRMAA). If your MAGI, two years before the current year, is less than $87,000, you are exempt from IRMAA in the current year. Her cost: $1,735.20 more this year. Had she instead realized those capital gains over the course of several years, her 2018 MAGI might not have crossed the $87,000 threshold. Most people are not aware of the IRMAA and take capital gains in larger amounts than they need.

This is a harsh lesson to learn, at a time in life when there’s not a lot of flexibility or time to catch up. Talking with an estate planning lawyer about Medicare and about tax planning, as well as having an estate plan created, would have spared this woman, and countless others, from the harsh consequences of her mistakes.

Reference: Forbes (Jan. 29, 2020) “Beware Medicare’s Part B Premium Penalty And Surcharge Traps”

FREQUENTLY ASKED QUESTIONS

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1. Are you still open?

Yes!  We are open during our normal hours as follows:

Monday -Thursday                 9:00 am to 5:00 pm

Friday                                        9:00 am to 12:00 pm

Saturday-Sunday                    Closed

 

2. Is anyone in the office?

The majority of our staff are working from home, but we are still answering phones and conducting meetings virtually.  When it is necessary for our staff to be in the office, we are practicing social distancing and working hard to adapt and maintain best practices as we become informed.

Our goal is to keep providing you with excellent service while we all navigate the new circumstances with COVID-19.

 

3. Can I get my estate plan done?

Yes, we are still preparing estate plans and working on a signing procedure that will allow you to get your complete estate plan done from the comfort of your own home. There are options for how to still get your estate plan done and we can help you navigate the choices that work the best for you.

 

4. Do you have any availability?

Absolutely! If you call our office during regular business hours, we will return your call promptly. If you call after hours, we will return your call the next business day. The staff and attorney will continue to take consults and have meetings via phone as needed to help you get the legal services you need.

 

5. What documents do I need?

This is best answered by the attorney after you have a conversation about your goals. Everyone’s situation is personal to them, so we recommend reviewing our past blog posts on various types of documents available and speaking with one of our attorneys to discuss what may be ideal for you.

 

6. What should I be doing right now?

Information on best practices for COVID -19 is updated frequently.  To help you stay up to date on the latest information from local, state, and federal guidance we have created links to important websites below:

Placer County COVID-19 guidance

Sacramento County COVID-19 guidance

California COVID-19 information page

California Secretary of State information page

Center for Disease Control (CDC) COVID-19 information page

 

When you are ready you can request a consultation here.  Or call us at 916.625.6556.

Five Estate Planning Mistakes to Avoid

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While it’s true that no estate is completely bulletproof, there are mistakes that people make that are big enough to walk through, while others are more like a slow drip, draining retirement finances in a slow but steady process. There are mistakes that can be easily avoided, reports Comstock Magazine in the article “Five Mistakes to Avoid When Planning Your Estate.”

  1. Misunderstanding Estate Law. Some people are so thrown by the idea of an estate plan, that they can’t get past the word “estate.” You don’t need a mansion to have an estate. The term is actually used to refer to any and all property that a person owns. Even modest people need a plan to help beneficiaries avoid unnecessary costs and stress. Talk with an estate planning attorney to learn what your needs are, from a will to trusts. Make sure that this is the attorney’s key practice area. A real estate or personal injury attorney won’t have the same knowledge and experience.
  2. Getting Bad Advice. It takes a team to create a strong estate plan. That means an estate planning attorney, a financial advisor and an accountant. Be wary of firms that focus entirely on selling trusts. There’s definitely a role for trusts in estate plans, but there are many other tools that are needed. Buying an insurance policy or an annuity is not an estate plan.
  3. Naming Yourself as a Sole Trustee. Naming yourself as a sole trustee puts you and your estate in a precarious position. What if you develop Alzheimer’s or are injured in an accident? A trusted individual, a family member, a longstanding friend or even a professional trustee, needs to be named as a backup trustee to protect your interests if you should become incapacitated.
  4. Losing Track of Assets. Without a complete list of all assets, it’s nearly impossible for someone to know what you own and who your heirs may be. Some assets, including retirement funds, life insurance policies, or investment accounts, have named beneficiaries. Those people will inherit these assets, regardless of what is in your will. If your heirs can’t find the assets, they may be lost. If you don’t update your beneficiaries, they may go to unintended heirs—like ex-spouses. Your attorney should help you compile that list to make sure that your successor agents and beneficiaries are informed.
  5. Deciding on Options Without Being Fully Informed. When it comes to estate planning, the natural tendency is to go with what we think is the right thing. However, unless you are an estate planning attorney, chances are you don’t know what the right thing is. For tax reasons, for instance, it may make sense to transfer assets, while you are still living. And for other reasons, it might be best to wait until you pass to transfer the assets. However, that might also be a terrible idea, if you choose the wrong person to hold your assets or don’t put them in the right kind of trust.

Estate planning is still a highly personal process that depends upon every person’s unique experience. Your family situation is different than anyone else’s. An experienced estate planning attorney will be able to create a plan and help you to avoid the big, most commonly made mistakes.

Reference: Comstock Magazine (Dec. 2019) “Five Mistakes to Avoid When Planning Your Estate” 

Aretha Franklin’s Niece Resign as Executor

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Sabrina Owens, the niece of soul singer Aretha Franklin, recently announced her resignation as executor in court filings, stating: “Given my aunt’s love of family and desire for privacy, this is not what she would have wanted for us, nor is it what I want … I hope that my departure will allow the business of the estate to continue, calm the rift in my family and allow me to return to my personal life.”

Rolling Stone’s recent article entitled “Aretha Franklin’s Niece Resigns as Estate Executor” reminds us that Franklin died in August of 2018, and, because she reportedly was intestate, Michigan law states that her assets are to be distributed equally among her four sons. Her sons agreed upon Owens as executor, but new family politics came up last May after three wills allegedly authored by Franklin were discovered in a notebook under some couch cushions.

“That is when relationships began to deteriorate with the heirs,” Owens wrote of the discovery of the wills. She added that she accepted the executor role on the condition that “no fractured relationships develop within the family” and that the family “did not end up in court disputes over disagreements with the Estate.” Both, Owens wrote, have happened.

Owens’ resignation, however, will not become effective immediately. Instead, she will keep serving as executor for the immediate future. It’s also unknown who will be appointed executor after she does leave.

Franklin’s youngest son, Kecalf, has attempted to gain control since one of the documents from 2014 appears to state that Franklin wanted him to take on that role (in August, a probate judge approved Kecalf’s request to have a handwriting expert analyze the documents that were found).

Although Kecalf has the support of his brother Edward, his plan is opposed by Franklin’s third son, Ted White, as well as the guardian for her eldest son, Clarence, who has special needs.

A hearing on the future of the estate is scheduled for early this spring.

The ongoing battles surrounding Franklin’s estate continue, as it gets ready for two significant posthumous projects: one is a biopic movie starring Jennifer Hudson, “Respect.” The other is an installment in the biographical anthology series, “Genius,” with Cynthia Erivo playing Franklin (both are currently in production).

In the last year, Owens, as executor, oversaw the release of the documentary, ‘Amazing Grace,” while at the same time managing the estate’s complicated finances, including $6.3 million owed to the IRS in back taxes.

Reference: Rolling Stone (Feb. 3, 2020) “Aretha Franklin’s Niece Resigns as Estate Executor”

What Happens If I Don’t Have an Estate Plan?

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It’s so much better to have an estate plan than not to. With a will and/or trust, you can direct your assets to those whom you wish to receive a legacy, rather than the default rules of the State of California. This is according to a recent article in the Houston Chronicle’s entitled “Elder Law: Will you plan now or pay later?”

You should also designate an independent financial agent (known as an executor, power of attorney and trustee). You may want to have an estate planning attorney create a special trust to provide for family members who are disabled, along with trusts for minors and even adult children.

Here are three major items about which you may not have considered that may require changes to your estate plan or motivate you to get one. Years ago, the amount a person could leave to beneficiaries (the tax-free exemption equivalent) was much lower. You were also required to either use it or lose it.

For example, back in 1987 when the exemption equivalent was $600,000 per taxpayer, a couple had to create a by-pass trust to protect the first $600,000 upon the first to die to take advantage of the exemption. The exemption is $11.58 million in 2020, and the “portability” law has changed the “use it or lose it” requirement. There may still be good reasons to use a forced by-pass trust in your will, but in some cases, it may be time to get rid of it.

Next, think about implementing planning to have some control over your assets after you die.

You could have a heart attack, a stroke, or an unfortunate accident. These types of events can happen quickly with no warning. You were healthy and then suddenly a sickness or injury leaves you severely disabled. You should plan in the event this happens to you.

Why would a person not take the opportunity to prepare documents such as powers of attorney for property, powers of attorney for health care, living wills, and medical privacy documents?

It’s good to know that becoming the subject of a court-supervised conservatorship proceeding is a matter of public record for everyone to see. There is also the unnecessary expense and frustration of a guardianship that could’ve been avoided if you’d taken the time to prepare the appropriate documents with an estate planning or elder law attorney.

Why would you want to procrastinate making an estate plan and then die suddenly without ever taking the time to make your will? Without valid estate planning documents, like a trust, your family will have to pay more for a costly probate proceeding.

Reference: Houston Chronicle (Jan. 16, 2020) “Elder Law: Will you plan now or pay later?”

C19 UPDATE: Tax Filing Deadline Extended to July 15

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There has been some confusion about the tax filing/tax payment deadline extensions. On Friday, March 20 we got clarity that both the filing and the payment deadlines have been extended from April 15 to July 15 giving all taxpayers and businesses additional time to file and make payments without interest or penalties.

If you are expecting a refund, however, the Treasury Department encourages you to go ahead and file as soon as possible – the sooner you file, the sooner you will get your refund.

Resource: Tax filing deadline moved to July 15, the latest measure to battle coronavirus downturn, The Washington Post, March 30, 2020

Get a Medical Power of Attorney Now

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If you have not yet named someone with Medical Power of Attorney, stop procrastinating and get this crucial planning in place now.

What is a Medical Power of Attorney?

A medical power of attorney (also known as an Advance Healthcare Directive) is a legal document you use to give someone else the authority to make medical decisions for you when you can no longer make them yourself.  This person, also known as an agent, can only exercise this power if your doctor says you are unable to make key decisions yourself.

Other Terms for Medical Power of Attorney

Depending on the state where you live, the medical power of attorney may be called something else. You may have seen this referred to as a health care power of attorney, an advance directive, advance health care directive, a durable power of attorney for health care, etc. There are many variations, but they all mean fundamentally the same thing.

Be aware that each state has its own laws about medical powers of attorney, so it’s important to work with a qualified estate planning attorney to ensure your decisions will be enforced through legally binding documents. Also, some states may not honor documents from other states, so even if you made these decisions and created documents in another state, it’s wise to review with an estate attorney to ensure they are legally valid in your state now.

What Can My Medical Agent Do for Me?

Just like there are many different terms for the medical power of attorney, there also are different terms for the medical agent – this person may be referred to as an attorney-in-fact, a health proxy, or surrogate.

Some of the things a medical POA authorizes your agent to decide for you:

  • Which doctors or facilities to work with and whether to change doctors
  • Give consent for additional testing or treatment
  • How aggressively to treat
  • Whether to disconnect life support

We are ready to help walk you through these decisions, understand the ramifications of your choices, and memorialize your plans in binding legal documents. We are currently offering no-contact initial conferences remotely if you prefer. Book a call now and let us help you make the right choices for yourself and your loved ones.

Some Estate Planning Actions for 2020

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Many of us set New Year’s resolutions to improve our quality of life. While it’s often a goal to exercise more or eat more healthily, you can also resolve to improve your financial well-being. It’s a great time to review your estate plan to make sure your legacy is protected, especially if you are home and have some time to think about your finances and your family.

The Tennessean’s recent article entitled “Five estate-planning steps to take in the new year” gives us some common updates for your estate planning.

Schedule a meeting with your estate planning attorney to discuss your situation and to help the attorney create your estate plan.

You should also regularly review and update all your estate planning documents.

Goals and priorities change, so review your estate documents annually to make sure that your plan continues to reflect your present circumstances and intent. You may have changes to family or friendship dynamics or a change in assets that may impact your estate plan. It could be a divorce or remarriage; a family member or a loved one with a disability diagnosis, mental illness, or addiction; a move to a new state; or a change in a family business. If there’s a change in your circumstances, get in touch with your estate planning attorney to update your documents as soon as possible.

Federal and state tax and estate laws change, so ask your attorney to look at your estate planning documents every few years in light of any new legislation.

Review retirement, investment, and trust accounts to make sure that they achieve your long-term financial goals.

A frequent estate planning error is forgetting to update the beneficiary designations on your retirement and investment accounts. Thoroughly review your accounts every year to ensure everything is up to snuff in your estate plan.

Communicate your intent to your heirs, who may include family, friends, and charities. It is important to engage in a frank discussion with your heirs about your legacy and estate plan. Because this can be an emotional conversation, begin with the basics.

Having this type of conversation now can prevent conflict and hard feelings later.

Reference: Tennessean (Jan. 3, 2020) “Five estate-planning steps to take in the new year.”

Seriously, Why Do I Need a Will?

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The Times Herald-Record’s article “55 Plus: Four Reasons to Create a Will” provides some tips and important reasons for why you should make a will.

When you create a will with the help of an estate planning attorney, you are able to decide who will execute your estate.

Creating a will and appointing a trusted executor will help make certain that your estate is managed in accordance with your wishes and instructions. If you have a will, you help the people you leave behind. A legally valid will can avoid added costs of legal confusion of who is supposed to inherit your assets. If you pass away without a will, the state will decide how your estate is divided.

Creating a will allows you to determine who inherits your estate. Your estate will include your home, motor vehicles, financial accounts and any other personal property you want to pass on to your loved ones. The great thing about a will is that it clearly states the persons or organizations that will receive all or part of your estate after your death.

Consulting with an experienced estate planning attorney to help understand your state laws and probate procedures is a wise move.

In your will, you can also decide and designate the person(s) who will care for your minor children. Creating a will gives you the opportunity to appoint a guardian for your minor children, in the event of your death. If you don’t have a will stating a guardianship, a court can make the issue its own and appoint a guardian in your absence. It could be someone you don’t like or someone you hardly know.

By creating a will, you provide several benefits for yourself and your family. A will offers peace of mind that your loved ones will be cared for as you intend after you’re no longer around.

And if you are in California, it is likely that you will want a trust instead of a will because of the significant cost and time delay of the probate process. With the recent COVID-19 events, the probate process has been extended likely an additional 3-4 months on top of the already year+ long process. Many Courts are closed and filed cases will be delayed until the Courts re-open.

Finally, a reminder for those with wills and estate plans: review these documents every year or three to be certain that everything is up to date. You want to be sure that your estate plan includes any new spouse, birth or adoption of a child or grandchild, death of a relative and change in your financial situation.

Reference: Times Herald-Record (Jan. 6, 2020) “55 Plus: Four Reasons to Create a Will”