Estate Planning Tips for Singles

Today, more and more people are delaying marriage for a variety of reasons, whether it be to become more established in their careers, pursue other interests, or that they simply do not want to get married. While many people believe they do not need to have an estate plan because they are not married or do not have children, this is not the case.

In fact, without a plan, the state’s intestacy laws will determine how any assets, such as bank accounts, securities, real estate and other assets, will be distributed upon death. In addition, the laws of intestate succession depend on whether or not the single individual had children. Moreover, if there are no children and no other living relatives can be found, the state will go to the state. Fore these reasons, it is essential for single individuals to have an estate plan.

The most basic estate planning document is a will which determines how assets will be managed and distributed. Moreover, a will is the only way in which guardians for minor children can be named, which makes having a will crucial for single parents. This estate planning document also designates an individual, known as a personal representative or executor to probate the will ad distribute assets to the beneficiaries. When selecting an executor, it is crucial that this person be capable and trustworthy. While it is common to name a close relative or friend, another option is to designate an attorney to act in this capacity.  Having a will does not avoid the probate process, it simply notifies the probate court what an individual’s wishes are with respect to the management and distribution of the assets.

The probate process, even with a will, in California is public, lengthy, and will likely be costly.  Furthermore, legal costs that are paid to probate attorneys and the court are designated by statute based on the size of the individual’s estate.  The amount of work, or little thereof, that an attorney does during the probate process does not lessen their fees.  However, an attorney may be entitled to collect fees above the amount designated by the statue.

There are a number of ways to avoid probate in California, (1) establish a Trust, (2) keep the amount of assets at the time of the individual’s death under the Small Estate Affidavit limit, which is currently $184,500.00, or (3) if the individual is over the Small Estate Affidavit limit (ii) have designated beneficiaries of the asset(s) (e.g., a financial account that is a Payable on Death account with a designated beneficiary) or (ii) hold the asset(s) in joint tenancy with other owner(s), for the amount that is over the Small Estate Affidavit limit.

The key is that when an individual dies their assets have a place to go on their death if they are over the Small Estates Affidavit limit. If there is Trust, then the Trust states where the assets go, and any conditions with regard to distribution. A Trust allows the most flexibility and control over distribution of an individual’s assets. If there is a designated beneficiary or if the asset(s) are held in joint tenancy, then the asset(s)’ ownership transfers automatically to the beneficiary or the surviving joint tenant(s), on the individual’s death.  Two things to keep in mind, the first is that if the individual would like to name a designated beneficiary, the account or asset is legally allowed to name a designated beneficiary (not all accounts have that option), and the second is that the individual wants to avoid having assets over the Small Estates Affidavit limit that do not legally have a place to go on their death.  If the individual’s asset(s) are over the Small Estate Affidavit limit and do not legally have a place to go (i.e., have a designated owner as a result of the individual’s death), then the assets must be probated, and the probate court directs where ownership of the asset(s) are transferred to, either in accordance with a Will, should they have one, or in accordance with the laws of intestate succession.

In addition to creating a trust and/or a will, it is also important for single individuals to plan for the possibility of becoming mentally or physically incapacitated. A durable power of attorney is a legal document that designates a trusted person, either a family member or close friend, to manage an individual’s personal and financial affairs, including bank accounts, real estate, and investments.

Moreover, an advance medical directive, or healthcare proxy, that designates someone to make decisions about a single person’s preferences for medical treatment when he or she is unable to communicate these decisions. Finally, if there are any retirement plans such as a 401(k) or life insurance policies in place, it is important to ensure that beneficiary designations are up-to-date and coincide with the estate plan.

In the end, everyone needs an estate plan, whether they are single or married. By having the advice and counsel of an experienced estate planning attorney, you can create a plan to ensure that your wishes are carried out.

By: Roy Schneider, Esq.

What Happens to Your Debt After You Die?

You have just lost a loved one. Then, you get a phone call from one of their creditors. This will very likely and very understandably catch you off guard. Why would a creditor of a deceased family member be contacting you regarding payment of an outstanding debt? Do you really have to pay? Understanding what happens to debt after someone dies can protect you from being taken advantage of financially in the wake of losing a loved one. 

First, consider what happens during the probate administration proceedings. Regarding any unpaid debts of the deceased, all creditors are provided with formal notice so that they can make a claim against the estate to collect any outstanding debts of the deceased. All debts that can be covered by assets in the estate will be paid. Some assets will be exempts from being used to pay off debts, but most are fair game. In a perfect world, all debts would be covered and paid off. Medical bills and credit card debt would be satisfied by assets of the estate. However, sometimes there is just not enough money in the estate to cover all outstanding debts.

When an estate cannot cover all debts owed by the deceased, most commonly, creditors will have to cut their losses and walk away. Oftentimes, there is no other legal way for the creditor to recover the debt once the assets of the estate have been exhausted. In some instances, surviving heirs, family members, and others may be liable to cover unpaid debts incurred by the deceased. The circumstances where this happens are very limited and include:

  • Failure of the executor of the estate to properly put creditors on notice, violating probate laws;
  • When an individual co-signed for a debt obligation with the deceased;
  • When a surviving spouse signed a legal agreement to assume the debt and be held liable for the debt of the deceased spouse; and
  • If someone else jointly held an account with the deceased.

Absent any of the above circumstances, it is likely that surviving loved ones will not be responsible for paying off outstanding debts of the deceased. This means that any phone calls you receive from debt collectors contacting you about payment of a debt the deceased incurred, are most likely predatory and trying to make you pay for an obligation that is not yours. In fact, under the Fair Debts Collection Practices Act (FDCPA), surviving family members are protecting from these types of abusive and deceptive collection practices.

The probate administration process is complicated. Debt collection practices are complicated and often intimidating. Be sure to know your rights so that you are not taken advantage of. Debt collectors with no other options will try some pretty outrageous things to try and collect money due. Always be aware of your legal obligations to pay or not pay a debt, especially if it was a debt incurred by someone else. 

If you have any questions regarding estate planning, please do not hesitate to contact an Estate Planning Attorney at Schneiders & Associates, LLP for advice and counsel.

Roy Schneider’s areas of practice include business planning, entity formation, mergers, acquisitions and sales of businesses, employment law, contracts, transactional matters of all kinds, real estate transactions, homeowners associations, non-profit law and estate planning.

What are Letters Testamentary?

An individual who has been named as a personal representative or executor in a will has a number of important duties. These include gathering the deceased person’s property and transferring it to the beneficiaries through a court-supervised process known as probate. In order to initiate this proceeding, the executor must first obtain what are referred to as letters testamentary. This document gives the executor the legal authority to administer the deceased person’s estate. 

While the process varies from state to state, the executor must petition the probate court in the county in which the decedent lived. This typically requires submitting the death certificate and completing a short application. The application includes a sworn statement that the person has been named as the executor in the will, as well as an estimate of the estate’s property and debts

The probate court will then hold a hearing to verify that the individual meets the qualifications to act as executor. Generally he or she must be a mentally competent adult and not be a convicted felon. If approved, the court will issue letters testamentary and officially open probate.

In short, the letters allow the executor to collect the assets of the deceased which may be held by  another person or an institution such as a bank. Since banks and other institutions may want to keep the document on file, it is necessary to obtain multiple certified copies. The executor can also carry out his or her other duties such as inventorying and appraising assets, paying debts, and transferring property to beneficiaries, according to the terms of the will.

Letters of Administration

In the event a person dies without a valid will in place, an heir of the decedent, typically a legal relative, needs to petition the probate court for letters of administration. In this situation, the court will hold a hearing to appoint this individual to act as the estate administrator, issue the letters and open probate. The administrator then manages and distributes the assets according to the state’s intestacy laws which generally give priority to spouses, children and parents.

If you have any questions regarding estate planning, please do not hesitate to contact an Estate Planning Attorney at Schneiders & Associates, LLP for advice and counsel.

By: Roy Schneider, Esq.

What is a Durable Power of Attorney?

Married couples will often have legal estate documents prepared together.  Such documents may include a trust, leaving all property to the surviving spouse and/or the couple’s children, and an advance Health Care Directive (sometimes known as a living will) to direct the spouse how to handle medical issues if one spouse becomes incapacitated.   However, another estate document may be beneficial for spouses — a durable power of attorney to handle financial matters.  

What is a durable power of attorney?

A durable power of attorney (POA) is a power of attorney given in the event of disability (whether mental or physical) by one spouse and directs the other spouse how to handle certain business or monetary activities detailed in the agreement.  Some instances of disability could include mental illness, physical illness, advanced age, drug use, alcoholism, confinement or disappearance.  

While California law may grant spouses certain rights to act for the other spouse without requiring a durable power of attorney, many activities are not covered.  A power of attorney also helps spouses who may have separate ownership of property by giving the spouse the right to act on behalf of the incapacitated spouse. 

Some examples of business decisions in real estate matters where the well spouse is not a co-owner (perhaps because the real estate was a premarital asset or for other tax reasons) and can act for the incapacitated spouse are:

  • If the incapacitated spouse owns rental property, the other spouse can collect rent
  • To pay real estate property taxes for properties that may not in both spouses ownership
  • To handle issues related to any mortgages
  • To take out property insurance

Some other general business-related functions a durable power of attorney can include: 

  • To sue on the collect of a debt
  • To file for bankruptcy
  • To write checks and do banking transactions
  • To sell stock or other securities
  • To file tax returns
  • To manage retirement accounts
  • To borrow money
  • To make loans
  • To make charitable donations
  • To hire attorneys, accountants or other professionals

In the event California law does not allow a spouse to do any of the functions described above for its incapacitated spouse, a durable power of attorney signed by the incapacitated spouse before the disability (and notarized for validity) can come in handy in a family emergency.  Each situation is unique, so we recommend consultation with one of the estate planning attorneys at Schneiders & Associates, LLP.

When Is A Person Unfit To Make A Will?

Testamentary capacity refers to a person’s ability to understand and execute a will. As a general rule, most people who are over the age of eighteen are thought to be competent to make and sign the will. They must be able to understand that they are signing the will, they must understand the nature of the property being affected by the will, and they must remember and understand who is affected by the will. These are simple burdens to meet. However, there are a number of reasons a person might challenge a will based on testamentary capacity.

If the testator of a will suffers from paranoid delusions, he or she may make changes to a testamentary document based on beliefs that have no basis in reality. If a disinherited heir can show that a testator suffered from such insane delusions when the changes were made, he or she can have the will invalidated. Similarly a person suffering from dementia or Alzheimer’s disease may be declared unfit to make a will. If a person suffers from a mental or physical disability that prevents them from understanding from understanding that a will is an instrument that is meant to direct how assets are to be distributed in the event of his or her death, that person is not capable of executing a valid will.

It is not entirely uncommon that disinherited heirs complain that a caretaker or a new acquaintance brainwashed the testator into changing his or her will. This is not an accusation of incapacity to make the will, but rather a claim of undue influence. If the third party suggested making the changes, if the third party threatened to withhold care if the will was not changed, or if the third party did anything at all to produce a will that would not be the testator’s intent absent that influence, the will may be set aside for undue influence. Regardless of the reason for the challenge, these determinations will only be made after the testator’s death if the will is presented to a court and challenged. For this reason, it is especially important for the testator to be as thorough as possible in making an estate plan and making sure that any changes are made with the assistance of an experienced estate planning attorney at Schneiders & Associates. Call today for a no fee consultation.

By: Roy Schneider, Esq.

4 Reasons Everyone Needs An Estate Plan

Many people are under the misconception that estate plans are only necessary for those with substantial wealth. In fact, estate plans are important for everyone who wants to plan for the future. For those unfamiliar with the concept, an estate plan coordinates the distribution of your assets upon your death. Without an estate plan, your estate (assets) will go through the probate system, regardless of how much or how little you have. There are many reasons that everyone needs an estate plan, but the top reasons are:

  1. Protecting You and Your Family
    Most people associate an estate plan with death, but an estate plan also comes into play if you become incapacitated. Through a proper estate plan, you can designate who will be responsible for making your financial and medical decisions, the authority they will have, and restrictions you would like placed on their power.
  2. Distributing Your Assets as You See Fit
    Without an estate plan, your estate will go to the probate courts, and your assets will be distributed according to the state’s intestacy laws, which generally prioritize spouses, children and parents. In addition, not having a will or trust in place lends itself to the potential of disputes between surviving family members. The best way to ensure that your beneficiaries receive the inheritance you intend for them is by having a well-conceived estate plan.
  3. Reducing Taxes
    Whether married or single, having an estate plan can significantly reduce taxes owed upon the transfer of your assets to your heirs.. Without proper planning, any transfers from you to a beneficiary may be subjected to federal and state taxation. Trusts, one of the most well-known, but least understood, estate planning tools, present excellent opportunities for reducing taxes associated with inheritance.
    Through a system of trusts and transfers, you can reduce the overall tax burden associated with the inheritance. For those with substantial assets, more advanced tax planning strategies will be necessary. Regardless of your current wealth, you will likely be able to reduce the taxation of your estate’s assets with the help of an experienced estate planning attorney.
  4. Providing for Your Family as You Believe Best
    By combining the ability to distribute assets with other estate planning tools such as trusts, you can include conditions for each recipient. This ensures that the money you want to give your nephew for college will actually be used for college, even if that is still 10 or 15 years away.
    As noted, estate planning is for everyone – not just the super-wealthy. Whether it’s avoiding a future family dispute, helping a loved one later in life, or reaching any other goals or objectives, having an estate plan is the best way to protect your interests.

If you have any questions regarding estate planning, please do not hesitate to contact an Estate Planning Attorney at Schneiders & Associates, LLP for advice and counsel.

Eric A. Hirschberg, “40 Under 40” Honoree

Schneiders & Associates, LLP is proud to announce that the Pacific Coast Business Times has named Eric A. Hirschberg a “40 Under 40” honoree! Eric focuses his practice in the areas of estate planning, trust administration, probate, business and corporate transactions, and entity formation. Eric prides himself on his lasting relationships with his clients built on trust and mutual respect, where they feel comfortable seeking legal advice from him regarding all aspects of their estates and businesses. Congratulations Eric!

Do Not Be Foolish With Your Heirs’ Future

If you own real property in California, the California Probate Code almost forces you to create a trust to avoid fettering away your children’s or your heirs’ inheritance.  While trust and probate law is a very complicated area of practice with numerous intricacies that requires the assistance of an attorney well versed in this practice area, below are some of the reason why it is so important in California to create an estate plan, which most likely would need to include a living trust.

Although there are some exceptions, if your home, other real property, and other assets have a combined gross value of over $150,000.00, and you do not have a trust or other vehicles for your assets to be transferred upon your death, such as “payable on death accounts”, then your assets will be required to go through probate before they can be distributed to your heirs[1].

Probate is time consuming, expensive, and the information disclosed therein is part of the public record.  Even a simple probate concerning a home with a value of over $150,000.00 takes at least six months to be completed, but typically longer.  Almost all of the documents filed in a probate are part of the public record and can be viewed by anyone.  However, the greatest determent to your heirs and family is   the cost of probate. California law imposes statutory fees to be paid to both the attorney that probates your estate and your personal representative (the person appointed by the Court to handle your assets and debts during the probate process).  Pursuant to California Probate Code section 10810(a), these fees are as follows:

“(1) Four percent on the first one hundred thousand dollars ($100,000).

(2) Three percent on the next one hundred thousand dollars ($100,000).

(3) Two percent on the next eight hundred thousand dollars ($800,000).

(4) One percent on the next nine million dollars ($9,000,000).

(5) One-half of 1 percent on the next fifteen million dollars ($15,000,000).

(6) For all amounts above twenty-five million dollars ($25,000,000), a reasonable amount to be determined by the court…”

Thus, if you have an estate consisting of a home with a gross value of $550,000, the statutory fees to probate your estate would be $14,000 to the attorney and $14,000 to the personal representative.  Thus, your heir will automatically lose $28,000 of their inheritance if your estate has to be probated.

To avoid these extensive fees, a person should consider creating a trust.  A trust in California can be as simple or as complicated as your particular assets, desired distributions, and tax needs require. However, whether you need a relatively simple trust or a complex trust, these instruments provide you with possible asset protection, privacy, and expedite the distribution of your assets following your death.  Unless there is litigation, the administration of a trust is not done through the courts and is not part of the public record.  Also, the creator of the trust, the settlor, can decide how his or her assets are to be distributed and to whom. Such benefits are not available if your estate is probated.  While a Will allows an individual to decide who will receive his or her estate, it will not avoid probate, nor does it provide the assets protection associated with a trust.

Further, the cost of preparing a trust should be far less than the cost of probate.  While there can still be some attorney’s fees associated with administering a trust upon the creator’s death, these attorney’s fee are typically far less than those mandated by statute for a probate.  Also, the creator of the trust can decide the fees that will be paid to the person they choose to administer the trust, the trustee.

Therefore, through estate planning, including a trust, a person or couple, can avoid time consuming, costly probates and ensure that their heirs and beneficiaries receive as much of their estates as possible.  Thus, it is imperative for people to discuss their estates with an estate planning attorney before it is too late to avoid the pitfalls set forth above.

Eric A. Hirschberg is an attorney with Schneiders & Associates, L.L.P., who focuses his practice on estate planning, trust administration, and probate.  If you have any questions about how to best protect your estate, please do not hesitate to contact Mr. Hirschberg and schedule a consultation.

By: Eric A. Hirschberg, Esq.

[1] If your real property is held as “community property with right of survivorship” or in Joint Tenancy, then the property will go to your spouse or joint tenant.  However, if your survivor passes without a trust then the property would have to be probated.

How to Avoid Family Conflict In Naming Your Trustee

Choosing a trustee or financial fiduciary to handle your estate upon death or incapacity is very personal decision and varies from family to family.  Some families prefer to name their children as their successor trustees or financial fiduciaries.  However, consider the “explosiveness” potential of requiring all your children to agree on every decision.  On the face of it, the desired effect of “forcing them to agree” can also force them to fight.  Appointing just one of two or three or whatever number of children may really impose more of a burden than necessary on such one child and places that child in a “family hot seat” leading again to family conflict that parents wish to avoid.

To avoid the potential for family fights and unnecessary burdens, consider naming an independent trustee or financial fiduciary.  There are private, licensed and bonded fiduciaries, and there are excellent financial institutions, who serve in the role of successor trustee or financial fiduciary and who simply follow the terms of the trust without the potential drama that comes from family.

If you would like to discuss your estate plan and the options regarding who is the financial matters at the proper time, please make an appointment with the estate planning attorneys at Schneiders & Associates, LLP.