Many of you may be familiar with the concept of an Estate Plan in California. And many of you may be aware of the fun new tv show, "Jane the Virgin" on CW. But are you aware that Monday night Jane and Rafael put together their estate plan for baby Mateo?
Before we get to the important question - did Jane and Rafael do a good job with their Estate Plan? - let's quickly recap what the tv show is about - and highlight the main points of an Estate Plan. Here are the quick facts:
What is Jane the Virgin about?
1. Jane (who happens to be a virgin) is accidentally inseminated by Rafael's sperm. 9 months later baby Mateo is born.
2. Rafael is a multimillionaire who owns an upscale hotel on Miami beach.
3. Rafael falls in love with Jane, but she's on the fence about him because of his crazy family.
4. There's lots of other craziness (like evil crime lord Sin Rostro) that you'll just have to watch the show for
What is the purpose of an Estate Plan in California?
1. An Estate Plan is a way to plan for the financial future and well being of your children
2. An Estate Plan is a way to spell out your wishes clearly and avoid family fights when you're gone
3. An Estate Plan is a way to plan for your own healthcare and finances
So, now that we know what we're dealing with - let's look at how Jane and Rafael did with their estate plan, specifically the trust for little Mateo.
First, Jane and Rafael meet with their Estate Planning attorney, a somewhat sassy man who starts their first meeting by bringing up the most awkward parts of any estate plan, such as, do you want the plug pulled should you become incapacitated? (i.e. the Advance Healthcare Directive). Their attorney adds a nice twist of humor to the issues, and Jane decides she does want the plug pulled, just not right away. Great choice, Jane. Of course, they would have to put that all in writing, and carefully go over the documents with a licensed notary - but let's just pretend they did that when we weren't looking.
After the show highlights a few of the less than fun parts of an estate plan (Power of Attorney, Healthcare Directive), they get into the good stuff - what goes in the trust for Mateo. And in the case of Jane and Rafael's estate plan, the trust certainly is exciting, as Rafael's net worth is upwards of $40 million! Now, even if you're not a multimillionaire, It's a great idea to have a trust if you have over $150,000 in assets. Placing the assets in a trust will allow for simpler, quicker, and cheaper distribution once you die, AND you can be as specific as you like with your directions for distribution within the trust documents. Specificity is particularly important for larger families with multiple children, blended families, and families prone to drama (that's most of us).
In the show they only focus on "Mateo's" trust. Because Mateo is only a few months old here, a trust with assets that went solely to him would also need a trustee (most likely Rafael) and a successor trustee, to manage the assets in the trust should anything happen to Rafael. Because Rafael is so wealthy, he and Jane are most likely setting up Mateo's trust as a regular trust (such as a family trust, child trust, revocable trust, or irrevocable trust), as opposed to a sub-trust of his own trust. The difference between a trust and a sub-trust is that the sub-trust does not come into existence until the creator of the primary trust dies. Most of us would set up a sub trust for our children, so that we could maintain control of the assets while we were still alive. However, if you're like Rafael, and have millions at your disposal, you may choose to fund a trust for your heir right away.
What Jane and Rafael do Right in their Estate Plan
1. Jane carefully reviews and edits their trust documents. The real purpose of a trust is to allow one the flexibility to completely tailor plans for their heirs to their wishes. As an Estate Planning attorney in the SF East Bay, I always appreciate it when clients take a serious interest in the details of their trust.
2. They choose a Trust Plan that gives them Peace of Mind. Jane decides that for every dollar Mateo inherits, he must give a dollar to charity. Because terms of a trust are completely flexible, this is a valid plan. As a Contra Costa Trust Attorney, drafting trusts that make clients feel as comfortable and safe as possible is second only to ensuring the legal validity of the trust.
2. Agreeing to Review their Estate Plan every 3 years. Reviewing and editing your estate plan as life changes is imperative. Important events that effect Estate Plans are marriages, deaths, births, divorces, inheritances, home purchases, and other significant life changes.
What Jane and Rafael do Wrong - Potentially
1. There's no mention of Taxes
The estate tax is rather sizable if you have over $5.34 million dollars. It's unclear whether or not all of Rafael's $40 million is going into Mateo's trust, but irregardless, his estate plan would no doubt need to account for the fact that he would owe a significant amount (about 40%) without any creative tax planning. Several tools exist (such as Charitable Remainder Trusts) to help lower taxes, and individuals with more than 5.34 million or 10.68 million as a couple must carefully select an experienced estate planning attorney with a history of high net worth clients. Many famous millionaires, such as Jimi Hendrix, James Gandolfini, and Marlon Brando neglected to do proper estate planning and effectively gave large donations to the federal government. It's doubtful Rafael's spunky estate planning attorney would allow him to do the same.
2. What about Jane?
As the mother of the very wealthy Mateo, it seems like there might be some provisions for her care and wellbeing should anything happen to Rafael. It would be quite a travesty if she had to ask her wealthy son to borrow money!
Estate Planning can seem overwhelming, and is something many of us constantly push to the back of our to-do list. However, for residents who live in towns such as Walnut Creek, Danville, San Ramon, Concord, Oakland, and Berkeley - estate planning is essential. As a Walnut Creek Elder Law attorney, I deal with trust and estate litigation on a day to day basis, much of which could have been prevented - saving the family thousands of dollars in attorney's fees and substantial stress - had a proper estate plan been done.
For a free consultation about your Estate Plan, or other Elder Law, Trust or Estate Issue within Contra Costa or Alameda County, call my office at 925-322-1763.