It’s Wise to Do All Estate Planning Early

Estate planning is an often overlooked obligation that if neglected can wreak havoc with family members left behind.

Thomas E. Stindt, a Woodland Hills lawyer and frequent correspondent to Legal View, shared his frustration about several neglectful clients in a letter earlier this year:

“The accumulation of property over a lifetime of work and saving, and the growth of investments or a family business all involve a responsibility, and it is one which is frequently overlooked. That responsibility is to a spouse, partner, child or close relative, and it is a responsibility to not leave for someone else to sort through and straighten out an entangled mess of jumbled titles, property holdings, and half-completed transactions.

“Why do people of substantial accomplishment wait until a spouse is unable to sign deeds or even give medical consents or instructions, then feel unfairly put upon by the system?” he wrote. “A health care power, a trust, a durable power, any number of (legal) devices could save family members thousands of dollars of expense and weeks of delay.”

I couldn’t have said it better.

The first step in any estate planning is to thoroughly understand your own financial situation and the available legal options, many of which have been mentioned in this column in the past. That may require some time and effort on your part. Buying one of the many good books available on estate planning and talking to friends who have already consulted estate planning lawyers are good initial steps. If your estate is simple, you may find the fill-in-the-blanks will form described in last week’s column best for you.

However, depending upon the complexity of your financial position, you may need personalized legal counsel.

But be a smart legal consumer. Come prepared. Understand what your lawyer is talking about when he or she refers to a trust, a durable power or a health care power.

To start you on your way, let me explain briefly a few of the devices Stindt mentioned. The durable power of attorney allows you to appoint someone else to handle your financial affairs, even if you become incapacitated.

This allows you to avoid the expense and inconvenience of a court conservatorship proceeding. The court won’t have to select someone to act on your behalf, because you will have already done so. “The Power of Attorney Book,” written by Denis Clifford and published by Nolo Press, includes tear-out forms.

A separate issue from your financial affairs is health care decisions. Who makes them if you are incapacitated?

There is another legal document, called a durable power of attorney for health care, that allows you to designate a person as your agent to make decisions about surgical procedures, life support equipment and other health care choices that you are unable to make.

The California Medical Assn. has published a form and explanatory booklet. For a copy, send $1.50 plus area sales tax to Sutter Publications, P. O. Box 7690, San Francisco, 94120-7690, telephone (415) 882-5175.

One other planning option Stindt mentioned is a trust. The most common one is known as a living trust. A trust is a legal entity into which you can transfer your assets.

The trust owns the assets, not you, but you control the trust by appointing yourself as trustee. After your death, the person you select as the successor trustee takes over control of the trust, and follows your instructions in the trust document. You avoid probate, but trusts are not a panacea. They don’t save taxes, and they do require paperwork.

One problem Stindt has noticed with clients who have established living trusts is that they forget to fund them. It’s not enough to create a trust document, which is commonly done by an attorney.

Then you must make sure that you or your lawyer complete the paperwork to make the trust the legal owner of your property, for example, by changing the title to your home or bank accounts to reflect the trust ownership. If you don’t do that, the property won’t be subject to the instructions in your trust and will be subject to probate.

For example, if property is listed as owned by two joint tenants, it won’t matter what the trust says, the surviving joint tenant will inherit the property.

“If Uncle Mort is to get his brother’s half interest in the deli,” explains Stindt, “and is relying on the trust which says so to make this happen, it won’t work out that way if the brother and his wife hold title to the deli as joint tenants.”

And Uncle Mort wouldn’t be too happy.