Southern California Estate Planning, Probate, Trust & Litigation Law Blog

Married couples will often have legal estate documents prepared together.  Such documents may include a will, leaving all property to the surviving spouse and/or the couple’s children, and a heath care proxy (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.  

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 state law may grant spouses certain rights to act for the other spouse, some activities may or may not be 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 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 state law did 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. 

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.

The majority of businesses in the United States are small businesses. To understand the impact that small business has, consider the fact that small business generates nearly 60% of all new jobs within the United States. Amazon, Walmart, and other big companies often stand out with their massive revenues and employment numbers, but at the end of the day, the primary drivers behind the economy are small business.

If you have a family business or personal business that you’ve built up, you are likely one of these economic drivers. For many families and individuals, the business becomes an identity. Family businesses in particular are susceptible to acting as an identity for that family. Thus, for many small business owners planning for retirement, the question of what to do with the small business is a major stressor. For a family business, the transfer of control and ownership from one generation to the next can be incredibly complicated and strenuous. If it’s not a family business, then the question is primarily how to effectuate the sale and estate planning repercussions. The following sections will give an overview of general considerations for family-owned businesses and then general concerns relating to the sale of a business.

Trustees are responsible for administering a trust for the benefit of the beneficiaries. In some instances, multiple trustees may administer a trust as co-trustees. Occasionally, issues arise causing the beneficiaries of a trust or the co-trustees to pursue removal of a trustee. These issues could be general unhappiness with trust accounting or failure of the trustee or co-trustee to provide information when requested. In short, the grantor (creator) of the trust, co-trustees, the trust beneficiaries,  and the  probate court have the ability to remove a trustee

Retirement planning is essential given ever-increasing life expectancies in the United States. Unfortunately, many Americans fail to save adequate amounts to make it through retirement. Often, individuals believe that they will be fine on Social Security. However, Social Security is only designed to compensate for 40% of your income; Social Security is designed to be an income supplement rather than a sole income source. To make matters worse, workers tend to overestimate how late into their life they will be able to work. Inadequate savings and an inability to work produce an exceptionally stressful retirement. Remember, it’s never too late to start saving.

Trying to unravel all the ins and outs of the estate planning process can make your head spin. Most people associate wills with estate planning, but there are so many more legal tools that can be put in place to help plan for the future health and financial well being of you and your family. An IRA inheritance trust is one such valuable legal tool that may be beneficial to you and your loved ones. Find out of an IRA inheritance trust should become part of your estate plan.

The majority of the time, the money held in an IRA account will be distributed to the person you list on the beneficiary designation form. This is one of the forms you will fill out when you open or amend an IRA account. Not many people are actually aware that you do not necessarily have to name an individual as the account beneficiary. You may list a trust as the beneficiary. This trust is what is referred to as an IRA inheritance trust.

When considering whether or not to utilize an IRA inheritance trust, you really need to think about who would benefit from establishing such a trust. This means considering who would be the designated beneficiary of the IRA proceeds. An IRA inheritance trust can be very beneficial if you are considering designating an IRA beneficiary who may:

A power of attorney is an estate planning document that has a variety of uses. There are several types of these documents available, and each one performs a slightly different function. One or more of these plans may be a good idea to include as part of your estate plan.

What is a Power of Attorney?

A power of attorney gives another person permission and authority to make decisions regarding various aspects of your life if you can’t make those decisions yourself or if you just want to hand over control to a friend or loved one for any other reason.

A power of attorney gives someone else, who does not have to be an attorney, the ability to make decisions for you. You are essentially authorizing this other person to act on your behalf either generally or if certain conditions are met.

You must complete a document to give this power to someone else. This document may need to be notarized or go through another type of authentication process.

Most people realize that they can use their last will and testament to set out who should receive particular assets or income. However, few people understand that they can also describe how they would like specific debts paid off in their will as well. Unfortunately, many of your debts do not just disappear when you pass away; they are often passed on to your loved ones to address.

Thankfully, some careful planning and forethought now can help your family and friends deal with these issues much more efficiently in the future, cutting down on confusion and stress.  

Types of Debts You May Leave After You Pass

Generally speaking, there are two types of debt. Which kind you have will affect how you can pay these items after your death.

A will contest or will challenge questions whether the will is valid or whether specific terms are really what the testator intended. In some will contests, the entire will could be determined invalid. In other situations, only portions of the will may be disregarded.

While there can be any number of validity challenges, will contest typically center around just a few common problems.

1. Lack of Testamentary Capacity

To create a will, you must be of sound mind. That means that the testator must have the mental capacity to understand what he or she is doing. The same requirement exists if the will is being modified or revoked as well.

Being of “sound mind” requires that the testator know what property he or she owns and understands the effects of creating and finalizing the will. This standard is relatively low. However, it can be a real challenge for someone who is suffering from the beginning stages of dementia or has another health issue.

2.  Undue Influence

When you create a will, you are supposed to develop it with no outside influences or pressure. When someone tricks you into including a specific provision, establishing or revoking a will, or altering your will, that can be considered undue influence. These situations are especially prevalent when the testator is vulnerable to outside pressure, such as when they have a health condition.

Having an attorney help prepare the will can help address potential issues with undue influence. For example, the testator should meet with his or her attorney alone so that they can discuss what the testator’s wishes are, not what children or spouses may be interested in.

Wills and trusts can be extremely complicated, especially when they relate to one another or feed off of each other. You can certainly have both tools as part of your estate  plan. Depending on your unique financial circumstances and personal preferences, it may make sense only to have a will. Moreover, there are some things that a will cannot do that a trust can, and vice versa. Are there ever situations where a trust can completely replace a will? Probably not.

Why Would I Want a Trust Instead of a Will?

The main reason that people prefer trusts instead of wills is that trusts  do not have to be probated, which can be an expensive and time-consuming process. It can also be difficult for your loved ones in some situations. A probated will is also a matter of public record, which may not be desirable for some people. For these and  and other reasons, some individuals choose to use an estate planning tool that will avoid the probate process -- a living trust.

You are purchasing a home, and the escrow officer asks, “How do you want to hold title to the property?” In the context of your overall home purchase, this may seem like a small, inconsequential detail; however nothing could be further from the truth. A property can be owned by the same people, yet the manner in which title is held can drastically affect each owner’s rights during their lifetime and upon their death. Below is an overview of the common ways to hold title to real estate:

Tenancy in Common
Tenants in common are two or more owners, who may own equal or unequal percentages of the property as specified on the deed. Any co-owner may transfer his or her interest in the property to another individual. Upon a co-owner’s death, his or her interest in the property passes to the heirs or beneficiaries of that co-owner; the remaining co-owners retain their same percentage of ownership. Transferring property upon the death of a co-tenant requires a probate proceeding.