11 Problems That Could Cost Your Family a Fortune -- and Their Solutions

By Philip Flanigan, QLS CEO, Estate Planning & Medi-Cal Planning Attorney

February 7, 2017

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Problem #1: Ineffective Estate Plans.

Protect your assets from an ineffective estate plan. Don’t depend on pre-printed “cookie cutter” form kits or document preparation services for your estate plan. Contrary to what you may have heard or read, one size does not fit all! You may think you have precisely what you need. But you will never know – because your family members will have to clean up the mess. You see, after you die, your family members will try to use your documents to settle your estate. And if the documents weren’t drafted correctly, they will cause additional expense and long delays because a probate will have to be done to convey title to your assets.

Problem #2: Unwanted Medical Care.

Protect your assets from unwanted and costly medical care by having an Advance Healthcare Directive and Health Care Powers of Attorney that spell out your instructions, including which medical care, treatment and procedures you want – and which you don’t want.

Problem #3: Nursing Home Care.

Protect joint assets from the high costs of nursing home care. Buy insurance that covers nursing home care and provides a death benefit that returns the money spent on nursing home care to your heirs and get educated on how to qualify for Medi-Cal.

Problem #4: Conservatorships.

Protect your assets from the high costs of incapacity by (1) setting up a Living Trust so you avoid the need for a conservatorship, (2) drawing up an Advance Healthcare Directive, and (3) drawing up a Health Care Power of Attorney.

Problem #5: Probate.

Probate is the Court-supervised process of passing title and ownership of a deceased person’s property to his or her heirs. The process consists of assembling assets, giving notice to creditors, paying bills and taxes, and passing title to property when the judge signs the order. Probate can cost your loved ones a sizeable portion of your estate. The biggest portion of the costs are the fees charged by attorneys and personal representatives for their services for the estate, in addition to filing fees, costs of publication, fees for copies of death certificates, filing and recording fees, bond premiums, appraisal and accounting fees, and so on. Often the fees of attorneys and personal representatives are based on a hourly rate, and while they can tell you what their hourly rate is, they cannot tell you the number of hours their services will take, so they cannot tell you what their total fees will be. Like surgery, probates can be simple and easy, but frequently probates can have very drastic and damaging results. Accordingly, like surgery, because of its uncertainty in terms of both the potential for problems and high costs and fees, probate is something best to avoid if you can. You can avoid probate by having an estate planning lawyer set up and fund a Revocable Living Trust. Since the Trust actually owns your assets, no probate will be required, saving your family many thousands of dollars.

Problem #6: Lawsuits and Creditors.

Protect the property you leave to your spouse and children from the claims of their creditors, ex-spouses, and the IRS. This can best be done with proper creditor protection provisions in a Revocable Living Trust.

Problem #7: Estate Taxes.

For married couples, protect your assets from state and federal estate taxes by setting up and funding a tax-saving Credit Shelter Trust. Under current law, a Credit Shelter Trust will completely protect your assets from estate taxes for estates valued up to $10,860,000 for a married couple. Estate taxes are not a big problem for most people anymore. Most couples don’t realize that the value of their estate for purposes of determining estate taxes includes their life insurance death benefit proceeds. Other ways you can avoid or reduce estate taxes include setting up (1) an Irrevocable Trust for your children, grandchildren or other heirs, (2) an Irrevocable Life Insurance Trust, (which detaches your life insurance benefits from your estate), (3) a Charitable Remainder Trust, and (4) Second-to-die Life Insurance so you can pay estate taxes for pennies on the dollar.

Problem #8: Income Taxes.

A family can lower its overall income taxes by setting up a Family Limited Partnership to own income-producing property. A parent can do this by setting up a Family Limited Partnership and making gifts of limited partnership interests to the other limited partners, normally their children or grandchildren who pay income tax at lower tax rates. A Family Limited Partnership is an excellent tool to shift income to partners who pay taxes at lower rates. It is also an effective way to make gifts and still keep total control of the property owned by the partnership.

Problem #9: Lawsuits.

Protect your assets from lawsuits by putting their inheritances into a Discretionary Trust. This is especially important if your children are likely to become professionals subject to potential malpractice actions or, on the other hand, are spendthrifts!

Problem #10: Inexperienced Beneficiaries.

Protect your assets from being wasted by young or inexperienced family members. Most beneficiaries spend their entire inheritances in less than two years, regardless of the size of the estate or the heir’s socio-economic background. Your lawyer can set up your Family Trust with protective provisions that provide guidance and safeguard your life savings.

Problem #11: Unqualified Lawyers.

Many attorneys are getting into estate planning because it’s perceived as being less stressful than other areas of law. Not surprisingly, most of these newcomers focus on the needs of senior citizens and almost never deal with issues affecting young families. If you have young children, choose an attorney who focuses their law practice on asset protection and estate planning for young families. This will help insure that the lawyer you choose has the knowledge, skill, experience and judgment necessary to fully protect your family and your assets, and to give you advice and counsel that is in your best interests.

I provide custom tailored estate plans for young individuals and families in California, so that they can have peace of mind that their loved ones will be taken care of when they are gone. In addition to serving many young families, I am uniquely qualified as an Elder Law Attorney. Elder Law involves a familiarity with public benefit programs (like Medi-Cal Planning and VA) and the drafting of important wealth preserving legal documents. So whether you are young and planning for yourself or planning for an elderly or disabled loved one, I can offer guidance and advocacy in any stage of life.

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