Articles Posted in Estate Planning Basics

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book-cover-from-amazon-234x300My new book, Every Californian’s Guide to Estate Planning is available now and I’m excited to share it with all of you.

I wrote it because there isn’t a California-specific estate planning book out there, and we, as Californians, have some special things to deal with.

In addition to an introduction to wills and trusts, what probate is and how to avoid it, and how to pick guardians for your minor children, this book also discusses these California-specific issues (and many others):

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03-Generosity-300x300What is estate planning, really? I know that most lawyers focus on reducing taxes, or the creation of documents, but when you get down to it, what you’re really doing when you make an estate plan is giving everything away, right?

So, to me, understanding the practice of generosity and what gets in the way of being generous are central to effective estate planning, and who better to explore that territory than my guest for episode 3 of Life/Death/Law: Myoshin Kelley, an eloquent teacher on the key Buddhist teachings on the wisdom of opening the heart. Myoshin is a Senior Instructor with the Tergar Community, which supports the worldwide vision of Tibetan master meditation teacher and author Mingyur Rinpoche, tergar.org, and it is an honor to have her on the podcast.

If you’ve ever been curious about the practice of generosity or the value of it, or found yourself wanting to be generous but somehow holding yourself back, and wondered what was getting in your way, please listen.

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01-Prenups-300x300Welcome to my new podcast, Life/Death/Law, where I explore the intersection of life, death, law (and love)–otherwise known as estate planning.

In this first episode Emily Bouchard, a family dynamics and money coach and the managing partner at Wealth Legacy Group, talks to me about money and the difficulties that families often have in engaging in honest conversations about it. Emily offers  fascinating insights into why money can be such a hard thing to talk about, and tips for helping to get these conversations started. I asked her to be on my show because, so often, a long, uncomfortable silence falls across the room when my clients begin to sort out who owns what in a marriage, or how parents want their children to treat an inheritance.  As Emily points out, avoiding open and honest communications about money (like avoiding the same kinds of conversations about death and illness) means a missed opportunity for learning about ourselves, our families, and our most closely held values and hopes. I hope you enjoy it.

To read more: Emily is the co-author, with Emily Chase Smith, of Beginner’s Guide to Purposeful Prenups and the author of Estate Planning for the Blended Family.

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digital-assets-fullimage-new-209x300As of January 1, 2017, California has a new law (The Revised Fiduciary Access to Digital Assets Act) that allows executors and trustees to gain disclosure of a person’s digital assets after the original user’s death under certain conditions. This is a good thing because, until now, federal and state law on digital access for executors and trustees made it difficult for executors and trustees to get such disclosure without a court order. Twenty other states have passed similar legislation but, of course, as is often the case, California’s version is slightly different than the model legislation it is based on.

Attempts to pass state laws to make such disclosure easier (in California and in other states as well) ran into difficulties as laws drafted by lawyers (who wanted to make it easy for executors and trustees to gain access to digital assets simply by virtue of the fact that they were executors or trustees) ran into opposition from privacy advocates (like the ACLU) and service providers/tech companies (like Google, Facebook, and Yahoo), who wanted to protect the privacy of deceased users from such disclosure without their consent and who pointed out that any disclosure without such consent violated federal law.

To read more about the legal issues involved and how content providers are (or aren’t) providing online tools to record your consent and to get a digital inventory form that you can use to catalog your digital assets and record your passwords and usernames, download an Ebook that I wrote, Estate Planning for Digital Assets, at my website, www.lizahanks.com .

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bank-building-300x225Most people know that the FDIC (Federal Deposit Insurance Corporation) insures bank accounts for up to $250,000 per depositor per covered bank. This insurance was increased from $100,000 to $250,000 in 2008, to reassure people during the chaos of the financial meltdown that started in that year. (This increase was supposed to be temporary, but was made permanent in 2010, as part of the Dodd-Frank Act).

So, if, for example, you are the sole owner of a bank account with $500,000 in it, that account is only insured for $250,000.  If that same bank account is co-owned by your spouse, that account is insured for $500,000 because each owner gets that $250,000 of insurance. For many of us, that’s enough insurance. But not always. I’ve had clients call me after they’ve sold a house, nervous about the fact that they have a large balance on deposit at the bank. What to do?

A living trust can help here. While it is true that everyday bank accounts that don’t accumulate much money (the ones you use to pay bills) are usually not put into a living trust, larger accounts are.  There are two reasons for this: first, large accounts should be held in trust to avoid probate at the owner’s death; second, holding a bank account in the name of a trust means additional FDIC insurance on that account.

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san-francisco-210230_640-300x225I can usually tell when mortgage rates begin to drop because my phone starts ringing with former clients who are trying to refinance.  Often, their loan broker wants them to supply assurances that, if the living trust owns the house, the trust gives the Trustee the power to mortgage the property and use the house as collateral so that the lender’s interest is secure. (That’s a lawyer way of saying that the lender wants to be certain that, if the mortgage isn’t paid, they can take the house.)

Sometimes the lender wants a letter from an attorney certifying certain things are true about the trust — usually that it is revocable, that is valid under California law, and the Trustee has certain powers including the power to borrow. Often, they want this letter right away because it’s holding up the deal.

The issue underlying all of this paperwork is that some (but not all) lenders are uncomfortable because something other than the individuals applying for the loan owns the property (the trust). Here’s an article that explains this in more depth from SF Gate

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loneliness-2308923_640-300x200A few months ago, the New York Times published an article entitled, “Single? No Children? No Will? Big Mistake.” I’ve been meaning to write about it ever since. The author writes, “Certain people never reach one of those obvious points in their lives to write one. If you are unmarried in middle age, do not have children and have never had a devastating disease or brush with death, making plans for what happens to your stuff if you’re not around may not feel pressing.”

The author is so right. I have met many people who somehow feel that, because they don’t have children, they don’t need an estate plan. But here’s the thing — people without children may have even MORE need to make a plan that those with kids.

For one thing, all of us, at some point, are going to get sick or otherwise incapacitated, and need someone to act on our behalf — to pay bills, maintain our homes, or make medical decisions. Estate planning is not just about transferring assets when you die, it is also about planning for incapacity. And everyone needs to do that.

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Tomcloseup-300x300When I started writing about California’s End of Life Option Act in this blog, I never imagined that an old friend, from a job that I had in the late 1980’s and early 1990’s, would be one of the people in California to make use of it.

But in late March, Tom Negrino, terminally ill with cancer, made a plan to take drugs that would put him to sleep, then allow him to pass away. The End of Life Option Act allows patients, like Tom, with less than six months to live, to choose to take their own lives, provided that two doctors determine that the person is mentally competent to make medical decisions, is able to swallow medication themselves, and requests the aid-in-dying drug both verbally and in writing.

In a story in the Healdsburg tribune, on March 7, 2017, Dori Smith, Tom’s wife, said that Tom was exhausted after a multi year struggle with kidney cancer and was ready to rest. She said, “He’s fought and he’s fought, all of his life. He’s the eldest son in an Italian family; he’s always been strong. His biggest grief now is that he can’t read or write.” If you’d like to read what Tom had to say about dying, you can read his post here.

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money signI was recently at a friend’s house, and, accidentally made someone’s day. This is not a usual occurrence for me, but I did enjoy it.  Here’s what happened: a woman that I didn’t know told me that she had inherited her parents’ house in Berkeley. Because she had inherited it from her parents, she also was able to keep their very low property tax rate. Her problem was that she thought that she’d like to sell that house and buy a new one, but was worried that her property tax rate would skyrocket as a result.

Here’s what she didn’t know: if she waits until next year, when she turns 55, and purchases a new home that’s worth the same or less than the residence that she is selling, and buys the new house within two years of selling the old one, she can keep her old property tax base for the new house. She has to sell her old house to a new owner so that the new home can be reassessed for property tax purposes and she has to file a claim for exclusion from reassessment on the new property within three years of the purchase. In tax language, this is called “transfer of base year value,” which is the value that the county assessors use to calculate the property tax owed each year.

This is a one-time exclusion from reassessment for those over 55. So, the next time she sells her home and buys a new one, her property taxes will go up. Proposition 60, passed in 1986, established this exception for intra-county transfers–that’s Latin for WITHIN a county. So, if my new acquaintance stays in Alameda county, and otherwise follows these rules, she won’t be reassessed.

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college quad
As the season turns and it starts to feel like Fall, many parents are either paying college tuition bills or worrying about paying them. Many of my clients have asked me how 529 college savings plans or custodial accounts are counted when colleges consider financial aid.

Here are the basic rules and a few strategic ways to use them.

Student’s assets are counted more heavily than parents’ assets by colleges. When a school analyzes family finances using the Free Application for Federal Student Aid (FAFSA), which most schools do, they count parental assets differently than those owned by students when they calculate how much a family should contribute towards college costs. When the schools calculate the Expected Family Contribution (EFC), they expect parents to contribute no more than 5.64% of their assets. But a student is expected to contribute 20% of their assets. That means that if a student is considered the owner of an asset, a school will expect that student to use more of it to pay for school than they would expect from a parent that owns the same amount of assets. So, any asset a student owns will reduce available financial aid more than any asset a parent owns.

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Liza’s Most Recent Books

Californian's Guide to Estate Planning Download Now
Estate Planning For Digital Assets Download Now
The Trustee's Legal Companion Purchase Here
Nolo's Crash Course in Estate Planning Basics Purchase Here