Living Trust Planning | Estate Planning Attorney

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  • Protecting Your Family’s Safety Net: How to Set Up Your Life Insurance Policy The Right Way

    Protecting Your Family’s Safety Net: How to Set Up Your Life Insurance Policy The Right Way

    A comprehensive Life & Legacy Plan is about creating a strategy that lets you enjoy your life to the fullest while protecting your loved ones’ future when you can no longer be there. It might seem like life insurance is an easy way to help secure your loved ones’ future – and it is – but your policy must be set up in the right way to have the best possible impact on your family.

    The way you set up your beneficiary designations on your insurance policy can significantly impact its effectiveness, how it’s used, and who controls it after you die. In this blog, we’ll explore how not to name beneficiaries on your life insurance and how to name beneficiaries to ensure your loved ones have the funds they need to thrive when something happens to you. 

    DO NOT Name a Minor As The Beneficiary of Your Life Insurance Policy  

    Naming your child or grandchild as a direct (or even backup) beneficiary of your life insurance policy may seem like a natural choice, but if you do that, you’re guaranteeing a bad outcome for the people you love.

    First of all, if a minor child is the beneficiary of a life insurance policy, it guarantees a court process called “guardianship” or “conservatorship” must occur to name a legal guardian or conservator to manage the assets for your minor beneficiary until they turn 18. Then, at 18, your minor child who is just barely an adult receives everything left in the account, outright, unprotected, with no oversight or guidance. This is the worst possible outcome for everyone involved. 

    If you’re buying life insurance, you’re doing it to make the lives of your loved ones better. We often say “insurance says I love you.” But naming a minor child as a beneficiary doesn’t say I love you; it says that you didn’t take the time to set your life insurance up the right way. You might think the answer is to name a trusted family member or friend as the beneficiary of your life insurance, hoping they’ll use the funds for your kids, but don’t do that! 

    If you name another adult as the beneficiary for a life insurance policy intended for your kids, your kids will have no legal right to the money – which means the adult you named as beneficiary can use the money however they want and don’t have to use it for your kids at all! 

    So what’s the solution? Keep reading to find out what to do instead.

    DO NOT Name Adult Beneficiaries Directly or They Risk Losing The Money Entirely

    Direct payouts to adult beneficiaries may seem straightforward, but can have unintended consequences. Life circumstances change, and the lump sum received from a life insurance policy might be at risk if not managed properly. By avoiding direct payouts, you can ensure that the financial security provided by the insurance is preserved for the long term.

    One key concern is the potential for beneficiaries to hastily misuse or exhaust the funds. A sudden windfall might lead to imprudent spending, leaving your loved ones without the financial support you intended. Additionally, if your beneficiaries aren’t financially savvy, they may struggle to manage a lump sum effectively, meaning the policy might lose money over time.

    Even if an adult beneficiary is financially responsible and savvy – or knows enough to speak to a financial advisor – life events can put the funds at risk. Because the life insurance proceeds now belong entirely to your beneficiaries in this case, the proceeds of the policy are now completely vulnerable to any future divorces or lawsuits that your beneficiary may go through in the future.

    That means that if your beneficiary is divorced, sued, or accumulates debt, all the money they received from your insurance policy could be lost.

    Plan For Your Life Insurance The Right Way: Use a Trust 

    A trust is an agreement you make with a person or an institution you choose. This person is called your trustee, and their directive is to manage the assets you put into or leave to your trust, according to the rules you create. 

    Instead of naming minors or adult loved ones as the direct beneficiaries of your life insurance, name your trust as the beneficiary of your policy instead. By doing this, your loved ones will still receive the funds you intend for them while maintaining control over how the funds are managed and distributed. This ensures that your wishes for your assets and your loved ones are carried out even after you’re gone. 

    How does it work?

    A well-drafted trust allows you to specify conditions for distributing the trust funds, ensuring that the funds are used for intended purposes such as your beneficiaries’ education, homeownership, or other specific needs. Distributions from the trust can also depend on the ages and circumstances of each beneficiary. This level of control can prevent the misuse of funds and promote responsible financial behavior for everyone involved. Plus, assets held in a trust bypass the probate process, ensuring a more efficient and timely distribution of funds to your beneficiaries. This can be crucial in providing immediate financial support to your loved ones when they need it the most. 

    While you can choose to have your trustee distribute life insurance proceeds directly to your beneficiaries outright at specific ages and stages, you may want to provide even more protection for your beneficiaries. One of the considerations we’ll help you make is whether to retain the assets in trust, giving your beneficiaries control over the trust assets, but in a manner that keeps the inherited life insurance protected from lawsuits, future divorces, and creditors.

    Let Us Set Up Your Entire Plan In The Best Way Possible

    Setting up your life insurance policy with the right beneficiaries involves careful consideration of your unique family dynamics, financial goals, and long-term objectives while being proactive to avoid future issues. By doing so, you maximize the benefits of your life insurance to provide a lasting legacy of financial security and support for your loved ones. 

    But planning for your life insurance is only one step in creating a plan for everything you own and everyone you love today and in the future. My mission is to guide you to create a comprehensive estate plan, which I call a Life & Legacy Plan, that ensures your wishes are fulfilled and your family’s future is protected no matter what the future holds.

    Schedule a complimentary call with my office to learn more.

    This article is a service of Jeannette Marsala, Personal Family Lawyer. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Life & Legacy Planning Session, during which you’ll get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Life and Legacy Planning Session and mention this article to find out how to get this $750 session at no charge.

  • From ‘I Do’ to ‘What If’: Estate Planning Must-Do’s for Newlyweds – Part 1

    From ‘I Do’ to ‘What If’: Estate Planning Must-Do’s for Newlyweds – Part 1

    Wedding season is winding down, and if you’re a newlywed or are planning to tie the knot soon, it’s time to make your first legal move as a married couple – creating an estate plan. With all the joy and happiness a new marriage brings, planning for your potential incapacity and future death may feel out of place, but creating your estate plan as part of your post-nuptial to-do list is the greatest gift you can give your new spouse.

    A lot changes once your marriage is official, but how you and your spouse want your finances to be managed or how you would want medical decisions to be made for each other aren’t automatically documented when you say “I do.”  

    If you become incapacitated for any reason before your estate plan is complete, your spouse wouldn’t have the legal authority to make medical decisions for you even though you’re married. Your loved one would also have no access to your bank accounts, and in the event of your death, could even be put into a position of losing the home and possessions that you owned together.

    Instead, your choices for yourself, each other, and your life together need to be properly documented to ensure your wishes are respected and honored no matter what the future holds.

    Here are 6 essential estate planning tools you need to put in place right now. 

    01 | Updated Beneficiary Designations

    One of the easiest estate planning tasks that newlyweds often overlook is updating their beneficiary designations. Some of your most valuable assets, such as life insurance policies, 401(k)s, and IRAs, don’t transfer via a will or trust. Instead, they have beneficiary designations that allow you to name the person (or persons) you’d like to inherit the asset upon your death.

    While every couple should consider creating and using a trust to transfer retirement (only with the guidance of a lawyer, as this can be complex) or life insurance distributions, you shouldn’t wait until your trust is created or your estate plan is complete to update your beneficiary designations. Until your estate plan is finished, if you would want your spouse to receive your retirement account benefits or life insurance at your death, you need to proactively name your spouse as your primary beneficiary, and then name at least one contingent, or alternate, beneficiary in case your spouse dies with or before you. 

    If you have minor children at home, remember to never name a minor child as a beneficiary of your life insurance or retirement accounts, even as a contingent beneficiary. If a minor is listed as the beneficiary, the assets would be distributed to a court-appointed custodian, who will be in charge of managing the funds until the child reaches the age of eighteen, at which point the funds would be distributed to them outright, to do with what they want. Instead, you can set up a trust and name the trust to receive your life insurance or retirement account benefits.

    If you have children or you plan to have children in the future, you should set up a trust to receive those assets instead so they can be properly managed for your child’s well-being while keeping the funds safe from any future overspending, debt, or legal trouble your child may have. Creating a trust to hold and distribute assets to your children is even more important if your marriage creates a blended family, as it will ensure your children inherit from you in the way you want and avoid conflict between step-siblings.

    If you aren’t sure how to update your beneficiary designations in the best way, contact my office today at (650) 600-1735 for a Family Wealth Planning Session. During the session, I’ll look at exactly what you own and guide you on exactly how your beneficiary designations should be filled out now and after your other estate planning tools like a will or trust are created. 

    02 | A Durable Financial Power of Attorney

    Estate planning isn’t just about planning for what happens when you die. It’s equally about planning for your life and the unexpected events life throws your way like a serious illness or accident that may leave you incapacitated. 

    If you become incapacitated and haven’t added your spouse as an owner on your bank accounts or legally granted them permission to manage your financial and legal interests, they may have to petition the court to be appointed as your guardian or conservator to handle these affairs for you. This is surprising to many newlyweds and long-time married couples who assume their spouse has automatic access to all of their assets at any time. Sadly, this isn’t the case, and without giving written permission to your spouse through a durable financial power of attorney, that authority could be given to someone else by the court, even a stranger or a family member you would never want to have control over your financial life. 

    A durable financial power of attorney would grant your spouse the immediate authority to manage your financial, legal, and business affairs in the event of your incapacity, and give them a broad range of powers to handle things like paying your bills and taxes, collecting government benefits for your care, selling your home or car, and managing your banking and investing.

    Creating a durable financial power of attorney is especially important if you don’t live in one of the community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In every other state, the law doesn’t assume your spouse has any ownership of property in your name alone, which means your spouse could be forced to move out of your shared home or give up your shared property with little notice and little legal recourse.

    03 | A Power of Attorney for Health Care and Living Will

    Where a durable financial power of attorney gives your spouse the authority to manage your financial and legal matters, a power of attorney for health care lets them make medical decisions for you if you can’t communicate them for yourself. 

    For example, a power of attorney for health care would let your spouse make decisions about your medical treatment if you’re in a serious car accident or hospitalized with a debilitating illness. If you don’t name your spouse as your power of attorney for health care and you do become incapacitated, your spouse would have to petition the court to become your legal guardian before they can make any major medical decisions on your behalf. 

    Even though your spouse is generally the court’s first choice for your legal guardian, relatives may also petition the court to be appointed as your guardian, which can create severe conflict and financial strain in your family. Creating a power of attorney for health care that names your spouse as your decision-maker far in advance will spare your spouse the time, money, and stress involved with a court guardianship process.

    Within or attached to your power of attorney for health care should be your living will. A living will explains to medical providers and to your decision-maker how you would want your medical care handled, particularly at the end of life. Because a power of attorney for health care and a living will go hand-in-hand, they’re often combined into a single document. 

    In your living will, you can explain your wishes for life support, whether you would want hydration and nutrition supplied intravenously, and even what kind of food you want and who can visit you in the hospital. It’s always a relief to your spouse to have instructions and wishes written out by you in advance that they can lean on, rather than having the added stress and trauma of trying to guess what your wishes would be in these situations.

    Through Sickness and Health, We Can Help

    Between moving in together, establishing a new routine, and combining your finances, estate planning can seem like a low priority for newlyweds. But in reality, estate planning shortly after getting married is one of the smartest decisions you can make for your marriage. Creating your plan shortly after your wedding is also the most convenient time to plan since you will inevitably be going to the bank and contacting your financial institutions to update your new marital status. 

    To make sure your new spouse has immediate access to your assets and that you can always care for them in the way they would want, give me a call at (650) 600-1735. It would be my honor to help you and your spouse plan for your new life and your future through my unique, heart-centered process. 

    If talking about finances and death shortly after your wedding feels heavy, don’t worry. I’ll guide the discussion in a way that feels casual, natural, and helps facilitate open communication between you and your new spouse.

    Read Part Two!

    This article is a service of Jeannette Marsala, Personal Family Lawyer. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, during which you’ll get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.

  • 3 Simple Mistakes That Can Derail Your Estate Plan

    3 Simple Mistakes That Can Derail Your Estate Plan

    If you’re tempted to use a DIY estate planning service or have already created a plan you aren’t 100% confident in, be sure to read how these three simple mistakes can derail your estate plan and leave your family with an expensive mess.

    We regularly meet with clients who ask us to review an estate plan that they created online or with an attorney who isn’t experienced with estate planning. You see, these clients usually think they found a faster and cheaper solution to estate planning, but once the plan is signed and done, they’re often left wondering whether this “cheap” plan will actually accomplish their goals, or if it will leave their family with a big mess instead. What I see time and again when I review these estate plans are poorly designed plans with simple but devastating mistakes. What’s more, these clients wouldn’t even realize their plan had these mistakes if they hadn’t met with us! 

    While it might seem simple enough to put together a trust online or have your tax attorney prepare your will, it can be very difficult to create an estate plan that works without the proper training and experience. What might seem like minor details to the inexperienced eye can often have major effects on your plan’s final outcome. 

    More often than not, clients who meet with us to review a DIY plan find out that instead of saving money on their estate plan, they’ve actually cost themselves much more by buying a plan that has mistakes. And if these mistakes aren’t caught by you while you’re alive and well, your loved ones will be the ones paying the price to resolve them after you’re gone.

    Here are the three biggest mistakes I see when reviewing DIY and low-cost estate plans:

    Leaving Assets Outright to Loved Ones 

    One of the simplest mistakes you can make in estate planning is distributing your assets directly to your beneficiaries upon your death. This is a bad idea for several reasons:

    • The assets have no protection from your beneficiaries’ creditors once they leave your estate.
    • The money can be squandered and used however the beneficiary wants.
    • If the beneficiary is a minor, a court will decide who manages the assets and how they’ll be used.

    Instead of gifting your assets directly to your beneficiaries, distribute your assets into a trust for the beneficiaries’ benefit. When creating a trust, you can choose who will manage your assets for your beneficiaries while also sheltering those assets from your beneficiaries’ creditors or their own poor money-management skills.

    Setting up a trust to hold your assets is especially important if you have minor children. Minors cannot own money on their own, which means they can’t receive any assets from you directly on your death. Instead, a court will need to appoint a trustee or conservator to manage the assets you leave for your children. There’s a high chance that the person the court appoints will not be the person you would have chosen yourself. And if the court appoints a professional trustee, your assets will be reduced by expensive trust administration fees.

    A court-appointed trustee will distribute the assets to your children outright when they reach the age of 18, but this only puts the assets at risk. Few young adults have the maturity or knowledge to manage a large sum of money responsibly so that it can grow and support them over time. Even if your adult child is responsible or has guidance from someone you trust, those assets are still susceptible to any lawsuits, divorces, and unforeseen financial troubles your child may experience in the future. 

    Instead of leaving assets outright to a minor or young adult, leaving your assets in a trust, established for the child’s benefit, allows you to choose the person who will manage the assets you leave for them, helps the assets grow through careful financial management, and protects the assets from your child’s lack of experience and future risk.

    Not Creating a Lifetime Asset Protection Trust

    Creating a trust to hold your assets can provide years of asset protection for your loved ones, but that protection only exists so long as the assets are held in the name of the trust. The second big mistake I see are trusts that direct the assets to be taken out of the trust’s protection and given to your child or beneficiary at a specific age. You might not see the problem with this scenario at first, but even if your child or beneficiary is mature enough to manage a sum of money, doing this still leaves those assets susceptible to future legal and financial risks.

    Instead, everyone should consider creating a Lifetime Asset Protection Trust to hold their beneficiaries’ assets indefinitely. This gives the assets lifelong protection while still providing financial support to your beneficiaries.

    Unfortunately, most lawyers don’t understand how to use trusts to establish this kind of protection for the inheritance you’re leaving behind, and some may even try to dissuade you from using a trust at all unless you have a very large estate. Even if you’re leaving behind a small number of assets, protecting those assets and helping them grow can make a huge difference in the future well-being of your loved ones. 

    Forgetting to Update Beneficiary Designations

    This final mistake is so simple yet so easily forgotten when creating a DIY plan or using an inexperienced estate planner: forgetting to update your insurance policies and retirement beneficiary designations so they match your estate plan. While your will and trust are important parts of your estate plan, it’s vital to update your insurance policies and retirement accounts to pay out to your trust instead of directly to your beneficiaries. 

    Leaving the names of your beneficiaries on your insurance and retirement accounts instead of the name of your trust ensures the largest assets you own won’t be a part of the plan you just created. Instead, the assets will be distributed directly to the beneficiaries listed on the account, to do with however they want, even if you had other plans for protecting the funds under your trust. We’ve even seen cases where the beneficiaries named on a life insurance or retirement account are so outdated that the person named on the account isn’t even a part of the client’s life anymore!

    Estate Planning That Works

    In order to make sure your estate plan truly works the way you intend it to, it’s essential that all of your assets are reviewed and accounted for to make sure that any accounts you have reflect the name of your trust or other estate plan method. That’s why we always create an inventory of your assets and follow up with you to make sure your assets are updated into the name of your trust. We can even update your assets for you, so you can rest assured that every piece of your plan works together. 

    If you’re thinking about using a DIY estate planning service or had an estate plan created by an attorney in a different practice area,  it’s crucial to check your plan for these three simple but major mistakes. Otherwise, your estate plan might end up causing more problems than it solves, leaving your family in court and conflict.

    That’s why we offer to review your current estate plan during a Family Wealth Planning Session. During this session, you’ll have the opportunity to discuss your concerns, learn how your current plan will (or won’t) work for you, and if you don’t feel confident in your current estate plan, we’ll create a new comprehensive plan for you that will provide the protection and support your family needs for years to come.

    Don’t let a simple estate planning mistake derail your plans for your family. Schedule your Family Wealth Planning Session. Your loved ones will thank you for it!

    This article is a service of Jeannette Marsala, Personal Family Lawyer. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, during which you’ll get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.

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