Book Recommendation: Estate Planning for the Sandwich Generation

Note: I receive no money, or any other type of gift from posting about this book.

I have a book recommendation for ANYONE who is wondering about where to begin for their personal estate planning, or for a loved ones future plans. 

Earlier this year, I was asked to review, preview, and give feedback on a book written by a fellow attorney. Catherine Hodder, Esq. reached out to me and interviewed me for her website back in April/May of 2017. You can read that HERE. I have never met with Catherine in person, or even talked to her over the phone. But, I like her. She’s smart. I know this because she wrote a very informative, accurate, and easy to read book about a topic that most people don’t understand.  She did an excellent job of breaking down the “legal stuff” and wrote a book about Estate Planning that 1.) does not put you to sleep; 2.) is written for everyday people, not lawyers; and 3.) is extremely well written, and targets those people who have aging parents and growing kids. 

“Estate Planning for the Sandwich Generation: How to Help Your Parents and Protect Your Kids” is a book I wish I had had the time to write. But, now I don’t have to worry about writing a book because Catherine captured everything I wish my current and future clients knew. 

If you are interested in a copy of the book, you can find it on Amazon, or by clicking the following link: Estate Planning for the Sandwich Generation.

Also, I received a shout out in the Acknowledgments. 


I highly recommend this book to anyone who is thinking about wills, revocable living trusts, powers of attorneys, advanced healthcare directives, etc. 

Medi-Cal Qualifications: what do I need to know?

There is a lot of misinformation about qualifying for Medi-Cal for long term care help. Many people hear, “You can only have $2000. Get rid of the rest.”

Also, many people think you can hide assets from Medi-Cal. It has been my personal experience that they know everything. You can’t hide your cash or your financial history from them.

The truth is, spending down your assets is not that simple. Medi-Cal categorizes your assets into countable and non-countable assets. Non-countable assets are sometimes called exempt assets.

For example, you can own a home and a car, and still qualify for Medi-Cal. The principle balance on your IRA is not countable. (But the income is.)

There are too many variables for each individual’s situation to be able to give advice here, but below is a short list of facts, and a link to a three page fact sheet that I’ve put together to give you a foundational knowledge. 

1.) Currently, there is a 30 month look back period. This means that even if you use a valid form of transfer (proper gifting, or an irrevocable trust), Medi-Cal will look back for 30 months and see what you did. If you wait for month 31+ to apply for Medi-Cal, this will be no big deal. But if you apply before the look back period is up, you will not qualify AND be “grounded” for a period of time. WHY? Medi-Cal is the state and federal government, which is taxpayer money, and if you have the cash assets, their thinking is, “Why does the taxpayer need to pay for your care if you can do some of it yourself?” It is assumed that the California legislature will finish passing regulations in 2019 that makes this look back period 60 months (5 years). Planning ahead is a must here.

2.) After you pass away, if your home is in a revocable living trust, Medi-Cal will not seek repayment via your home. That goes for any other asset you have that is not part of your probate estate. (Yet another good reason to form a trust if you own real property.)

3.) If you are married and your spouse needs help with long term care, your local Medi-Cal representative can help you apply. You will not be left in the cold.

Click the link above to download a fact sheet for your convenience.

FAQ #1: How much does an estate plan cost?

Frequently Asked Question:

How much will an Estate Plan cost?

Answer: That depends on what you need. I don’t hide my fees…you can find them under the “services” tab on my Facebook page, or under my “fees” page on this website. A full estate plan in California should typically cost you anywhere between $2500-$3500+ to be completed by an attorney. Of course, this fee isn’t just for the printed words on paper. This fee should include access to your attorney for all your questions, a productive initial meeting where not only is important information gathered, but also your attorney gets to know you and your family situation, AND you should leave this meeting feeling confident with your choices and moving forward. You should leave knowing there will be no hidden fees or surprises later. Your situation might be a little different than most and it may cost you slightly less or slightly more. No matter what it costs you, it will be far less than the average cost of probate for your family later. You could be saving your family thousands of dollars and years spent in court by planning ahead.

9 Steps to Take to Administer a Trust

As a new trustee, you probably have a lot of questions about what to do first. Below are 9 steps to take in administering the trust you are now responsible for.

If the trust was set up with your spouse or registered domestic partner, when the first person passes, usually all that is required is to file an “Affidavit of Death of Trustee” with every county in which property is held. The reason you do this is to put the world on notice that a prior signer of a deed has passed away and can no longer sign for themselves. If the remaining spouse wishes to sell the home or a property, they can now sign by themselves. The explanation for why the other person can’t sign is in the “Affidavit of Death of Trustee.”

When the Original Settlors/Trustees Pass Away

If you are the new trustee of a revocable living trust, there are many things that you may have to do in order to carry out trust administration properly. (SETTLORS= the people who “set up” the trust. When that person has passed, or when both people have passed, the SUCCESSOR TRUSTEE steps into their shoes to follow their instructions and manage their assets.)

1.)       Know that the trust is now irrevocable. This means you cannot change the terms of the trust. At all. (Unless you petition the court. And now you are in court…the very thing the original trustees wanted to avoid. Sometimes you can’t help it, especially if the trust was a bad one to start with. Just know you can’t go into the trust and decide to change beneficiaries or shares they receive on your own.)

Having said that, you need to read the trust. If there is something you do not understand, it would be wise to consult with an attorney. You do NOT have to consult with the same attorney who drafted the trust. If they send you a letter telling them that you do…they aren’t being honest. Of course, you CAN use the same attorney, especially if you like them and trust them.

2.)       Send California Probate Code 16061.7 NOTICE to all heirs at law and everybody named in the trust.

3.)       You will need to lodge the will with the probate court. This is not a difficult process. A proper estate plan will have a “pour over” will. Take it to the court and lodge it.

4.)        Gather asset information and prepare an inventory.

5.)        You will need to get a EIN/TIN from the IRS. You can do this online. Now that the original trustees have passed, the trust needs a government ID number. This number will allow you to open a bank account for the trust…and if there is already a trust bank account, the bank will want this new number.

6.)       Related to above: you will have to file a 1041 Federal Tax return. This is the income tax return for the estate…if the estate makes $600 or more, you must file this return.  IRS INFO HERE 

The estate tax threshold is fairly high, and only those estates worth $5.49million+ for each individual will need to pay. (You still need to file even if you don’t owe. Talk to your favorite CPA about this. This is separate from “income” taxes.)

7.)        Also related to #5: open up a trust bank account. This is where cash and proceeds need to go. This makes it easy to account to the beneficiaries (via bank statements), make deposits, and also make distributions.

 8.)       Deal with creditors: gather creditor information and prepare a list for notice. Open probate Court file to accept creditor claims. Publish in local newspaper to notify potential creditors. Send notice to potential creditors including Medi-Cal (the Department of Health Services).

9.) File an “Affidavit of Death of Trustee” with every county that the Settlor owned property. This puts everyone on notice that that person can no longer sign future deeds. A Change of Ownership report also needs to be filed with your county assessor’s office. SAMPLE AFFIDAVIT OF DEATH HERE

Is there anything else?

Although there are numerous steps in administering a trust, it is far easier and more cost efficient than having to go through the probate process. Your particular situation might require more steps than the introductory ones listed above. If you are unsure about your situation, please call an attorney who regularly works in trust administration to guide you through the process.

A well prepared estate plan will help the successor trustee in their duties as they take over the trust. If you are a new trustee, you may want to consult an attorney on the right path to take for your situation. If you are looking for an estate planning attorney, find one that will keep your loved ones in mind as the end result of the process. After all, your trust is meant to help your family, not make things more complicated in a time of grief.

Is it Okay to Add My Adult Child’s Name to My Account or Deed?

Is it okay to add one of my kids’ names to my bank account or property to avoid probate and make it easier on my family?

The answer depends upon your situation. It is frustrating that I cannot give you legal advice on this topic, but truly, without knowing your situation, I can give zero advice. 

But I can share this information, and maybe you can guess which way I would lean, regardless of your circumstances.

The Good?

You can add another person to your bank account or deed on your property in order to try and avoid probate. When you add another person, this person become a joint owner of the account. For example, you can add your son to your checking account so that he can write checks for you if you need him to, or deposit funds without a fuss from the bank, etc. When you pass away, he has access to the account immediately, making the transition seamless on his part. That can be considered the upside to adding another name on an account or deed. (You can add someone to your property as well.)

The Bad.

When you add another person to your account or property, they become a joint owner. Legally, you have equal rights to the account or property. Let’s say you add your son John to your checking account. You have a retirement check that is deposited every month, and you use this account for everything: a little savings, and paying the bills. If John gets in any kind of financial trouble, your account is now half his, and your money can be taken. The same goes if you add John to your deed. Your property can have liens put upon it against John. You also cannot just take John off of the account or property…he has to consent to it. 

The Ugly!

Many people have added children to their accounts or property without incident. A lot of the time it can work. However, a case recently came out that reminds us that things can get really ugly. Let me tell you a story about Betty, Kelli, and Tom.

Betty has two children: Kelli and Tom. She set up a trust, but be also had a separate checking account at Wells Fargo. She put Kelli’s name on the account. When Betty passed away, Tom insisted that the account was meant to go into the trust and be divided between he and Kelli. Kelli disagreed and said that the account was hers because Mom put her name on the account. A court battle ensued: brother and against sister, and vice versa. 

What did Betty actually want? It didn’t matter and couldn’t be proven, so the law came into play. Probate Code section 5302 states that there is a presumption that joint property is meant to be just that. You need clear and convincing evidence to overcome the presumption of survivorship laws that govern joint accounts. (You can read the decision HERE.)

If you add a child on a joint account, and tell them to split the money with others after you pass, they do not have any obligation to do so. They can claim it as their own. And it is completely legal.

Lesson:

When you add someone to your account or deed as a joint owner to make things easier after your passing, you may be very well on your way to opening the door to liability and fraud while you are alive, and greedy behavior after your death. Your efforts to avoid your children going to probate court may very well land them there in a protracted battle anyways.

A solid plan that is well executed is your safest bet to both protect your assets while you are living, and to help avoid family battles after you are no longer here to look after your family. Consider what a revocable living trust can do for you.

Increased Recorder Fees in California

Beginning January 01, 2018, a new $75 fee will be attached to certain real estate documents (and others) that are recorded at the county recorder’s office. This new fee is due to Senate Bill 2, which was signed into law this week. The funds are to be used to address California’s affordable housing crisis.

HOW DOES THIS AFFECT ME?

When you plan for your estate, frequently the best planning includes a trust. When you form a trust, one step you must take is to record a new deed for your real property stating that your property is now in the the trust. This deed gets recorded at the county recorder’s office.

There are certain exceptions to this fee: however, for estate planning purposes, this fee will impact how much it costs for record deeds to and from a trust. In Kern County, most deeds cost between $16-19 to record. As of January 01, 2018, this will go up to $91-94 for the same deed, if you do not fall under certain exceptions.

The short of it is this: if you are putting the home you own AND occupy into a trust, you are exempt from this fee. (Whew!) However, if you have other properties, you are not. There is a certain amount of uncertainty amongst lawyers and county officials in multiple counties: I’ve had contact with others in this area and every county seems to be doing it a little differently. I’ll update this as soon as it becomes more definitive. But so far, the practice here in Kern County is that if someone owns a parcel of land apart from their residence, that land has the $75 fee attached.

THE LAW

The text of the law as found in the Government Code is below, or you can click HERE to read the entire bill.

27388.1.

 (a) (1) Commencing January 1, 2018, and except as provided in paragraph (2), in addition to any other recording fees specified in this code, a fee of seventy-five dollars ($75) shall be paid at the time of recording of every real estate instrument, paper, or notice required or permitted by law to be recorded, except those expressly exempted from payment of recording fees, per each single transaction per parcel of real property. The fee imposed by this section shall not exceed two hundred twenty-five dollars ($225). “Real estate instrument, paper, or notice” means a document relating to real property, including, but not limited to, the following: deed, grant deed, trustee’s deed, deed of trust, reconveyance, quit claim deed, fictitious deed of trust, assignment of deed of trust, request for notice of default, abstract of judgment, subordination agreement, declaration of homestead, abandonment of homestead, notice of default, release or discharge, easement, notice of trustee sale, notice of completion, UCC financing statement, mechanic’s lien, maps, and covenants, conditions, and restrictions.

(2) The fee described in paragraph (1) shall not be imposed on any real estate instrument, paper, or notice recorded in connection with a transfer subject to the imposition of a documentary transfer tax as defined in Section 11911 of the Revenue and Taxation Code or on any real estate instrument, paper, or notice recorded in connection with a transfer of real property that is a residential dwelling to an owner-occupier.
(b) The county recorder shall remit quarterly, on or before the last day of the month next succeeding each calendar quarterly period, the fees, after deduction of any actual and necessary administrative costs incurred by the county recorder in carrying out this section, to the Controller for deposit in the Building Homes and Jobs Trust Fund established by Section 50470 of the Health and Safety Code, to be expended for the purposes set forth in that section. In addition, the county shall pay to the Controller interest, at the legal rate, on any funds not paid to the Controller before the last day of the month next succeeding each quarterly period.
(c) If the Department of Housing and Community Development determines that any moneys derived from fees collected are being allocated by the state for a purpose not authorized by Section 50470 of the Health and Safety Code, the county recorder shall, upon notice of the determination, immediately cease collection of the fees, and shall resume collection of those fees only upon notice that the moneys derived from the fees collected are being allocated by the state only for a purpose authorized by Section 50470 of the Health and Safety Code.

Medi-Cal Estate Planning

Medi-Cal Estate Planning

For the last 20+ years, California has attempted to recover some of the fees it has paid out on your behalf if you are a recipient of Medi-Cal services. (Medi-Cal is California’s version of Medicare/Medicaid.) While personal opinions may differ on the validity of this recovery, the fact of the matter is, Medi-Cal recovery after your death had the potential to wipe out your estate and your children’s ability to inherit your assets.

One way around this was to put your home into an irrevocable trust. Putting anything into an irrevocable trust means it is not really yours any longer. Many people created “Medi-Cal Asset Protection Trusts,” a type of irrevocable trust. You would name a trust protector, and typically you were able to still live in the house until your death. After your passing, it would be given to your named beneficiary, but it would be untouchable my Medi-Cal because you no longer had control over it. This type of trust was expensive to form and maintain, and a person had to be confident that they would never need to sell their home, since they were relinquishing incidents of ownership to it.

NO MORE.

The good news is that the State of California enacted a few laws that took effect on January 01, 2017. These laws (found in SB 33 and SB 833) apply to anyone who has died or will die on or after January 01, 2017, and it limits what recovery can take place by the state against your assets. (If you have a family member or friend who passed before this date, the old rules of recovery still apply.)

Essentially, the state can recover for certain services it provides against your probate estate only.

Having a revocable living trust keeps your assets out of your probate estate…so you have shielded your assets from the state once again, preserving as much as possible for your heirs. This recovery limitation also applies to those properties that have been named in a Transfer on Death Deed, or held in joint tenancy.

This is great news for everyone who has already planned ahead! There is no need to form a special trust in the future, giving up control of your property when you may have never needed it in the first place.

Remember, a revocable living trust (with all the accompanying documents) is your map to asset protection planning. If your future changes and you need to add to, change, or in any other way alter your trust, you are free to do that. You keep control of your assets during your life, but trust becomes irrevocable on your death so that your trustee or beneficiaries can’t change your plans. It is the best gift you can give your family.

 

If you would like to read more about this on your own, I have found a consumer friendly PDF guide on this topic, located HERE.

A Tale of Sadness: When You Thought You Were Prepared

*All names have been changed.

Sam and Tanya were together for over 30 years. They were good for each other: soulmates. Both of them were getting a bit older in years, and both were having health problems. They married in the summer, and three months later, Sam was diagnosed with cancer and passed away. He had written a holographic will, but it had burned in a fire. There was no evidence of any of his wishes for his property. He told his new wife that he wanted her to have everything, and to give a few specific monetary gifts to his sister and nephew. He wanted her to be taken care of.

Because Sam didn’t have a will,  Tanya is left with probating his estate. Any property they would have owned as community property would go to Tanya directly, but because they weren’t married for all those years, neither one them had community property together. Intestate laws dictate that she will receive 1/2 of his separate property. His mother will receive the other half. Sam’s intentions to take care of Tanya and provide for her will not be fully realized, and because creditors will be paid first, Tanya and Sam’s mom will receive their inheritance AFTER the bills have been paid. Medi-cal will come knocking on the door and demand payment.

Sam would be heartbroken if he could see the result of not taking care of his assets. His intentions were good, but failure to take care of business now leaves his beloved wife in a mess.

Probate court is not where you want your assets made public, and it is not where you want your loved ones to have to be after they lose you. Plan ahead and get your affairs in order now, so your family doesn’t have to pay the price later.

“You don’t need to fund your trust.” Said no good lawyer, ever.

A Trust Needs to Be Funded To Be Valid

I was reading my parent’s trust documents recently.  I called my dad up and asked him a few questions about the process he went through. That’s another post for another time. I would like to tell you that he paid big bucks for a trust to be formed. At the time, his houses were put in the trust. Since then, he has sold both and moved, AND acquired a rental house.

None of the new properties are in the trust. He asked his lawyer about it and was told not to worry about it. The pourover will catches all that property and puts it into the trust.

And it does.

AFTER IT GOES THROUGH PROBATE.

One of the biggest reasons to form a trust in the first place is to avoid probate! We are both wondering why the lawyer would say this.

Perhaps they are thinking of a Heggstad** petition, based on the case by the same name (probate Code 850). If your trust includes a list of assets you want in the trust, along with a statement of conveyance, your heirs can petition the court to have those assets included in the trust.  Or, maybe they are thinking of the 2015 update to this idea of “I forgot to fund my trust” with the Ukkestad case *** where the court ruled that specific language in the trust could be a substitute for actual titling the property in the name of the trust. A simple provision stating something to the effect of “all my real property” in just the right place of the trust will suffice.

Both of these remedies to an unfunded trust avoids a full probate. But it still goes through the courts, which is what we are trying to avoid. Your heirs will be dealing with the grief of your absence: they shouldn’t have to deal with grief from the courts.

You MUST title your property in the name of your trust if you want to avoid probate and the courts. It’s as simple as filing a grant deed with the recorder’s office. Is it a pain to drive downtown after you sign the paper in front of a notary?

Yes. (For the record, if I prepare your trust for you, I take the deeds downtown for you.)

But, it is far worse for your heirs to drive downtown to file for probate, which is expensive and takes months (sometimes years) on end. Probate can cost thousands, even tens of thousands of dollars. Yikes. Even if they are granted a shortened probate process with a Heggstad petition, that is still time and money spent with the courts.

Do yourself and your heirs a favor: look through your trust documents and make sure your assets are in the trust. If someone says, “Don’t worry about putting those in the trust. The will catches it all.” Run. Run away and go straight to the recorder’s office with a notarized grant deed in hand.

Fund that trust.

** Estate of Heggstad, 16 Ca4th 943, 20 CR2d 433 (1993)

***Ukkestad v RBS Asset Finance,  235 Cal.App.4th 156 (2015)

 

 

A Revocable Living Trust: What is it?

A revocable living trust is both simple and confusing at the same time.

It can take a while to wrap your head around it. It probably doesn’t help when you see a trust full of really big words and complex paragraphs. Trusts are boring to read, and trusts seem like something only rich people do.

You know, like in the movies? Or perhaps you’ve met someone who was a trust fund kid?

If your estate is like mine (and most the people I know), and you want to avoid the probate process, I can help you.  If you own a home and have a few assets like a life insurance policy, a retirement fund, and maybe a couple of cars or toys, then a revocable living trust can be one tool in your estate plan that will save your family time and money by avoiding the probate process.

A Trust Is…

A revocable living trust is a tool. A proper estate plan is like Batman’s utility belt. Lots of different gadgets and tools are on that belt, and each one has a different function to help Batman in a time of need.

A revocable living trust is one of those tools in your estate planning “utility belt.” (There are other tools as well.) It’s made of paper and words, but it is a tool that is legally recognized as a way to help a person or a family preserve their property. We all work hard. We deserve the right to be able to take care of our property and keep the courts and prying eyes out of our business.

A trust can do that.

A trust is a private document. It allows you to stay out of the courts and keep your hard earned property yours. A revocable living trust is one type of tool that allows this, and it might be right for you if:

  • You would like to avoid probate, AND
  • You would like to keep your assets out of the reach of possible MediCal recovery, AND
  • You want to maintain control over all your property and assets while you are alive, AND
  • You can name successors who are responsible and willing to follow the trust documents when you are no longer able to do so yourself.

I like to tell my clients that a trust is like a treasure chest. The trust documents build the chest, and your “stuff” is the treasure inside it. While you are living, you have complete control over the chest, and the treasure inside it. You can change the contents, and you can even change the structure of the chest. Once you pass away, however, the chest is no longer changeable, and your successor trustee must now follow your instructions on what to do with the chest, and how to manage your treasures inside.

How It Works

If you think you need a revocable living trust, you and I will work together to determine if a trust will serve your needs, and if yes, what you would like your trust to say. A trust can be formed whether you are single or married, and if you are married, you may choose to come in singly or together with your spouse.

We will discuss your financial situation in as much detail that allows me to advise you properly. At this point, you will have attorney-client privilege, so this information stays confidential. We will also talk about what you envision for the future at certain time periods: 10 years from now, 20 years, etc. This helps us both know what is important to you so your estate plan can reflect your values.

After we dive in and talk about your assets, liabilities, your values, and your family, I will be ready to draft your documents, and your RLT will be one of those documents.** You will be one giant step closer to having a plan in place, and the peace of mind that comes from that is priceless for both you and your family.

**There are other documents you need for a fully formed estate plan. When you form your revocable living trust with me, those other documents are included in your plan. These include wills, powers of attorney, advanced healthcare directives, HIPAA forms, and other documents to get you organized and ready for the future.