August 22, 2008

‘Still more ways you can mess up your estate plan’ – part ten

By Robert P. Bergman
Special to the Times

The final installment in our continuing series of articles on “Ways You Can Mess Up Your Estate Plan:”

28. Assuming That If You Do Have a Living Trust, It Will Accomplish All the Things Discussed in Previous Articles.

I have seen many poorly-drafted Living Trust Estate Plans (and Will-based Estate Plans) drafted by inexperienced attorneys, financial planners, CPAs and using books or online companies that provide “common” legal documents like living trusts.

Some living trusts will not even avoid probate, as such trusts say that “Upon my death my trust shall be paid to my estate.” Many trusts drafted for married couples don’t have estate tax planning provisions, don’t address the issue of “second marriages,” and don’t provide for any asset protection for children’s inheritance.

A Living Trust can be as short or as long as you want to make it. There is no such thing as a “standard living trust” or a “common living trust.” A one-page living trust may technically be a living trust, but it probably does not do many of the things we have discussed in this report.

Assuming that living trusts are all basically the same can be a costly error. If you have any doubts, you should get your current estate plan reviewed by an experienced estate planning attorney.

29. Not Having An Estate Plan At All.

If you don’t have an estate plan, this is called dying “intestate,” meaning dying without even a Last Will and Testament. If you die intestate, the State of California has drafted a “Will” for you, and it may not be what you would want. Not many people would purposely let their state legislature draft their Wills for them, yet that is what you get if you don’t plan yourself.

For instance, if there is a lot of property titled just in the husband’s name, that property may end up being distributed one-half to his surviving spouse and one-half to his children because of the intestacy laws. I find that is rarely what my married clients would want. They generally want to provide for each other first, and the see the kids get an inheritance only after they are both gone. Many married couples mistakenly assume that if one spouse dies, all of his or her property will automatically pass to the survivor. This may be a wrong assumption - California law may require that a significant portion pass to the deceased spouse’s children, or even his or her parents!

At a minimum, you should consider at least having a Will.

Consider also that by having a properly drafted and funded Living Trust with a durable power of attorney and advance health care directive, you can avoid a conservatorship if you become disabled, avoid probate on the death of both spouses, and, for married couples and depending on the size of your estate, your children may save hundreds of thousands of dollars in unnecessary federal estate taxes (i.e. the “Death Tax) than if you relied on a simple Will or joint tenancy ownership of property.

30. Not Having An Estate Plan At All.

The problems discussed in this and the previous articles in this series are only a sample of the estate planning mistakes which are frequently made. Many times changes can be made to estate plans in time to avoid these problems. Other times, it is too late to solve the problem, especially if the person is already disabled or deceased.

We hope these examples of common estate planning mistakes have helped you better appreciate the complexities of estate planning and the role that an experienced estate planning professional can have in creating and updating your estate plan.

As you can see, with proper planning, you can make things easier and less expensive for your family upon your disability and upon your death. A well-drafted Living Trust Estate Plan is worthy of your consideration.

Robert P. Bergman is a San Jose estate planning attorney and counselor who devotes his law practice exclusively to assisting individuals and couples plan for incapacity and the eventual transfer of their property to their heirs. Bob specializes in working with parents who have minor children. Bob gives a regular monthly seminar at the Addison-Penzak Jewish Commun-ity Center in Los Gatos entitled “Everything You Wanted To Know About Wills and Trusts, But Were Afraid to Ask!” Visit his website at www.lawbob.com where you can learn more, get on his mailing list, register for an upcoming seminar, schedule a consultation and read other articles on estate planning topics that Bob has written. You can also reach him by e-mail at rpb@lawbob.com or telephone at (408) 247-0444. All inquiries are confidential. This column is intended to provide general information about estate planning ideas, concepts, and laws, and is not to be relied upon as rendering legal advice about your particular situation. No attorney-client relationship is created by these articles. The laws concerning estate planning, wills, trusts and estate taxes are very complex, often state-specific and change on a regular basis. Consult with an experienced attorney before taking any action that would affect your personal or business matters.