Wednesday, May 24, 2017

Who Has the Title to Your Deed: You May Be Vulnerable to Probate

This case study is a cautionary tale, and unfortunately, we see this kind of situation all too often. It highlights the importance of what is called vesting, or the way in which title to a Deed is held. It seems like a small thing, but a Deed is the legal document that identifies the property owner. Without the title, it is impossible to buy or sell a home. And as our client discovered, she also couldn’t update her Living Trust.

Updating Claire’s trust to reflect the changes in her life

It began when our client, “Claire”, came in to our Walnut Creek office to update her Living Trust. She’d experienced some significant changes since she’d created her Trust more than ten years before. She’d divorced, added a grandchild, lost her daughter to breast cancer and her mother to heart disease, changed jobs so that she was making significantly more money, bought a very promising stock that was soaring, invested in a Tahoe timeshare and purchased a life insurance policy. These were precisely the kinds of life events that should alert people to the need to be updating their Trusts.
We began amending Claire’s Trust to reflect the many changes in her life, but ran into a problem when we got to Claire’s Walnut Creek home. We needed to move the home into the Trust, but it was partially owned by her mother, and mom had died in 2015. Unfortunately, the Deed didn’t state that the owner and her mother were “joint tenants”, which meant that full title didn’t automatically pass to Claire when mom died. The result: 50% of the property would now have to go through Probate to determine ownership.

Probate a growing practice area for us

At California Document Preparers, uncontested Probate is a growing practice area for us, and this is one of the situations we most frequently encounter.
As part of Probate, the Court appoints a personal representative, or administrator, to settle the estate, so we work closely with the administrator throughout the Probate process. Claire became the administrator for the Probate, responsible for the following:
  • Placing a notice in the local newspaper and mailing notices to creditors. Probate is a public process.
  • Collecting the Probate property of the decedent.
  • Paying all debts, claims and taxes owed by the estate.
  • Collecting al rights to income, dividends, etc. and settling disputes.
  • Distributing or transferring the remaining property to the heirs.

Access to the decedent’s accounts

As an administrator, Claire can access all of the decedent’s records to understand the financial landscape. This may include valuing assets, taking physical custody of assets and selling assets, as necessary, to pay off debts or expenses. In this case, since Claire’s mother had already dealt with those financial assets by beneficiary designations, the only outstanding issue was the Deed to the home.
During Probate, the deceased’s estate becomes a separate tax entity, so Claire had to obtain a federal identification number. She was also responsible for filing the estate’s tax return and a final individual tax return.

Distribution of remaining assets

Once all taxes and debts have been satisfied, the Court distributes any remaining assets according to state law. In California, as in most states, the first priority is given to the deceased’s spouse, followed by the deceased’s children. In this case, the only asset in question is the 50% ownership of the home in which Claire is living. Claire was her mother’s only daughter, so mom’s interest in the house was distributed to Claire.

By vesting the Deed as joint tenants, they would have avoided Probate

If the Claire and her mother had been joint tenants on the Deed to their home, this scenario would have been dramatically simplified and they would have avoided Probate. When we prepare a Deed, we present all the options so clients can make informed decisions about how they wish to hold title—hopefully avoiding an unfortunate situation like this.
Do you need to transfer your Deed? Call California Document Preparers at one of our three Bay Area offices today to schedule an appointment. You can also jumpstart the process with our easy-to-use, secure online storefront–we’re still available by phone and email if you have questions. We’re helpful, compassionate and affordable.

Tuesday, May 16, 2017

Updating Living Trust After Death of Spouse


When we create Living Trusts for our clients, we always caution them that there’s a reason these are referred to as Living Trusts---these are living documents that need to be updated with important life events.

So what are life events?

A good way to think of this is anything that would affect the inheritance of those who are included in the Trust: Births, deaths, divorce, the acquisition of significant assets, including real property.
A good example of someone’s updating his Trust is Mike, from Pleasant Hill, who came in to update his Trust after his wife, Mary, died from a long battle with breast cancer. Mike and Mary originally created their Trust in 1997, when their daughter Lucy was 15 and their son Joey was 17. They had named Mike's older brother, Bob, as the Successor Trustee, and his wife's twin sister, Jennifer, as the Backup Successor Trustee. Lucy and Joey were equal beneficiaries when they reached 25.

Amending their old AB Trust

Mike and Mary had a complex AB Trust, fairly common at the time, that was to be divided into two Trusts when the first spouse died. But according to Article 7.3 of their Trust, at the death of the first spouse, the surviving spouse can amend or revoke any part of the entire Trust. As the lone Trustee, Mike had permission to amend his Trust.

Needs had changed; Mike now wanted adult children to serve as Trustees

When Mike and Mary had originally created their Trust, their kids were young, and they needed to include adult Trustees in the event something happened to them. But those kids were now grown and married, with lives of their own. Mike wanted to remove Bob and Jennifer as Trustees and make Lucy, a CPA in San Jose, the Trustee—she was most able to take care of him and manage his affairs if he became incapacitated. Joey, a graphic designer, would be Lucy’s backup.
Mike’s home was in the Trust, and he had inherited his mother's home from her Trust when she died. His mother's home was in Washington state, and while he had added Mary to the title, he had never moved this home into their Trust. He wanted to move his mother’s home into his and Mary's trust.

How California Document Preparers assisted Mike

  • Amendment to Living Trust. Mike amended their Trust, converting it from an AB Trust.
  • A change of Trustees. He amended the Trustees, making his CPA daughter Lucy the first Successor Trustee and Joey her backup. Lucy also became his Agent with Power of Attorney for financial matters and the Agent for his Advance Healthcare Directive.
  • Affidavit of Death of Joint Tenants. We created an Affidavit of Death of Joint Tenants, informing Washoe County, Washington, that Mike’s wife had died and prepared a Deed to transfer his mother’s home into his and Mary's Trust.
  • Pour Over Will. A standard part of our Trust package is a Pour Over Will, which Mike created. There is a lot to think about when preparing legal documents, and clients are often concerned that they will have forgotten to include some of their assets in their Living Trusts. The Pour Over Will acts as a safety net, stating that any remaining assets or property not previously transferred into the Trust “pours over” into the Trust so they may be distributed according to the terms of the Trust.
  • Personal Organizer. We also included a personal organizer, a place for listing contact information of healthcare providers, insurance agents, financial advisers, veterinarians, etc. We also encourage our clients to include login information to their digital assets.
Mike's total fee was $949. This fee included amending and updating his Living Trust, the Will, Power of Attorney, Advance Healthcare Directive, Affidavit of Death and Deed Transfers. The fees for our Living Trusts and Deeds are fixed rates--no surprises.
We were delighted when the following week Mike’s daughter, Lucy, came in to create a Living Trust for herself and her husband, Jake.

Call California Document Preparers today at one of our three Bay Area offices today to schedule an appointment to update your Living TrustWe’re helpful, compassionate, affordable.

Monday, May 8, 2017

Single Mom Creates Living Trust to Provide for Her Daughter

The concept of family has evolved. It’s not uncommon for men or women these days to decide that they really don’t want to get married at all, but they do want to have a child and be a parent. The families they form may include the child’s birth father or mother—or not. It’s really up to them to define their version of the new American family.

Introducing Mary: A 34-year-old pregnant surfer

One such woman, “Mary” recently came in to our Walnut Creek office. She is 34, lives in Danville, has a great job, loves to surf at Ocean Beach—and is five months pregnant with a little girl. She and her boyfriend, “Oliver” have been together for five years, and he’s a software salesman who does a fair amount of traveling. When she told him that she was pregnant, he wanted to get married. But while she loves Oliver, she doesn’t want to marry him.
Mary owns two properties—a four-unit apartment in Alameda and the home in Danville in which she lives. It had been her grandmother’s house, and when she died, Mary and her parents became equal owners.

Having a child will dramatically change her lifestyle

Mary is healthy, happy and eagerly anticipating the birth of her daughter. She knows that being a single mother is going to be challenging and that her lifestyle will change dramatically. Even with her demanding job, she knows she must prioritize the needs of her new daughter.
But Mary has always wanted to have children, and she knows that this is the right time. She also knows she can count on her strong support system, including Oliver. Her parents, who live close by, are ecstatic about the prospect of their first grandchild. Mary also has friends and extended family members who live in the East Bay, and she knows she will need to rely on all of these people as she navigates her new life as a single mom.

What happens to her daughter if something happens to Mary?

Mary is worried, however, about what would happen to her daughter if something happened to her. She wants to make sure her daughter would inherit her assets, but she also wants to make it easy for Oliver to raise their child.

Here’s how California Document Preparers helped Mary provide for her daughter:

  • We created Mary’s Living Trust package from the information she provided in our easy-to-use workbook.
  • She named Oliver and her father as Co-trustees.
  • Mary left the apartment to Oliver and her home to her parents.
  • She named Oliver as the child's guardian and her sister as a backup guardian.
  • Our comprehensive Living Trust package includes a Power of Attorney, and she decided that her father, an attorney, will be her Financial Power of Attorney, with Oliver as the backup.
  • Mary named Oliver, her sister, mother and father on her Advance Healthcare Directive.
  • We also did two Deeds transfers for Mary; the Alameda apartment building is 100% in her Trust and her grandmother’s Danville home is 50% in her parents’ Trust and 50% in her new Trust.
Mary is delighted that we were able to take care of her Trust in one week--long before her child is due. It is giving her peace of mind as she prepares for the birth of her daughter.
There’s a common misperception that Living Trusts are just for old people! In the same way that Mary wanted to provide for her daughter if something happened to her, anyone with dependents should have a Trust.
Call California Document Preparers at one of our three Bay Area offices today to schedule an appointment. We’re helpful, compassionate, affordable.

Thursday, May 4, 2017

The Economics of Divorce: 6 Ways to Prepare

If you’re thinking about divorce, you’re likely agonizing over your decision. While you’d love to be living without the constant bickering and tension that you know are affecting your kids, divorce would likely mean making some economic sacrifices. Living in the Bay Area is expensive, and you’ve built a life predicated on two incomes. Will you be able to afford your current lifestyle on a single income or will you need to make changes, including selling your home? Should you be talking to your boss about a raise or looking for a new job altogether—one that pays a lot more money? What about the timing? Can you be looking for a new job while you’re in the process of getting a divorce?
Here at California Document Preparers, these are among the concerns we frequently hear from our clients. While they invariably decide that creating a new life, free of an abusing spouse or a dysfunctional relationship is worth it, there is significant anxiety associated with the decision. And ultimately, many of those anxieties are related to the economics of divorce.

If you’re contemplating divorce, here are six things to do now to prepare 

  1. Take stock of your mutual assets. Take stock of account balances and understand the total value of joint assets, including checking, savings and brokerage accounts, retirement plans and life insurance policies, real property, vehicles and other acquisitions that are part of your total net worth. You will need this information as you begin the division of property.
  2. Be fiscally conservative. Resist the urge to make significant withdrawals or expensive purchases prior to or during the divorce process. You’re going to have some big expenses coming up.
  3. Prepare for a new career ASAP. As soon as people know they are getting a divorce, they should think about how they will support themselves in the years after the divorce. If one spouse has been a stay-at-home mom or dad, it’s time to get serious about reentering the workforce. A common mistake is waiting until a divorce is final before beginning a job hunt. By that point, precious months have been squandered that could have been spent polishing skills, getting new training or networking to build important business contacts.
  4. Don’t get emotional about your home or other items. In many cases, people give up valuable assets or other rights in order to keep the family home. Selling the house can be traumatic because there are so many emotions tied to the family home—it’s where you once lived happily together and raised your kids; it may be in a great neighborhood where you’re surrounded by friends, but sometimes it’s the right thing to do. Try to look at the big picture, with the house as just one part of the overall accumulation of assets.
  5. Think about the tax implications. Next to a house, a retirement fund may be the most valuable asset a person owns. But couples shouldn’t simply cash out and split the proceeds. There are tax consequences of trading one asset for another as you divide your property. The vacation home is a tax-free benefit while the 401k is taxable.
  6. Consider all insurance options. Divorces commonly require one spouse to pay child support or maintain health insurance for dependents. But if that person loses his/her job or is unable to work for whatever reason—something that is all too common these days—a significant amount of support suddenly disappears. Picking up the cost of health insurance for dependents can be a significant financial contribution.

Do you have questions about our Uncontested Divorce?

We assist clients who can agree on division of property and a parenting plan. Our family law team prepares the legal documents, notarizes and files them with the court. Divorce is never easy, but we’re sensitive to the emotional needs of our clients and are in touch throughout the divorce processWe’re helpful, compassionate and affordable.

Tuesday, April 25, 2017

Living Trusts and the Issue of Mental Capacity

These days, hardly a day goes by that we don’t hear about someone we know being diagnosed with Alzheimer’s or some form of dementia. In some tragic cases, it comes way too early and it’s agonizing to see a life cut short.

Alzheimer’s: No hope, no cure

Alzheimer’s is one disease for which we have no cure, no revolutionary treatment. It violates every demographic, and the statistics indicate that nearly 80% of us will experience some kind of dementia before we die—it may not be the complete debilitation of Alzheimer’s, but we’ll have some degree of memory loss and inability to deal with our surroundings. For those who are in the process of creating a Living Trust, along with a Power of Attorney and Advance Healthcare Directive, this presents a potential problem. At what point is someone incapable of creating and signing a legal document such as a Living Trust?

Legally, everyone is presumed to be competent

However, the presumption that someone has legal capacity can be challenged in court. If the challenge is successful, the court will invalidate the Living Trust, making it necessary for the heirs to go through Probate to settle the estate and distribute the deceased’s assets.

Possession of a mental deficit

In California, testamentary incapacity does not refer to physical or mental disorders, but rather to one of three factors: The inability of a person to understand and sign estate-planning documents, the presence of an unsound mind or the possession of a mental deficit “so substantial that, under the circumstances, the person should be deemed to lack legal capacity.”
It’s important to note that age, illness and disease in themselves are not factors in the determination of testamentary capacity. People can be well into their 90s or suffering from debilitating disease, yet still have the capacity to be fully cognizant of what they are doing, legally able to sign a Will and Living Trust.

Under California law, deficits that may affect testamentary capacity are divided into four categories.

  • Alertness and attention. The court would be looking for poor arousal or consciousness; a weak orientation to time, place, person, and situation; inability to concentrate.
  • Information processing. This includes deficits in short or long-term memory; the inability to understand or communicate with others; the lack of recognition of familiar objects and people; the inability to understand and appreciate quantities; the inability to reason logically and to carry out a plan or action.
  • Thought processes. Extreme examples of inability to complete thought processes would be hallucinations, delusions and uncontrollable, repetitive thoughts.
  • The ability to modulate mood and effect. In this case, there would be evidence of persistent, recurrent moods inappropriate to an individual’s circumstances, including euphoria, anger, anxiety, fear, panic, depression, hopelessness, despair, apathy or indifference.
The presence of one or more of these factors does not necessarily mean someone is incapable of making decisions regarding his/her estate or signing related legal documents–an illness or prescribed medications may temporarily influence testamentary capacity, for instance. Once the prescribed drug treatment is finished or the illness has passed, the person may be fine once again.

With a diagnosis comes some immediacy

But evidence of any one or all of these factors in at least some degree raises the need to take extra precautions if you or someone in your family is creating estate-planning documents. Once people have been diagnosed with dementia, there is, of course, the need to create end-of-life documents as quickly as possible. In addition to the issue of testamentary capacity, there are very practical considerations–they may soon need these documents to be in place if they are no longer able to take care of their own affairs and make decisions about their own care. They will need to identify a Power of Attorney and an Agent for their Advance Healthcare Directive.

Wednesday, April 19, 2017

Wedding Season: Is a Prenup Part of Your Wedding Plans?


June is the month when wedding season gets into full swing, which means April is crunch time for wedding plans. Increasingly, those wedding plans include a Prenuptial Agreement.
We read about celebrities and other wealthy individuals who wouldn’t dream of getting married without a carefully conceived Prenuptial Agreements to protect their fortunes. Other couples create their Prenuptial Agreements with provisos that leave us skeptical about the long-term stability of a marriage that’s based on these kinds of priorities:
  • Who gets the pool boy, the gardener and the dog.
  • The right to perform random drug tests.
  • A claim on all frequent-flier miles should a spouse be unfaithful, plus severe financial penalties for incidents of unfaithfulness
  • Thresholds on the amount of weight both partners can gain. If either exceeds the limit, he/she will be fined $500/pound.
  • Limits on the number of football games the husband can watch with his BFFs; the wife’s constraints on the number of reality TV shows she’s allowed to watch.
  • Assurances that the kids will be raised as vegans.
We can laugh at these silly stipulations that have little relation to the hard work of making a long-term commitment and sharing a life with someone. Thankfully, these are rarely the kinds of terms that we see our clients including in their Prenuptial Agreements.

Prenuptial Agreements are on the rise for a few very good reasons

  • Couples are entering marriage later in life. They’re likely have gone to have graduated from college and often graduate school and have well-paying jobs. They’ve worked hard and accumulated assets—a home, a portfolio, a 401k. These are level-headed people who may have fallen in love and truly want to get married and live happily ever after, but they’re also practical enough to want to protect their assets.
  • Divorce has created another demographic that is increasingly inclined to create Prenuptial Agreements. These couples, like the ones described above, also tend to be older and have accumulated assets that they want to protect. But there’s another big factor here—each partner is likely to be bringing children into this relationship as they merge and become one of America’s many blended families. Especially for older couples who are getting remarried later in life, there’s a likelihood that each spouse wants to protect the assets that he/she is bringing into the marriage and, ultimately, the inheritance of his/her own children.
While there is often some initial reluctance to talk about money and creating a contract before the wedding has even taken place, it is really a very logical thing to do. Marriage is a contract, and thoughtfully working through the process of creating this agreement is an excellent way to begin a marriage.

Attorney review: A very good idea

Because a Prenuptial Agreement deals with the property rights of the marrying parties, it is advisable for both parties to have separate and independent attorneys review the agreement. Certain provisions, such as giving up the right to spousal support, are unenforceable if the party who later wants support (in a divorce proceeding) did not have an independent attorney explain the agreement to that party. California Document Preparers has relationships with excellent local attorneys and can provide referrals for the reviews. Combining quality legal document assistance with legal advice is an excellent use of your legal dollars.
Are you and your fiancĂ© considering a Prenup? We know this can sometimes be difficult for couples, so we’re sensitive to their needs. Contact California Document Preparers at one of our three Bay Area locations and schedule an appointment today! We’re helpful, compassionate and affordable.

Wednesday, April 12, 2017

April 16–National Healthcare Decisions Day: The Importance of Naming a Healthcare Agent




April 16 is National Healthcare Decisions Day, so we want to emphasize the importance of advance healthcare planning. This is a difficult conversation—no one really looks forward to sitting down with his/her loved ones and talking about end-of-life planning. Instead, people tend to ignore it and keep it buried at the bottom of their to-do lists.

Today’s baby boomer generation has redefined “aging”

It’s easy to put off advance healthcare planning because today’s baby-boomer generation has raised the bar on aging—they’re youthful and vigorous; embarking on new careers; traveling the world and living their lives to the fullest. They think they’ll have plenty of time for end-of-life-planning when they get “old”. But the time for planning is always too soon until it’s too late. Sadly, half the people over 65 who are admitted to a hospital are unable to make decisions for themselves. The reality is that the majority of us will have at least a temporary period when we are unable to communicate our healthcare wishes.

What is an Advance Healthcare Directive

Advance Healthcare Directives (AHDs) are written directions that appoint another individual to make healthcare decisions on your behalf. You not only should be appointing a trusted person to make decisions for you, but you should be thinking about important decisions such as whether or not you want to remain in your own home or in nursing care, when to enlist the help of hospice care when you are clearly in failing health.

How to choose an Agent or Healthcare Proxy

A Healthcare Proxy (also called a Healthcare Agent) is the person you choose to make healthcare decisions for you if you’re incapacitated or too sick to make them for yourself. Once permissioned, your Proxy can talk with your doctors, consult your medical records, and make decisions about tests, procedures and treatment options.

Some things to be thinking about as you choose a Healthcare Agent

  • Can you trust the person to make decisions that are in line with your wishes?
  • Will the person make decisions on your behalf even if his/her own wishes and belief system don’t necessarily align with yours?
  • Will the person find it difficult making decisions on your behalf because of the close emotional connection?
  • Can your Agent make fairly quick decisions–“Your mother has pneumonia. Do you want us to start antibiotics?” or “Your brother is no longer able to take food by mouth. Do you want us to insert a feeding tube?”
In one example, a woman initially chose her mother as her Agent. But then she realized that she would likely outlive her mother, making this an impractical choice. She also knew that it might be too painful for her mother to be put in the position of making decisions that would have such a direct effect on her life, so she chose a friend instead.

When to choose an Agent or Proxy

Up until age 18, parents automatically serve as a child’s Agent. After 18, no one can access your medical record or make decisions for you unless that person has written permission. Everyone age 18 or older should complete a Healthcare Proxy form — even if perfectly healthy. If you’re over 18 and haven’t yet chosen a Healthcare Agent, the time to do this is now!

It’s good to review your choice of proxy:

  • At the start of each decade. When you turn 20, 30, 40, 50, 60, 70, etc.
  • At a major life event. When you go to college, get married, have children, are eligible for Medicare, have a major illness.
At California Document Preparers, we make getting an Advance Healthcare Directive easy; it’s part of our comprehensive Living Trust package that also includes a Power of Attorney. We want our clients to be thinking about all of the details that should be included in this document. We provide space to list important contact information for healthcare providers, financial service advisers, insurance agents, veterinarians, etc. We also encourage our clients to include the logins and passwords to their online accounts. The more information you provide, the easier it will be for your loved ones at what will be a very difficult time.
Call California Document Preparers at one of our three Bay Area offices today to schedule an appointment to create your Living Trust and Advance Healthcare Directive. We’re helpful, compassionate, affordable.