Nevada Estate Planning & Elder Law Information Blog

"Read This If I Am Dead" - A Guide for Love Ones Left Behind

Did you catch Newspaper Commentator Humberto Cruz' recent article entitled "Read This If I Am Dead File Stands as Life Guide to Loved Ones Left Behind".  In the article, Mr. Cruz talks about a computer file he keeps updated with all of his important information, he is quoted as saying:

All these changes have been duly recorded in the regularly updated and arguably most important document I keep, a lengthy file (at last count, 6,382 words) titled, "Read This If I Am Dead."  This document, meant for my wife and daughter, but invaluable to me by keeping important information in one place:

• Lists all of our accounts and assets, including our home, credit cards and insurance policies, with a basic description, account numbers and contact information, including passwords when required.
• Identifies individuals and organizations to be contacted when I die (for example, professional advisers and the Social Security administration.)

You can read the entire article by clicking here.  Humberto Cruz, who is a regular contributor in the business section of the Las Vegas Review Journal, writes about practical financial and estate planning tips you can implement in your everyday life.  At The Herr Law Group we also endorse the concept of having a  personal organizer in addition to your estate planning documents. 

Just as your trust organizes the ownership and control of your assets, your personal organizer allows you to gather all of your important information in one place.  It even gives you an opportunity to leave instructions for some of those trivial but pesky matters like where to obtain replacement air filters for your house, how to change the timing on the sprinkler system, or where the water shut off value is located.  These small remainders can be a real life-line for a grief stricken family, overwhelmed with dealing with the details of winding up your affairs. 

Organizing Your Financial Records

One of the best gifts you can leave your family, is a single document or notebook listing all of your assets, debts, and important information.  If you need help organizing your financial records try the T. Rowe Price Family Records Organizer. This organizer is available on-line for free, and you do not have to be a T. Rowe Price customer to get a copy.  To order the free CD click here. 

The organizer has a number of different sections for personal information such as date and place of birth, social security number, visa or passport information, banking, credit cards, loans, the location of your will or trust, health and medical information, insurance information, etc.

Organizing all of this information into one easy location can be a real help to a grieving family, and can also be a real help in times of emergency.  Consider the circumstances of the Katrina Hurricane victims.  Many people were forced to evacuate their homes with only what they could fit in a vehicle.  In such circumstances, you do not have time or room to move a filing cabinet full of documents.  However a single notebook, printout or CD of your financial records and important information can be invaluable should you have a catastrophic loss and need to make insurance claims, or access financial records in an emergency. 

It takes a little time to pull together an organized list -- but having this information at a time of crisis is well worth the time invested!

Who Should be the Trustee of Your Revocable Living Trust

In most cases, you will want to be the trustee of your own trust.  You and your spouse can be either separate or co-trustees of your family trust.  If you are a co-trustee, either one of you can act to manage and control the trust.  If one of you becomes incapacitated or dies, the remaining co-trustee automatically assumes control without the need for any court intervention. 

In the event there is no co-trustee, upon your death or incapacity, a successor trustee will be used.  A successor trustee will be named by you in your trust, and can be any individual you choose -- an adult child, relative, or trusted friend.  Another option is to use a corporate trustee.  This is typically a bank or trust company whose job it is to manage your assets.  Corporate trustees are typically experienced investment managers, and can be relied upon to make sound, objective financial decisions on your behalf. 

A successor trustee looks after your personal care, and manages your financial affairs for as long as needed.  If you recover, you will automatically resume control.  In the event you dies, he successor trustee pays your debts and distributes your assets in accordance with the terms of your trust. 

For additional information on selecting a trustee click here to visit the Living Trust Network.

What Is a Living Trust

If you have been reading this blog for a while, you have heard me refer to a Living Trust as an instruction manual.  In fact this explanation might be selling a Living Trust short.  A Trust does carry with it instructions for caring for you, your assets, and your debts, but more than just "instructions", a Living Trust is an entity in which you place all of your assets so that they can be stored together. 

Because the trust now becomes the owner of all of the assets, your can elect to control the trust yourself, or you can elect to give someone else control of the trust.  This can be a real benefit should you become incapacitated and unable to handle your own affairs.  This can also be useful in the case of a spouse who is unfamiliar or uncomfortable handling the family finances.  A trustee can be designated to assist that spouse, without them having to give up any of the benefits of the assets.

Best of all, because legally, you no longer "own" your assets (the trust owns the assets), your estate does not have to go through probate when you pass away, which saves your beneficiaries, both time and money. 

In the meantime, assuming you elect to act as the trustee of your own trust, you maintain full control. As a trustee, you can do everything you did before.  Buy and sell assets, change beneficiaries, and (in the case of a revocable living trust) even revoke or end your trust.   For more information on Living Trusts check out this free information available from the State Bar of California.

Why Do I Need a Trust if I Have a Power of Attorney

A common question is why a trust is necessary if you become incapacitated but have a power of attorney.  After all, if the person holding your power of attorney can transfer and sell assets on your behalf, what is the problem?

The answer is three fold.  First, depending upon the type of power of attorney you have given your designee (i.e. Springing, Durable, Limited, etc), that person may or may not have the authority to act on your behalf once you are found to be incompetent.  Should you die, a power of attorney ends, meaning that your family will have to go through probate to wind up your affairs. 

Next your power of attorney could be refused without additional documents to back it up.  Sometimes, banks and other financial institutions will not honor a power of attorney unless it is on "their" form.  Additionally, unless your power of attorney has been recently executed, others become reluctant to honor the power of attorney, fearing that the power of attorney has grown stale or outdated.

Finally, giving someone your power of attorney without directions on how it is to be used, is a bit like placing a child is a candy shop.  Given someone a blank check to do whatever he or she wants with your finances can be risky.  A trust acts as an instruction manual.  Just as a parent leaves instructions for a  babysitter before going out for the evening, a trust leaves instructions for your trustee about how you want to be cared for, what type of medical treatment you want, and how, in the event of your death you want your finances handled.  Thus the power of attorney with the trust becomes an effective tool, while the power of attorney alone can be very risky. 

Using Joint Ownership to Transfer Assets

Joint ownership of assets is sometimes known as the common mans estate plan.  One of the most common forms, is owning a home or other real estate in joint tenancy with rights of survivorship.  When a piece of property is owned in joint tenancy, full ownership of the property will transfer at death to the surviving owner without the necessity of probate.  However before you look at this as your first and best option for avoiding probate there are a few things you might want to consider.

First, while joint ownership may avoid probate for the first partner, it does not avoid probate for the second owner.  Unless the remaining owner perpetually adds a new owner, eventually the property will go through probate, and the heirs will still be faced with concerns about cost, time, lack of privacy and control. 

More importantly however, when you add a co-owner, you run a big risk of losing control.  Adding a child to your property after the death of your spouse may seem like an easy answer, but do you want to be at risk to your child's creditors.  What if your child goes through a divorce, or ends up in bankruptcy.  Your home is now at risk because of matters over which you have no control.

Additionally, in the case of real estate, all of the owners will need to sign off in order to sell or encumber the property.  Should you need to take money out of your property, you may find yourself at odds with your new co-owner who has different ideas about the way the property should be handled or maintained.

What is Probate?

Probate is a court process which occurs when you die to insure that all of your debts are paid, and any assets you leave behind are distributed.  If you have a will, the court will review the document, and give the public the opportunity to contest whether the will is legally valid.  Assuming that your will is valid, the court will then supervise the executor of the will, who is charged with the responsibility of carrying out your wishes for the distribution of your assets.  If no legal will exists, then the property is distributed in accordance with state law.

The concern, that I , as well as other attorneys, have about the probate process, is primarily the time and expense involved.  The executor of your will is entitled to fees for that service.  If you have nominated a family member or friend as the executor, that person may be willing to waive any fees for their services, however it is likely they will need to retain a lawyer to assist them through this legal process.  Additionally, there may be fees charged by the court, and if any assets have to be valued, it may be necessary to obtain a real estate or other type of property appraisal.

If for some reason, the person you nominated as your executor is unable to serve in that capacity, the court may hired someone on your behalf.  A court appointed executor will definitely charge for their time.  An additional concern comes up if you have property located in different states, such as a primary residence here in Nevada, but a cabin or vacation home in Utah or Arizona.  The property located in each state will be distributed in accordance which each states laws.  This means that in some circumstances, it could require multiple probates for the various states involved.  Your executor might have to incur travel expense, or other costs to complete this process -- all of which must be paid first before your assets can be fully distributed.

The probate process can also take a lot of time -- any where from a few months to a few years depending upon the complexity of the estate.  During at least a part of the time that the probate is pending, it is common to have the assets "frozen" so an inventory can be taken, values can be established, and if necessary, taxes calculated and paid.  Assets cannot be distributed or sold without court and executor approval.  In the meantime, your family or heirs may need money to live on.  They can request a living allowance, however this type of request is discretionary with the court and is not automatic.  Your family incurs more cost for the request, and more time is taken to evaluate the claim.

For more information on Probate, see this free public information brochure available from the State Bar of Nevada.

 

Estate Planning Basics

Estate Planning is a tool available to everyone with many different applications.  You should consider estate planning,

• If you wish to control how your assets are distributed
• You want to name a guardian for your children or dependent family members
• You want to protect your family from certain types of creditors, or
• You need to reduce the potential tax burden an inheritance would create for your heirs.

The cornerstone of your plan will be either a will or trust.  The primary distinction between the two, is that a will only becomes effective upon your death.  A trust, sometimes referred to as a "living" trust, becomes effective immediately, and can provide for protective actions to occur upon disability, as well as death.  Circumstances upon which you could become disabled could include an illness, or accident.  Anything that would render you unable to take action for yourself.  In such an event, the trust would allow a trustee to make decisions in your best interest and in keeping with the directions established in your trust document.

A trust sometimes costs a bit more to prepare than a will.  This is because a trust is a more involved document and has broader application than a will.

It is important to know that estate planning documents can be useful to many different people, from many different economic backgrounds.  Estate plans are not just for the "rich and famous", and they are not just for avoiding taxes.  If you have young children, you can use these documents to provide for your children's care in your absence.  If you have an elderly parent, or a special needs relative, you can make arrangements for their financial and physical care, if something were to happen to you.  Estate plans are essentially directions for caring, transferring, and protecting your assets and obligations.