Is something missing in your estate
plan? Do the documents that you rely
upon still serve you and your loved-ones?
There are certain recurring estate planning short comings to be aware of. Let’s discuss some important ones.
In the event of incapacity is the
power of attorney and living trust, as relevant, sufficiently robust to manage
all important necessities? People who
choose to grant “all powers” on the California statutory power of attorney incorrectly
believe that doing so means that the power of attorney is sufficiently broad to
cover all situations. In fact, special
instructions are often required to be added to the statutory power of attorney
to deal with particular planning goals.
Consider a parent who financially supports a dependent adult
child, does the parent’s power of attorney authorize the agent not only to pay the
bills related to the parent’s household affairs but also to continue providing
the same support to the adult dependent child.
What if an incapacitated person has pets, does the power of
attorney instruct the agent to pay veterinary care and/or boarding service
Moreover, consider an incapacitated
married person who needs skilled nursing home care and is trying to become
eligible for Medi-Cal, does the person’s well spouse as agent have authority to
gift the person’s residence and other assets to the well spouse to accelerate Medi-Cal
eligibility and to preserve assets for the couple’s children? The limited gifting authority provided in most
powers of attorney does not contemplate such gifting and falls short. In fact using the power of attorney to make
such unauthorized gifts would be a breach of the agent’s duty and a conflict of
interest if the agent were gifting to him or herself. All of this needs to be expressly authorized
in the power of attorney and/or trust, as relevant.
Will there be an unintended probate
at death? A not too uncommon
misconception some people have is that having a will avoids probate – not true
(having a will invites a probate). With
a will an estate is subject to probate if assets — excluding non-probate
assets that pass to designate death beneficiaries or surviving joint tenants —
with a combined gross value over $150,000 go to someone other than the decedent’s
own surviving spouse (who may receive an unlimited amount of assets without
being required to have a formal probate).
Does each one of the person’s non
probate assets have up-to-date and complete death beneficiary designation
forms? Are both primary and alternative/contingent
beneficiaries named? Not naming alternative
beneficiaries can sometimes result in an unintended probate or in unintended
distributions when a primary beneficiary does not survive to inherit.
Does the person’s estate leave
assets outright to beneficiaries who — for any variety of reasons– should not
receive outright inheritances? This may
be because the beneficiary receives needs based government benefits, has
substance abuse problems, has creditor problems or is unable to manage his
It is much more feasible to identify
and to correct inadequacies in one’s estate planning beforehand, when there is
no compelling necessity to do so, than to remedy the situation after
unfavorable events occur. A periodic update
to one’s estate plan will bring peace of mind.