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The Wealth Advisor
Estate Planning Pop Quiz

August means school is back in session or just around the corner, signaling the return of new school supplies, homework, and pop quizzes. Try your hand at this estate planning pop quiz to see if your knowledge of estate planning makes the grade and if it is time for us to schedule a meeting.

Question #1: True or false? You must name the same person to make both your financial and medical decisions on your behalf.

Answer: False. When choosing who should be your trusted decision makers, you should select individuals based on their strengths. In other words, you should consider what characteristics or traits each decision-making role requires and select the people who have those traits. For example, if one of your children is a doctor and another child is a certified public accountant (CPA), then it makes sense that the doctor would make medical decisions on your behalf and the CPA would make financial decisions on your behalf. It is also a common misconception that you must choose the same person to be your children’s guardian and to handle the money that you leave for your children. This is false: you can choose the person who you think will make the best and most loving guardian for your children and choose another person to handle the finances.

You may also need to consider that choosing the right person for the job could mean going with a professional. If none of your children have the organizational skills or focused temperament to handle administering your estate, or if your children are type A personalities that would second-guess every decision made by a sibling, then perhaps the best option would be to appoint a professional to act as one of your trusted decision makers. This could end up preserving your property and family relationships.

Question #2: True or false? If I do not create my own estate plan or if my plan fails to provide for my current situation, my state’s law will decide what happens.

Answer: True. Every state has default laws (called intestacy laws) that kick in if a person has not made their own estate planning choices. These laws are designed with a “one size fits most” situation in mind. For example, if you are married, your spouse will usually have priority with regard to making decisions and receiving your property because most married people would choose their spouse. However, there are innumerable reasons why you may not want your spouse to make certain decisions or receive certain items of property. For this reason, it is essential that you create your own estate plan and make your own decisions. If you have not created or finished your estate plan, now is the time to stop procrastinating and make an appointment with us to complete it.

If you have an estate plan, consider reviewing it in case your existing estate plan does not accurately reflect your current situation. For example, perhaps one or more of the people you chose as your trusted decision makers or beneficiaries is no longer living or able to serve, or there may be other people (e.g., a new child or a new spouse) who you want in those roles instead. When you experience a significant life event such as a marriage, divorce, retirement, change of occupation, or birth or death of a loved one, a change to your estate plan may be necessary.

Further, the ever-changing laws governing taxes and estate planning may necessitate an update to your estate plan. Even if no change is required, a periodic review with your estate planning attorney will give you peace of mind knowing that your plan will work as anticipated when the time comes.

Question #3: True or false? A will accomplishes all of the same goals as a trust, but a will is cheaper.

Answer: False. While both a will and a trust can give instructions about how you want your property to be distributed upon your death, one of the biggest differences between a will and a trust is that a will has no effect until the time of your death. A trust, on the other hand, can be utilized to deal with a period of incapacity (a time where you cannot make or communicate your wishes) that may occur prior to your death, which can be very helpful for loved ones trying to care for you. For example, Son wants to sell Mom’s home to help pay for the cost of an assisted living facility for her. If Mom only has a will, then Son has no power to sell the home and must go to court to be given the authority to act on Mom’s behalf. This situation might be avoided if Son was named as an agent under Mom’s financial power of attorney, but relying on this as the only method can sometimes be problematic. On the other hand, if Mom’s home was owned by her trust, then Son, acting as successor trustee, would have the power and authority to sell Mom’s home without court intervention.

In addition, a will guarantees that your loved ones will have to go through the probate court process upon your death. The executor or personal representative who you have named in your will must be approved and appointed by a probate court to have the power to deal with the property in your estate. On the other hand, when you use a trust and properly fund it, your successor trustee can immediately step in and deal with the property in your trust without any court intervention.

No matter your score on this estate planning pop quiz, you can be an A+ student by ensuring that you have a specially tailored plan in place with carefully chosen trusted decision makers. We can help you create or update your plan to ensure that it will work as you intend when the time comes.

Law Offices of J.R. Hastings • 1003 Third Street, San Rafael, California 94901 • 415-450-6692

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