Countdown for a Stress-free New Year

End of life planning can be an unsettling process. No one wants to think about death, much less plan for it. Yet while the majority of our Living Trust clients are older, often retired or thinking about it, anyone who has assets and a family should have a Trust. It documents how you want your property to be distributed, how you want your children cared for if something should happen to you. Rather than being unsettling, many of our clients tell us that creating their Living Trust provides important peace of mind.

A New Year and a fresh start

There’s a good chance that you’ve been putting this off for a while, so here’s a countdown to a stress-free 2018. Make this the year you finish creating your Living Trust and related documents.

5. Create an Advance Health Care Directive

Creating an Advance Healthcare Directive is an important part of long-term planning. Unless your wishes are stated explicitly in writing, doctors, hospitals and EMTs are taught to keep people alive—not necessarily to follow their wishes. Healthcare professionals are not legally bound to listen to your loved ones.

Think about how you want to spend your final days. If you should become incapacitated, do you want to be at home, surrounded by family, perhaps with the help of an aide or hospice, or in a nursing facility? You will need to think about whether you want to sign a Do Not Resuscitate (DNR) Order. Whatever your wishes, you need to share them with your family and your doctor. Make sure you choose people whom you trust to carry out your wishes—even if their views conflict with their own beliefs or feelings.

4. Appoint a Power of Attorney whom you trust

A Power of Attorney is that person whom you trust to manage your life if for some reason you are no longer able to do this yourself. A Power of Attorney will be responsible for paying your bills, taking care of your taxes and other financial commitments as well as making important healthcare decisions. This can be a demanding role that requires time as well as the ability to manage financial matters, so choose this person carefully.

3. Review a Will or Trust if it is more than five years old

Surprisingly, more than 50% of Americans die without a Will or a Living Trust. The result? Their families will have to go through Probate—a lengthy and expensive process at what will already be a very difficult time.

Many people create their Trusts but fail to update them. That can be a problem if someone dies and his/her Trust is 20 years old–there were likely a number of significant life changes over those 20 years that were not reflected in the Trust.

Consider updating your Trust if it is an AB Trust

There have also been several significant law changes over the last 20 years that affect married couples with Trusts. Many couples did “AB” Trusts in the past because the estate tax threshold was much lower than it is today. Those AB Trusts come with very onerous administration after the first spouse dies, including segregating assets and filing an additional annual tax for the Trust.  The surviving spouse is also prohibited from changing part of the terms of the Trust because it partly becomes irrevocable.

With the recent tax bill, estates under $10,000,000 are not subject to the estate tax, so a married couple should check their joint trust to see whether it is an AB Trust, and whether that is still appropriate for them.  We can help convert an old AB Trust into a simpler and more flexible plan.

Anything that will affect the inheritance of your family is a reason to update a Trust. Births, deaths, divorces, purchases of property and assets need to be reflected in your Trust.

2. Make provisions for your pets

Pets these days are spoiled and pampered for good reason—they’re funny and charming and provide comfort and companionship to millions of people who might otherwise be lonely. If something were to happen to you, whom would you trust to care for your pets? Think about the costs of feeding your pets and trips to the vet. Most important, identify someone who will love your pets as much as you do.

1. Provide access to your digital assets and accounts

Most of us conduct the bulk of our personal business online, but what happens to these online assets and accounts after you die? Take some steps now to help your family deal with your digital property.

• Make a list of all of your online accounts, including e-mail, financial records, Facebook and other social media accounts–anywhere you conduct business online.
• Include your username and password for each account.
• Include access information for your digital devices, including smartphones, tablets and computers.
• Make sure the Agent for your Power of Attorney and the Successor Trustee of your Trust have authority to access your online accounts.

California Document Preparers makes it easy for our clients

Our comprehensive Living Trust package includes a Power of Attorney and Advance Healthcare Directive. We help our clients through every step of the process. Contact California Document Preparers at one of our three Bay Area offices todayto schedule an appointment. We’re helpful, compassionate and affordable.

Tom Clancy’s Estate Battle: Wording Trumps Intentions

Tom Clancy died in August of heart failure. Just 66, he left behind a huge body of work, and most of us remember him for his books and the movies they spawned, including The Hunt for Red October and Patriot Games. He left behind a family, a fortune and an estate battle, but the struggle between his widow and four adult children over his $86M estate is now over. Maryland’s highest court ruled about a key clause in the codicil to Clancy’s Will, and the ruling was a decisive victory for Clancy’s widow.

Legal documents written in an unclear manner

One of the best-selling authors of all time, it’s ironic that the fight boiled down to an interpretation of a clause in his estate-planning documents that was written in an unclear manner.

The dispute centered around a provision in Clancy’s second codicil (amendment) to his Will. The Will, signed in 2007, divided Clancy’s assets into three Trusts:

• One-third for his wife
• Another third for his wife to use while she was alive and then onto his daughter from that marriage
• The last third was to be split among his four adult children from a prior marriage.

Just weeks before he died, Clancy signed the codicil, which included this key sentence: “No asset or proceeds of any assets shall be included in the Marital Share of the Nonexempt Family Residuary Trust as to which a marital deduction would not be allowed if included.”

Four justices sided with the widow 

Maryland’s court was closely divided about what this language meant. The four who ruled in favor of Clancy’s widow believed that this clause meant that all estate taxes from Clancy’s Estate would have to be paid by the children’s Trust, not the Trusts containing her money, because that was the only way to fully protect the marital deduction to federal estate-tax laws.

Three justices sided with the four adult children

These justices felt that the children should only pay one-half the tax bill, not all of it, and this clause did not alter the outcome. They felt that Clancy wanted to protect the marital deduction but not to increase it at the expense of what his children would inherit.

Interestingly, the lawyer who drafted the codicil initially acted as executor of Tom Clancy’s estate, and he sided with the children. This suggests that the language was intended to apply as the children contended, yet the law isn’t about intentions, but what the documents actually say.

What does this mean for Tom Clancy’s heirs?

The four children now have to pay the IRS estate tax bill of almost $12M. If they’d won, the total tax bill would have been closer to $16M, but they would have been able to split it with one of the Trusts set up for Clancy’s widow. The results: they lost $8M, and the IRS lost out on $4M.

A strange irony for a writer

A loss of $8M for Clancy’s adult children, two years’ worth of litigation and who knows how much money in legal fees. And it all would have been avoided if the language had been more clear.

Take a lesson from Tom Clancy: wording trumps intentions

The wording of your estate-planning documents is what matters, not your intentions. While most of us, unfortunately, don’t have $86M estates over which our heirs will haggle, battles like this occur on a regular basis across the country. Make sure all of your assets are accounted for; read your documents carefully; understand what everything means before signing.

Still putting off your Living Trust? We prepare the legal documents and notarize them–most of our clients tell us they’re surprised at just how easy it was! Make an appointment today to get started on your Trust.