6 Critical things to know about Beneficiary Designations

This week we're looking at beneficiary designations - and what it's critical to keep in mind when it comes to these guys. So, let's define it first. 

Assets that are registered as "transfer on death" or "payable on death" will transfer to a specified beneficiary upon your death. these types of assets were designed to automatically pass to beneficiaries, avoiding a legal proceeding, and keeping things simple. Examples of these assets include retirement plans, life insurance, IRAs and annuity contracts. The beneficiary can be an individual, a charity, or a trust, among othere things. For other examples, you can read about more assets with beneficiary designations here.

One thing to keep in mind is that these assets are not necessarily included in your estate plan. Hasty estate planning attorneys sometimes fail to mention the importance of beneficary designations because of this. So, if you have an estate plan already, be sure to check that your beneficiary designations are up to date, and consult with your attorney about the advantages and disadvantages of naming your trust as the beneficiary.

Now, while assets with beneficiary designations need not be named in your estate plan, they do still count as part of your taxable estate.

Let's get to the meat of the subject. What is essential for you to know about beneficiary designations. We'll start with 6 tips in this article, but keep in mind it's not a complete list and you'll want to consult with your estate planning lawyer to discuss the best options for you and your family.

1. Your beneficiary designation takes precedent over your Will. This one is especially important if you remarry and forget to change old beneficiary designations. Your new husband, for example, would not inherit your life insurance policy, even though you bequested it to him in your will, if the beneficiary on the actual policy was your old husband. 

2. Consider the Tax Consequences for your beneficary. This point typically comes into play when either your assets are large, or your beneficiary's are. If you designate someone other than your spouse as a beneficiary, that amount will be counted as your taxable estate. This may push you above the estate tax limit. And while the estate tax marker is over $5 million this year, it may be significantly less the year you pass. As for your beneficiary, any inherited assets will be inlcluded in their estate, which could push them over the tax exclusion limit. 

Investment guru Christine Benz also points out the tax consequences of company retirement funds. If you leave company retirement plan funds to someone other than your spouse, they may have to take distributions and pay tax on those distributions. Your spouse on the other hand, could simply roll over those assets into their own IRA.

3. Get to Know the fundamentals of Estate Planning. While you may not have done a formal estate plan, designating beneficiaries is in fact an important step toward completing your estate plan. The next step is a Will. After that you'll want to make sure to complete a Power of Attorney and Health Care Directive as well. Once you've got the basics down, check with a local estate planning attorney to get advice on what else you'll need. In California, most families with over $150,000 in assets will also find a living trust to be a good choice as well. Your estate plan should go hand in hand with your beneficiary designations, so don't forget to bring these up with your attorney too.

4. The Custodian (Bank, Insurance, etc) must have your beneficiary form on file. While this one may seem obvious, it's a great reminder to us all to get that stack of paperwork out and fax, email or mail the beneficiary form in ASAP. If the custodian of your account does not have your beneficiary on file, legally there is no beneficiary at all. Now, this brings us to our next point:

5. No beneficiary at all can be better than naming your Trust or Estate. With some assets this will not be an issue - naming your trust as a beneficiary is just fine, and might actually be advantageous. However, there are some assets/accounts that will cost your beneficiaries a lot of money if they pass through the estate. One such asset is the IRA. An IRA with a designated beneficiary is protected from creditors when the owner dies. If it passes through the estate, however, it can be used to pay the decedent's debts. Financial advisor Deborah Jacobs also points out in her article, When Bad things happen to good people with IRAs that your beneficiary will not be allowed to stretch out distributions if the IRA is left to the estate.

6. Consider Beneficiaries with Special Needs. Most loved ones with special needs take advantage of  government benefits to provide for their well being. Their eligibility for benefits, however, may be affected if assets are bequested to them directly. A Special Needs Trust can ensure that they keep their benefits, while having additional support from an inheritance. The other thing to consider is whether or not they are able to manage the assets. In this case, a good Estate Planning attorney can advise you on your best option. This may simply be a trust with responsible trustee, but could also include a limited conservatorship.  

If this seems like a lot to consider, hire a professional. A few thousand dollars spent on organizing your assets can save your loved ones thousands more in the long run. A good estate planning lawyer can help you organize your estate plan, and if necessary refer you to a financial advisor to help you keep everything in order.

As a Walnut Creek Estate Planning attorney, I help clients in Contra Costa County, Alameda County, and the San Francisco East Bay put together their estate plans. I offer a free consultation from my Walnut Creek Elder Law and Estate Planning firm, and am always happy to answer your questions. Call 925-322-1763 for an appointment or phone consult. 

Do you Need an Attorney to do your Estate Plan?

Do you need a Lawyer to do your Estate Plan?

The simple answer is yes, the more accurate answer is maybe. Many of the documents contained in a classic estate plan can be filled out using online programs for a relatively low cost. If you have a simple situation - for instance, 1 house, 1 child, 1-2 bank/brokerage accounts, and of course, complete faith in the ability of said child to manage your assets, this option might suit you. For persons with a slightly more complicated situation, however, professionals agree that securing an experienced Estate Planning attorney is the safest way to go. It is also the least expensive route if your assets total more than $150,000. If your assets are not secured in a trust (part of your estate plan), your property must go through Probate. Do It Yourself Estate Planning is better than no estate plan at all, but it's a risky proposition when you weigh the 1 pro (low cost) against the many risks.

In my experience as a Contra Costa County Estate Planning lawyer who frequently works in Probate and Trust litigation, I see the consequences of haphazard estate plans on a daily basis. Most of my litigation cases involve a lack of estate plan, while others exist because they were done by an inexperienced lawyer, or put together by the person who has passed. I have one client presently who hand wrote their own will based on internet examples. Due to several oversights on his part, his wife and daughter (who is an attorney as well), now have to give a portion of their inheritance to court fees and attorneys fees. 

Specific language is also important. This is true for all of the documents in a typical estate plan. Your Trust, Your Will, Your Power of Attorney, and Your Healthcare Directive are Yours. They should properly reflect your wishes in a legally sound manner. An experienced estate planning attorney will know how to craft the wording specifically for your family and its unique dynamics.

In addition, the documents in your estate plan should have a high degree of specificity. When a lack of specificity exists, your will and/or estate is left open to interpretation. Different interpretations lead to possible litigation and high attorney fees. A good Estate Planning Attorney can put your mind at ease by ensuring all of your bases are covered.  

The cost of a complete Estate Plan in Contra Costa County runs between $2-$3,000. The attorney fees of an estate going through Probate, of a $1 million dollar estate for example, are above $20,000. Fees go up as the asset value increases. The cost of litigation can certainly be much more, but is best avoided by a legally sound Estate Plan tailored specifically for your needs.

I offer a free 30 minute consultation for all clients from my Elder Law office in downtown Walnut Creek. Call 925-322-1763 to get started.

The Importance of the Advance Health Care Directive and the Power of Attorney

"Ending Life," a piece by 60 minutes that aired on July 19th, highlights the importance of having an advance health care directive and power of attorney. The piece detailed the criminal case of Barbara Mancini, who was arrested for allegedly aiding her father's suicide. Her actions were simple: she handed her dying father a bottle of morphine, nothing more. Four days later he died in the hospital, sparking an End of Life Debate that has gotten considerable press. As an Estate Planning attorney, the story reiterated for me just how important it is to have detailed legal documents such as an Advance Health Care Directive and Power of Attorney. While such forms cannot always prevent complications, they can certainly provide insurance against it. While lawyers are no doubt familiar with what these documents are, most of us are not. So, what exactly are they, and how can they help us when we're older?

Advance Health Care Directive

Under Federal Law, we all have the legal right to give specific instructions regarding our own health care. The Advance Health Care Directive, also called a living will, is the legal document that specifies your wishes, should you become unable to make decisions or become incapacitated. Because of the sophistication of medicine and medical technology that exists today, having a document that specifies how you wish to live or be cared for, has become essential. The expense, pain, and burden which our life prolonging technology affords us is something many of us may not wish to endure. Or, alternately, may wish to take advantage of.

The "Power of Attorney" typically goes hand in hand with the Advance Health Care Directive. 

Power of Attorney

In addition to having the right to specify our own health care wishes, by law we have the right to name another person to make health care decisions for us. A Power of Attorney outlines not only who you wish to make decisions for you, but how and when you wish them to do so.

Do you need the help of an Attorney?

While you can fill out a legally valid Health Care Directive form provided by the state, most people will benefit by having an Advance Health Care Directive crafted by an experienced Estate Planning attorney. The benefit of working with an attorney comes down to foresight and specificity. For example, the form provided by California has two options to choose from:

"I do not want my life to be prolonged if the likely risks and burdens of treatment would outweigh the expected benefits, or if I become unconscious and, to a realistic degree of medical certainty, I will not regain consciousness, or if I have an incurable and irreversible condition that will result in my death in a relatively short time. "


"I want my life to be prolonged as long as possible within the limits of generally accepted medical treatment standards."

When you consider these two options, you will realize they are not very specific. An experienced Estate Planning lawyer can help you craft your directive in a way that not only guards against potential complication (or unnecessary pain for that matter), but honors your wishes and values. The Advance Health Care Directive is a standard part of any well designed Estate Plan, and has no additional cost associated with it. 

The same goes for your Power of Attorney. Yes, you can print out a form and fill it out yourself. However, taking advantage of an attorney's expertise helps to insure against future unforeseen problems. For example, a particularly important part of the document is called the "Agent's Authority." On the form provided by the state of California, the following choices are offered:

My agent is authorized to 1) make all health care decisions for me, including decisions to provide, withhold, or withdraw artificial nutrition and hydration and all other forms of health care to keep me alive, 2) to choose a particular physician or health care facility, and 3) to receive or consent to the release of medical information and records.

At a basic level, an attorney can make sure your AHD (advance health care directive) and POA (Power of Attorney) do not conflict with one another. They can also help you to provide more specificity. As you may notice, the above statement gives the person with Power of Attorney free reign. A good estate attorney will help you craft a Power of Attorney that takes into consideration the dynamics of your particular situation and to foresee any potential complications. The Power of Attorney is also a standard part of any well designed Estate Plan, and is included at no additional cost.

To complete your Estate Plan, or update a previous Estate Plan in California, contact my law office at 925-322-1763. I offer a free consultation and specialize in Estate Planning in Contra Costa County and Alameda County.


What is Elder Law? Part 1

 Elder Law Part 1: Estate Planning 


While the mansion in the photo is indeed elderly (circa 1700), and many would no doubt call it an "estate," Elder Law as it relates to estate planning isn't always about large homes, or even elder persons.

The term “Elder Law Attorney” actually refers to a fairly new field of Law - yes, you guessed it - Elder Law. This speciality encompasses the traditional Estate Planning arena, but also includes healthcare, planning for mental disability or incapacity and the receipt of benefits as related to seniors. Often Elder Law overlaps with other practice areas and legal issues when a person is over 65. So how has this field come to be?

One of the primary reasons is the rapid increase of the elderly population in the United States. In the early 2000’s, 12% of our population was over 65 - but by 2050, it’s estimated that it will be upwards of 20%. These same people are also wealthier and more educated than ever before, thus giving them more political sway. This power, however, has been met with the cutting of government benefits upon which many senior citizens depend, and the rise of healthcare costs. In order to protect their assets, more and more seniors are seeking legal assistance in order to protect their hard earned assets.

In this post series, I will address the primary facets of Elder Law: Estate Planning, Medi-Cal Planning, Conservatorships/Guardianships, Elder Abuse, Estate & Trust Administration, and Probate & Trust Litigation. First, let's consider Estate Planning as it relates to Elder Law.

Estate Planning and Elder Law:

An estate plan with a Trust (in addition to a will) is essential for anyone with assets over $150,000.  However, an estate plan is also necessary to plan for one's medical care should they no longer be able to make medical decisions for themselves. A durable Power of Attorney and Advance Healthcare Directive provide a means by which to secure a trusted 3rd party to make medical decisions in case of incapacity. These documents are typically part of an estate plan, which can be done with an experienced estate planning attorney.

Estate Planning and Elder Law are also closely tied together in the sense that if one does not formally complete their Estate Planning documents and should become incapacitated or pass away, their family will be left to cope with one of the other facets of Elder Law - Probate, Conservatorship/Guardianship, Estate Litigation, and possibly Financial Elder Abuse. A probate is defined as the court distribution of assets upon the passing of someone who may have a will, but does not have a Trust. A conservatorship (also called guardianship in some states) is necessary if an individual becomes mentally unable to care for themselves, their assets, or both. In Contra Costa County, the majority of conservatorships I have dealt with as an attorney are for elderly persons who have Alzheimer's or dementia. Probate or Estate Litigation can occur when there is no will, or a will in which gray area exists.

If estate planning documents are not carefully worded, specifically for you and your family members by an experienced attorney, room is left for argument between family members. Family members, as we all know - can and will argue. Arguments most frequently ensue over money and assets, but can occur when there is a contested conservatorship or other disagreement about medical care as well. Without estate planning documents, elder abuse claims can arise around financial elder abuse or physical elder abuse. Example: a sibling receives money from a parent just prior to passing instead of it going through probate to be distributed to all the children equally. Estate planning documents do not exist, so another sibling accuses the sibling who received money of applying "undue influence" to the parent, who was known to have dementia. Physical elder abuse claims can occur in situations like the Casey Kasem case, in which his daughter decided to "pull the plug" on his life support machine and his wife decided to remove him from the hospital and take him on a wild west coast excursion.

The bottom line is obvious: if you haven't done your estate plan, it's a really good idea to get it out of the way. I suggest going with an Estate Planning Attorney who specializes in Litigation - that way, they're familiar with all of the ways things can go wrong, and can ensure your documents are executed as air tight as possible. And if you have a parent or elderly relative who has not yet done an estate plan - encourage them to do it as well.

Estate Planning is an often overlooked but critical part of a healthy financial future. If you need an estate plan, or need to update your estate plan, contact Matthew B. Talbot, Walnut Creek Elder Law attorney at 925-322-1763.