California Estate Planning Attorney Blog

I found a very interesting statement on a website that is targeting sales agents. The website http://insurancenewsnet.com is promoting a webinar, teaching sales agents how to double their income by selling funeral trusts. The stunning fact in the article is that sales agents get as much as up to 16% commission for the "sale" of "Irrevocable Funeral Trusts". In my opinion, that is a lot of money for an agent who has nothing else to do but to sell a ready-made-legal-document combined with a life insurance.

Funeral Trusts are an legal instrument designed to shield your final expenses from nursing home-claims. In 2007 Chuck Jaffe of Marketwatch has criticized the sale of those funeral trusts in an detailed article that also explains what funeral trusts are and why they can be useful in some cases. He also stresses that from the viewpoint of a financial planner those trusts are commonly underperforming. I don't want to repeat Chuck here. So if you need further information on the issue of funeral trusts read the article.

Irrevocable Funeral Trusts can also be set up by your trusted estate planning attorney. That way you could choose the trustee yourself and you wouldn't have to trust an insurance company (that actually pays up to 16% commission out of your last expenses!) to administer your trust. A lawyer would also perform a legal check and explain other options to you. Therefore sales-persons, who are truly experts in making their product seem perfect for you should be treated with care. Think twice and if in doubt, consult a lawyer, who is the professional with regard to legal instruments like Funeral Trusts.

In a tough economy it may become necessary for some parents to lend money to their children. Liza Horvath has recently published an article on http://www.montereyherald.com that deals with family loans and estate planning. With this article, I would like to add some thoughts from an estate planner's point of view regarding the intertwined issues of estate planning and family loans.

First of all it is highly recommended to keep loan agreements in between family members in writing. That is especially important - even though you trust each other - because if something happens to one of the parties a third party "professional" might have to figure out, what exactly the parties agreed on. Even more important, if you use a promissory note, both parties will know what they've agreed on (memory tends to fade over time). The written document will also allow to formally write off the loan for tax purpose if it is not repaid as initially intended.

The document should outline all the details of the loan, starting with the loan value and the repayment details (repayment schedule). The document should also contain a clause, the deals with the solution of problems between the parties that might arise in the future (arbitration clause). The document should be written clearly and unambiguously in order to avoid later disputes. If you don't feel comfortable with perfectly drafting such a document it is often a good idea to ask a lawyer to draft or at least to revise your document.

From an estate planning perspective it is also important to consider the loan with respect to your general estate plan. If you have for example a living trust that leaves all off the parent's estate to more than one child in equal shares, the prior loan to one child should be mentioned in the trust document to avoid later disputes that might end up court. You could for example regard the loan as irrelevant or alternatively deduct it from the debtor's share as far as it is not repaid upon the death of the grantor. The decision is up to the grantor. Either way, the living trust document should be updated. If you don't feel comfortable to update your living trust document yourself (see our learning center for living trust amendments), you should ask an estate planning attorney to do so.

Continue reading "Estate Planning and Family Loans" »

Today's entry completes the article about legal guardianship that I have begun last Thursday (see here).

The guardian is only loosely supervised by the probate court, so the guardian should be chosen wisely. The wish for a specific guardian can be contained within the last will or within a separate letter. The legal appointment of a guardian is done by a judge of the probate court. Technically the judge is not bound by the written choice of the parents, but in almost all cases a written choice of the deceased parents is honored. Judges give people who are expressly nominated priority over anyone else.

The ideal guardian for your kids should be the person who has the most advantages compared to everyone else. Most people have to compromise though, because perfect guardians are very rare. A perfect guardian should have good parenting skills like patience and a sense for humor. Money is also an issue if you want your children to be raised in a stable environment. Another major advantage is if the virtual guardian lives nearby. That way your children don't have to move far from their friends if the guardianship should ever become real. Finally it is usually good if a prospective guardian lives a healthy lifestyle and values education. If a guardian a is chosen who fulfills some of these criteria, a judge shouldn't object the nomination of the guardian.

When the nominated guardian is needed, the nomination procedure at the probate court needs to be filed. You do not generally have to have a lawyer. But, it takes quite a bit of time and energy to fill out the court forms, because the forms and rules for notice are complicated. Most people make mistakes that can lengthen the procedure. A family or estate planning lawyer can help you to present your case to the court, especially if one or both parents object to the guardianship. It is also a good idea to consult a attorney if the child has property with a lot of value, you live out-of-state or the child has special needs.

Continue reading "About Guardianship (Part II)" »

Estate Planning is not only about financial matters. Sure, setting up a living trust to avoid costly probate proceedings is important and should not be neglected. I have already stressed that on our website. If you need advice in how to set up a living trust, you should read the firm's learning center first.

Estate planning is also about practical things of daily life. Especially young families with minor children will have to incorporate measures into their estate plan to ensure that one is taking care of the children if both parents die or become incapacitated. The legal instrument to fulfill this purpose is the nomination of a legal guardian.

Technically there are two types of legal Guardianship: First guardianship of the person which means the guardian has custody of the child and second guardianship of the estate which means the guardian manages the child's income, money or other property until the child turns 18. In most cases one guardian serves for both purposes.

A legal guardian has the same right and the obligation to care for a child as the child's parents. Until the child turns 18, the guardian is responsible to provide all the child's needs, like food, education or medical care. Also the legal guardian is responsible for any legal relevant misbehavior of the child after the parents have passed away.

The article will be continued on Saturday, Dec 5.