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Estate planning is dead?

I came across an article in Forbes today called “Estate Planning is Dead.”  It is dangerously misleading about the need for a proper estate plan, but buried under all of that is the true message that Mr. Scott, the author, believes and was trying to deliver.  And it is a message I can get behind.

That message is that traditional estate planning isn’t about you, it is about what will happen when you die.  It is a plan based around the two great inevitabilities: death and taxes.

Estate planning, with the proper planner, can and should be more.  It should be about your legacy.  What you have brought into this world, and are still bringing into this world.  Proper planning is more than a snapshot of who you are.  It is a projection of what you will be and a plan to be even more of who you are.

Meeting with clients, many have to take a deep breath and say something like “Here we go!” when they start to make their plan.   It feels more like they are about to jump out of an airplane instead of making a sound financial decision.  But it is a sound decision, not just for the estate, but for YOU.  As estate planning draws to a close, my clients feel relief, secure in the knowledge that they can live their lives with a significant chunk put finally in its place.

Dare to reorient your thinking about estate planning.  Think about YOUR future.

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When do I make a will as a millenial?

We usually define a millennial as someone born from the early 80s through the mid-90s.  I’m one, and most of us don’t think about dying as much as we think about getting to work on time, making house payments, and feeding children or even before that, when to swipe left.

So why start working on the business of dying when there is so much living left to do?  Without delving into morbid statistics, there are good reasons to prepare a will even if you are okay and also if you don’t have a lot to your name.

First, you should do it for the people you love.  A will is one more time that people can hear from you after you are gone.  Even if you bequeath someone your computer or a doll collection, to be thought of by someone after they are gone is a good feeling.

Second, you will feel better after you do it.  I promise.  Every will I have seen finished ends with happiness.  A feeling of completion and a sense of control sets in around an area that doesn’t often give people feelings of control.

Third and finally, when you die, your stuff goes to your family through the laws of intestacy unless you have a will.  Millennials just aren’t marrying like other generations.  If you want your partner to get anything after you die, you need to spell it out.

If you don’t have much, a form will might be enough.  You can fill it out and get a lawyer to look it over.  If you have significant assets, it is worth consulting an attorney because of probate and other issues.

 

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Is an unsent text a valid will?

Last year in Australia a man committed suicide and was found with his phone near his body.  On the phone was a text leaving all of his worldly possessions to other relatives, not his immediate family:

Dave Nic you and Jack keep all that I have house and superannuation, put my ashes in the back garden with Trish Julie will take her stuff only she’s ok gone back to her ex AGAIN I’m beaten . A bit of cash behind TV and a bit in the bank Cash card pin 3636 MRN190162Q 10/10/2016 My will.

The Australian supreme court ruled that the message was a valid will, and the instructions in the text message were carried out.  The Australian law on what makes a will valid is similar to California.  A will must be signed and dated by the maker of the will and witnessed by two witnesses, but the court can overlook those requirements if it is satisfied that a document is meant to be the will but doesn’t meet the criteria.

In that case, there was enough outside evidence to satisfy the court that the will was valid.

Given the general attitude of California cases, California courts are unlikely to find an unsent text to be a valid will.  If nobody witnesses the will, it must be handwritten, signed, and the court must be able to figure out the date of the will.

The court can (but does not usually) ignore these requirements if the writer doesn’t meet them entirely, but even then the will must be signed.  California allows for digital signatures, but an unsent text message is not a digital signature.  Most of the relevant code sections are here.

Either way, it would be an expensive lawsuit in California with claims from both the widow and the other family members.  Even if the man had followed the California instructions for a holographic will,  it would not be cut and dry, and his assets would be subject to probate.

This whole situation could all be avoided by a few hours of preplanning.  Even when using a form will, consulting an attorney will ensure that everything is correctly filled out.  Don’t leave the future of your loved ones to chance.

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Passing the family business

Most business owners I speak with don’t have a plan for what will happen to their business if they are incapacitated or pass on.  They have a general idea of who they want their business to go to, but not how the business will get to that person or people.

There are numerous ways to pass on or sell a business, and the earlier one begins planning, the better the chance of success and the cheaper it will be.   For example, if you are passing your business to a loved one, it may be better to start giving portions of the business via tax-free gifting long before you pass to avoid tax penalties later on.  I’ll get into a few more examples later, just know that there are many ways to decrease the cost in both a sale and passing on of a business, and the earlier you do so, the easier it will be in the long run.

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Last week I participated in a clinic to provide simple wills for seniors.  One senior attended because her doctor recommended that she have a will prepared.  She had a simple estate with only a condo and a few small bank accounts and wanted to ensure that her condo passed to her children.

We advised against doing the will even though her estate was worth only about $500,000.  Why?  Because in California, an estate worth over $150,000 in probateable assets MUST go through the probate process, so a simple will would actually cost a lot more than going to see an attorney.

The probate process is expensive.  The government sets the cost of probate, and this year, probate costs 4% of the first $100,000 of the gross value of the probate estate. 3% of the next $100,000. 2% of the next $800,000. 1% of the next $9 million.  

That means that for a $500,000 estate, probate fees are $13,000.  That is just the state fee.  The attorney and potentially the executor also need to get paid.

The estimated attorney and executor fees, in this case, are roughly equal to the probate fees, so passing the estate via simple will ends up costing well over $30,000.

For typical California homeowners with homes worth over a million, these fees can be over $60,000 easily, and even more expensive depending on the complexity of the assets involved.

Both the woman and her adult children didn’t understand why it would cost so much to pass on something she already owns.  The answer is that there are much cheaper and faster ways to ensure your property gets to the those you love, but none of them are free.  There are various ways to set up the transfer via deed and trust, all of which cost less than $5,000.

I’ll explain why probate is so expensive later this week, but for now, just know that a little preparation, even in the simplest of cases, can save a lot on the back end.

To sum up, even with just a small condo, failure to have an estate plan will cost your estate tens of thousands of dollars, where for a few hundred or thousand up front, you can be sure your property goes to your heirs quickly and efficiently.

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Why everybody needs an advance directive

You are 26, or 34, or 45.   You are with your friends, or your significant other, or your children, enjoying yourself.  A car hits you, or you only fall down, and you can no longer talk or speak or move. You may or may not be conscious. Even if you open your eyes, you aren’t there, yet you are still alive.

For years your relatives come into the room where you lay, a tube stuffed down your throat, blinking away the seconds, day after day.  Finally, they remove the tube but don’t give you pain medication.  They are sure that you can’t feel what is happening.  You sit there and blink and starve until you are gone.

This living hell is regularly reported on and fought over in courtrooms and Congress, and you can avoid it all with a simple piece of paper. The famous example of this is Terri Schiavo, a vibrant 26-year-old who collapsed at home, suffering massive brain damage:

An advance directive is a document that tells the doctors what you want when you can’t tell them yourself.

It is simple enough to fill out an advance directive without guidance, but making sure it is effective and followed is another matter entirely.  Here in the East Bay it is possible to file them with many major hospitals like Kaiser in advance, but a large number of doctors and nurses ignore advance directives because nobody filed them correctly.  Many doctors, absent an advanced directive, will do anything to keep you alive. I for one want them to stop short of anything.