Cava and Faulkner

In What Ways Can Charitable Donations Affect My Estate Plan?

In California, the primary focus when considering and implementing an estate plan is preserving your assets and accumulated wealth for the future benefit of your heirs, family, and beneficiaries. However, there are other significant reasons to draft a plan that many families in California embrace: to provide a legacy of philanthropy and the charitable causes you care about.

California’s residents are well known for their generous giving to others, and charitable giving as part of a comprehensive estate plan can continue to benefit the causes you care about after you die.

However, although you desire to help others, you must be aware of all the legalities and develop these plans in concert with your obligations to your family and beneficiaries; this is where a well-versed, experienced, and knowledgeable estate planning lawyer can be an invaluable help in reaching both of these worthy goals.

Additionally, by professionally planning your charitable trust, you may also receive the side benefit of reducing estate taxes.

For example, your qualified and knowledgeable estate planning lawyer could recommend that you leave a significant amount of your retirement assets to charities. These types of assets are commonly taxed the most after death. So, having your estate plan give a part of your retirement assets directly to a charity you care about will also give you and your heirs a possibly significant federal estate tax charitable deduction. This strategic move will lessen estate taxes for your heirs and beneficiaries, and the charity won’t have to pay taxes on your gift.

However, You must note that every estate differs in size and scope, and one way to give to charities may not suit your unique situation; there is no “one size fits all” in proper estate planning.

This is one of the main reasons your professional and experienced estate planning lawyer’s advice and guidance will be invaluable. It will allow you to give to the causes you care about and help those you love to have a sound financial future.

What Types of Trusts Can Benefit My Charities After My Death?

A professional and well-drafted estate plan is strategically designed to provide the means to carry out your precise wishes to distribute your assets. Hence, they benefit your family, business, and the charities you have supported most of your life. Charitable giving can maintain a legacy for you and your surviving family but requires special consideration and planning.

Just a few of the types of charitable giving strategies your skilled lawyer may use are;

• Giving financial (or other types) gifts directly to the causes you care about – This straightforward approach gives your charity immediate help. For example, you could donate cash, assets, securities, and more directly to the charity named. This is a simple transfer and could result in immediate tax benefits.
• By drafting a charitable trust – You can strategically design a charitable trust to benefit your family or heirs financially and the charities you and your family care about.

A professional charitable trust can provide income for your heirs and family in many ways. Still, it can also effectively donate funds, assets, or items (such as vehicles, etc.) to your charity.

For example, a “charitable remainder” trust will give your family income for a specified time. Then, any remaining funds or assets will go to your charities.

• Create a donor-advised funds trust (or DAF) – DAFs allow you to give freely and contribute to a fund and then recommend that specific charity grants be offered at designated times. This is also a simple way to give and yet provides your heirs with immediate tax benefits.
• Set up a private foundation—This is usually done if you have substantial wealth and assets and want to ensure that giving (possibly to multiple charities) is well controlled. A foundation follows exact guidelines for giving and usually involves family or heirs in future philanthropic decision-making.

These are just a few ways to structure your financial and charitable goals. The wise and prudent way to find what’s best for your unique circumstances is to meet with a local, skilled, empathetic, and passionate charitable giving trusts lawyer.

What Are the Two Main Types of Trusts Used for Charitable Giving in California?

Most estate planning lawyers are used to clients wanting to provide for their favored charity. While leaving funds in a Will may be easy, creating a charitable trust may provide benefits before you die.

California, most often, uses two main types of charitable trusts:

• The charitable lead trust – If you draft a charitable lead trust, you will always designate a beneficiary organization or recipient. After this trust has been created, your assets and their value, as well as any dividends generated, will benefit the charity.
• A Charitable Remainder Trust – You must transfer your property (or assets) into the trust’s designated account using a charitable remainder trust. Then, trustees must be named, such as you, another family member, etc., to manage the trust.

Choosing the right financial tool to help your charities at your death can be complex, and trusts are often preferred. But by getting the valuable, well-versed advice of an Elk Grove trusts lawyer, you can be confident that all your options will be made clear to you, and only then can you choose the best way to proceed.

Are There Benefits To Including My Charity In My Estate Plan Using a Trust?

The benefits of leaving a legacy of giving are probably evident to you. Additionally, there can be significant financial benefits, but they are based on your estate’s scope and size.

Just a few of the benefits to you and your heirs may include;

• Tax benefits that could be significant – Charitable giving usually results in major tax advantages, such as income tax deductions, estate tax savings, and avoiding capital gains taxes. Your lawyer will plan your charitable activities to capitalize on these tax benefits while supporting your philanthropic causes.
• Maintaining your family’s values – For many California residents, philanthropy is a lifelong, fulfilling occupation. Continuing this legacy after you pass can maintain a time-honored tradition and leave a valued family legacy.
• Continuing your family’s legacy – Including charitable giving in your estate plan will help foster unity and shared values. Allowing your loved ones to continue following your proud legacy will instill a sense of purpose and responsibility in managing family wealth and benefiting others.

The benefits of charitable giving through trusts are usually a sound decision for you and your family. But always remember that consulting and discussing the overall picture with an Elk Grove charitable giving lawyer is critical to the entire process.

I Need More Information About Charitable Giving In My Estate Plan; How Should I Proceed?

Charitable giving is a worthy and prudent item to include in your estate plan, and some specific types of trusts can be intrinsically a wise and mindful way to reach your goals. However, every estate, financial, and familial situation differs. Therefore, obtaining the personalized estate planning guidance you must have is critical.

The trust lawyers at Cava & Faulkner Attorneys & Counselors at Law have the expertise and resources to fully explain this highly complex subject matter so that you are clear on all your options. Call them today at 916-685-1225 for a free consultation, and they will answer all your questions and concerns.

What Is a Special Needs Trust, and Can It Protect My Special Needs Loved Ones?

If you’re concerned about your special needs children or loved ones after you’re gone, understanding special needs trusts in California can be crucial for safeguarding the future of your loved ones with disabilities.

A special needs trust combines asset protection and estate planning. This combination helps ensure the long-term support of your loved one but doesn’t usually jeopardize the government benefits they may be receiving, such as Medicaid and SSI.

Special needs trusts (aka SNTs) in California are uniquely designed to benefit children and family members with disabilities and hold some somewhat unique combined characteristics, such as;

• Protection of assets for your loved one – Any assets held in a special needs trust do not count towards the beneficiary’s asset limits when applying for or receiving government benefits.
• Allowance of discretionary spending if necessary – The trustees have the power and authority to allow discretionary distributions to assist the beneficiary’s needs beyond what their government benefits may cover.
• More flexibility in their use – SNTs can be designed to meet the beneficiary’s unique requirements. This ensures more personalized support for your disabled loved ones’ needs.

All in all, a special needs trust can be a valuable and powerful legal tool that can be uniquely drafted to protect your special needs family member if you become incapacitated or die. However, SNTs are legally complex documents, and if you are considering an SNT, the help of a conscientious, knowledgeable, and experienced special needs lawyer is mandatory.

Does a Special Needs Trust Differ from a CalABLE Account?

California does attempt to give loved ones living with disabilities and their families varying options to deal with their future care, and a CalABLE account is one of them.

Having a CalABLE account may sometimes help with future planning for your disabled family members, but there are limitations on the scope and use of these accounts.

Suppose your disabled family member receives Medi-Cal benefits. In that case, a CalABLE account provides some tax-advantaged savings and allows your special needs family member to save up to $16,000 per year and up to $529,000 in their lifetime without losing their Medi-Cal benefits.

A CalABLE account is essentially a tax-advantaged savings account that earns interest for your disabled loved one. This interest is tax-free and does not count as income when applying for benefits.

So, your disabled family member can save for the future and disability-related expenses, but it doesn’t jeopardize their government benefits.

However, if you’re considering a CalABLE account, it’s still prudent to discuss all your goals and financial plans with a local, empathetic, and knowledgeable estate planning law team. CalABLE accounts may be suited to some situations but not to others. For example, a special needs trust is commonly significantly more financially flexible and can be uniquely designed to the specific needs and circumstances of your particular special needs family member.

Can A Special Needs Trust Help to Maximize My Disabled Family Member’s Benefits?

The simple answer is yes, it can in most cases. Most special needs trusts offer significant and valuable benefits in planning for the care of your special needs family member from both a legal and personal aspect. This commonly makes them a useful tool for families with members who have disabilities.

Just some of the legal benefits and protections are;

• An SNT will preserve their government benefits – One of the main advantages of an SNT is the ability to hold assets without affecting a beneficiary’s eligibility for government or state programs.
• Specific asset management and protection – SNTs are legally secure and help to manage and protect your disabled family members’ assets. This significantly helps to ensure that these assets are used appropriately and only for the benefit of the beneficiary.

Some of an SNTs personal advantages are;

• The assurance of long-term care – A professionally drafted and executed SNT ensures the beneficiary will have access to resources for their care and well-being well into the future.
• Enhancements in quality of life – SNTs can supplement government benefits and provide additional resources to beneficiaries to improve their quality of life. The SNT can provide resources for educational opportunities, personal care necessities, recreational activities, and much more.

Of course, every situation and set of circumstances differ, and these are complex documents designed to work in the future to benefit your special needs loved one for years to come. Therefore, they must be strategically drafted to meet, at times, very specific needs. Thus, a complete and detailed discussion and plan should be ironed out with a skilled professional specialist in these valuable legal tools.

Are There Different Types of Special Needs Trusts?

The area of the law that deals with special needs trusts and planning is a complex and specialized area of the law.

You know that if you have a family member with special needs, protecting them if you die or become incapacitated is always a vexing problem on your mind.

However, by obtaining the proper professional advice and utilizing an SNT, you can protect your loved one and provide them with a higher quality of life.

There are various types of special needs trusts available in California; however, the two most common are;

• The First Party Special Needs Trust – This SNT is drafted by a parent, grandparent, legal guardian, or the Court to benefit a family member with special needs. The Trust must be funded with funds owned by the person with the disability. This type of SNT is subject to payback provisions. This means that when the beneficiary dies, an appointed trustee must use any of the remaining trust assets to repay the state of California for all benefits they provided.
• A third-party special needs trust (SNT) is funded with another person’s assets, not the beneficiaries. It is the most common SNT used by parents or relatives to provide for a child with a disability. This type of trust is not subject to any payback provision.

With the professional help of a well-versed estate plan lawyer, a special needs trust can provide a well-designed and detailed framework for proper medical care and asset management and protect your family members’ assets from creditors and financial predators.

I Want More Information About Special Needs Trusts; How Should I Proceed?

Planning for the future of your special needs child or another family member can seem daunting. However, by obtaining the proper and most current information possible from a skilled, highly experienced, and empathetic special needs planning lawyer, you can be sure your special needs loved ones’ future is sound and secure.

The well-versed special needs planning lawyers at Cava & Faulkner have a long, compassionate, and effective track record of assisting Californian families in giving their special needs family members a long, happy, and fulfilling life.

Call them today at 916-831-7565 for a free consultation on your case. They will work tirelessly to put this constant, nagging worry behind you.

What Is a Power of Attorney, and Why Do I Need One?

As you enter your thirties or forties, you see that anyone’s life, young or old, can change quickly. Let’s say you’re a young father and get into a car accident on the way to work; you now could be unable to handle your affairs.

This is why setting up a power of attorney so a trusted friend, relative, or professional can make these decisions for you is wise, prudent, and smart.

Any power of attorney (or POA) gives one or more trusted individuals the power to act on your behalf as your attorney-in-fact when you can’t do so; for example, during an illness, accident, or mental trauma.

There are specific powers of attorney, and some only authorize limited powers, but others can cover a wide range of issues, such as financial matters, health decisions, real estate transactions, and more.

For example, let’s say you cannot manage your financial affairs; a financial power of attorney can appoint someone to manage these matters and ensure they’re handled following your precise wishes, plans, and goals.

However, there are limitations, and if you are killed, your power of attorney will no longer remain valid or legally binding. Upon your death, other legal issues will arise, and usually, a trustee or executor of your will now execute all aspects of the estate plans you previously created.

By consulting with a skilled, experienced power of attorney lawyer, you can explain all the details of your unique situation, and your lawyer will provide all the legal options that a professionally drafted, detailed power of attorney may offer to resolve your concerns and put your mind at ease.

If I Set Up a Power of Attorney, What Vital Factors Must I Consider?

Of course, the first thing to do is to obtain a thorough consultation with a qualified and knowledgeable power of attorney law team. Your meticulous and empathetic law team will help you determine precisely what you wish to accomplish with your POA and also provide the best type that suits your unique needs.

That said, one of the most critical decisions you must make is who will be assigned the responsibilities of being your attorney-in-fact; this job can be stressful and time-consuming and is not a good fit for everyone.

Then, before you decide who will manage your affairs, discuss this duty thoroughly with them and ensure they are able and willing to do the job.

Most relatives, etc., you speak to may wish to help but might be the wrong person to manage your affairs for the following common reasons;

• They are too busy to do the job – Most people have lots to do today, and taking on the additional tasks involved in adequately managing their affairs could be overwhelming.
• They are willing but unable to do the job—Being placed in this position, they must be experts at paying attention to details. If they are unhealthy or disorganized, they probably will not do an excellent job of managing your money, assets, etc.
• They are indifferent or don’t care – Managing your affairs is serious, and if your attorney-in-fact doesn’t care enough, they’re unlikely to notice poor care, abuse, financial issues, etc.

These are only a few reasons that choosing the right attorney is critical to this vital process.

Also, it is wise to have a backup agent if your primary agent becomes unavailable. Once a well-drafted and detailed POA is in place, how well it’s implemented becomes the most critical factor. This is why you may consider using your estate planning lawyer as your “attorney, in fact;” as a professional, they’ll know what must be done and ensure all your directives are carried out according to your precise specifications.

In California, What Are Some Of the Requirements For a POA?

Every state has different legal rules to draft and legally enforce your POA. So, to create a legally valid power of attorney in California, the document must meet some basic requirements, such as;

• You, as the principal, must be at least 18 years old.
• You must hold the mental capacity to fully understand your POA and its legal consequences and ramifications.
• Your agent, who will manage your POA, must also be 18 years old and have the mental capacity to understand and manage the duties demanded by the POA.
• Your POA must be appropriately executed, such as needing to be signed by a notary public, and usually have two competent witnesses
• If your POA contains real estate transactions that must be done, it must be notarized and possibly have other legal stipulations.
• If you are in a nursing home and have a medical POA, it needs to be witnessed by an ombudsman (or patient advocate) in addition to the notary and other directives.

Each POA differs, and so may the rules and legal requirements it must have; this is the most significant reason to have the guidance of a skilled and professional California power of attorney law team.

Are There Various Types of POAs, and How Do I Know Which to Use?

This is another vital factor you must get right so the POA you draft does exactly what you want it to do. For this reason, there are various options for a California power of attorney, such as;

• An advance health care directive – This is usually a classic medical POA that allows your agent to manage health care decisions on your behalf and a living will that outlines your wishes and preferences regarding medical treatment.
• A durable POA – This is one of the most valuable powers of attorney, as it remains effective even if you (as the principal) are incapacitated and unable to make your own decisions. However, it also must include specific legal terminology to be effective.
• Limited POA – This standard financial power of attorney gives your agent authority over particular duties for a limited time.
• General POA – Usually a financial power of attorney that allows your agent broad authority in managing your financial and business affairs.

Once again, every situation and the POA that must be used to manage it correctly differs. Therefore, the professional advice and guidance of an empathetic and thorough power of attorney lawyer is mandatory.

I Need Advice on Drafting a Power of Attorney; How Should I Proceed?

A power of attorney is a powerful and highly effective legal tool as long as it’s drafted to your precise specifications, allowing it to solve the issues you address and nothing more.

It also must be in place before you lose your ability to think or function adequately to manage your affairs. It also requires a person or professional you trust who will faithfully and dutifully carry out their responsibilities on your behalf.

The law firm of Cava & Faulkner has a long, successful, and empathetic history of drafting and creating powers of attorney that meet your specific needs and ensure that all your precise wishes are carried out. Call them today at 916-831-7565 for a free consultation on your particular needs and concerns. They will use their substantial knowledge of California POAs to make sure your family and affairs are cared for if you become incapacitated.

What Is a Health Care Directive?

A health care directive (often referred to as an advance health care directive) is a legal document that allows you to specify what you do and don’t want in terms of medical care and treatment if you become incapacitated and unable to state your preferences yourself.

Often, people think this is only valuable for elderly people, but that couldn’t be further from the truth. Unfortunately, everyday events like car accidents or undiagnosed medical conditions can cause even otherwise young and healthy people to become incapacitated. While it’s uncomfortable to consider that possibility, it’s vital for people to prepare for it and hope never to need it.

A health care directive allows you to name an agent who can make decisions on your behalf while you cannot. It can set in place a wide variety of preferences, including what healthcare
providers or institutions you do or don’t want involved, what types of care and treatment you would or wouldn’t want in specific circumstances (for example, forced feeding or breathing if you’re unlikely to survive or gain consciousness without it), and whether or not you’d want your organs to be donated.

In California, a health care directive is comprised of two parts:

• Power of attorney. This document names the person authorized to make medical decisions on behalf of the incapacitated person.
• Instructions for health care. This is the list of specific instructions the person would have wanted if they could speak for themselves.

It’s important to understand that a health care directive is not a do-not-resuscitate (DNR) order. The latter applies only to respiratory or cardiac arrest. You can have your doctor prepare a DNR for you to have in your records.

What Happens if There’s No Health Care Directive for Someone Who Becomes Incapacitated?

If someone without a health care directive becomes incapacitated, the medical professionals caring for them will likely turn to the family members closest to the invalid. While this can work

in some cases, in others, it can lead to strife and animosity if the family members disagree about what should be done and who is best suited to make those decisions. For example, if a widower becomes incapacitated and has two children who disagree on whether or not the widower would want life-sustaining treatments, the decision could end up in court in a conservatorship proceeding. That’s costly, time-consuming, and could lead to a permanent rift between the siblings. It could also lead to treatments the invalid would not have wanted, especially if they would have preferred not to be kept alive by artificial means. A judge may also be the one to choose your guardian (conservator) and this may not be the first choice for making healthcare decisions. Conservatorships and expensive, invasive and very time consuming.

To ensure your wishes may be followed, it’s vital to work with an experienced health care directive attorney who understands California law and can work with you to develop a directive that meets your requirements.

How Do I Choose a Health Care Directive Agent?

Choosing the right person to act as your health care directive agent is as important as having the directive itself. People often choose a family member, but that’s not always the best choice. The following are some of the crucial aspects of choosing an agent.

Trustworthiness. Will the person follow your wishes? If you would not want forced feeding or breathing apparatuses used, but the person you’re considering for your agent believes in prolonging life no matter what, can you trust that they’ll put aside their beliefs for yours?

Location. Choosing someone who lives far away is not ideal, as they may need to be on-site as soon as you become incapacitated.
Good assertiveness and communication skills. The agent must be able to communicate well and sometimes forcefully, both with medical staff and family members.

Note: In California, you cannot name your supervising health care provider, any employee of the health care institution where you’re receiving care, or operator or employer of a senior care facility where you live as your agent.

What Is the Process for Setting up a Health Care Directive?

As noted above, there are two documents for a health care directive, the power of attorney that names the agent and the instructions for health care. But before filling those out, it’s recommended that you spend some time determining your wishes and discussing them with close family and your attorney to ensure you’ve covered as many aspects as you can.

Once you’ve laid out your instructions for health care, you should go over them with the person you want to name as your agent. These can be uncomfortable conversations, but they need to happen so you can be sure the agent understands and will follow your wishes if necessary. You may need to consider someone else as an agent if they appear hesitant. It’s also a good idea to have a backup agent in the event that something happens to the primary agent.

Once the directive is finalized, you should provide copies to your family, the agent, your doctor, and if you’re in a hospital, senior facility, or other health organization, provide one to them as well.

What Should I Do if I Want to Set up a Health Care Directive?

Call Cava & Faulkner at 916-685-1225 for a free consultation. This is a vital document for everyone, and you’ll want to ensure it clearly reflects your wishes and leaves little room for error or misinterpretation. We can walk you through what it should include and help you determine what your specific requests are and how to make them as legally binding as possible.

What Is a Trust?

A trust is a legal fiduciary arrangement that places assets into a separate ownership usually managed by a third party, known as the trustee. Trusts are organized in numerous ways including how assets eventually make their way to the named beneficiaries. Some trusts provide protection for family members with disabilities by helping them avoid conflicts with government programs such as Medicare or Social Security. Others can provide a steady, controlled income to beneficiaries who may have difficulty managing money prudently.

One advantage of many trusts is that they avoid probate, unlike wills. That has a couple of advantages: First, it usually means the assets will be distributed more quickly when the original estate owner dies. Second, avoiding probate means that the details of the estate are private. Probate is a public function, and wills and estates that go through probate are made available for public review, while trusts remain private. Third, the cost of probate is very high and can drain assets that were meant to improve the lives of loved ones. Fourth, probate deprives a person of choosing when and how a beneficiary receives an asset so an 18 year old could inherit money which may alter the course of their life in a very negative way.

What Types of Trusts Are Available in California, and What Can They Do?

There are many. This is not a complete list, but does include some of the most commonly used trusts. For concerns about your estate’s specific needs, it’s crucial to work with an experienced estate planning attorney.

Revocable or Irrevocable Trust

Trusts are generally either revocable or irrevocable. Which is best for you estate depends on how you feel about the requirements of each.

Revocable trust. The trustor (person who moves their assets into the trust) creates the trust and has the ability to change, end, or revoke the trust at any point in their lifetime, as long as they’re deemed mentally competent. This type is commonly used to avoid probate because the trustor has the ability to make changes in the future (for example, if they come to believe someone listed as a beneficiary is no longer the best choice for certain assets, they can change those assets to go to someone else).

Irrevocable trust. With this type of trust, once the trustor moves the assets into it, they no longer have the right to make any changes, cancel, or revoke the trust. While it might seem logical that the trustor would prefer to retain control, there are circumstances in which an irrevocable trust might be the better choice. One primary reason is that assets in an irrevocable trust can’t be reached by creditors. For people who are more susceptible to being sued (including physicians and lawyers), this is a good way to ensure that a yet-unforeseen lawsuit won’t destroy the estate they’ve built up.

Special Needs Trust

If the trustor wants to ensure one or more beneficiaries who have special needs and will need a steady income for the foreseeable future can receive those without losing their eligibility for various needs-based governmental options such as Medicare/Medicaid. This is especially helpful when there are beneficiaries with disabilities that will make it difficult for them to support themselves as adults.

Life Insurance Trust

This type of trust is arranged to have life insurance payouts go directly into the trust upon the trustor’s death. It can only be an irrevocable trust, and the trustor can’t borrow money against the life insurance policy in their lifetime. But it can protect against excessive taxation at the trustor’s death.

Testamentary Trust

Unlike the other types of trusts mentioned so far which go into effect as soon as the trustor moves assets into them, a testamentary trust doesn’t go into effect until the trustor passes away. These are also irrevocable trusts.

Blind Trust

This is useful when the trustor has reasons not to want the beneficiaries to know about the trust (or the trustees appointed to manage it) because they fear there could be conflict between themselves and the beneficiaries or among the beneficiaries.

If I Have a Trust, Do I Need a Will?

If you have any assets that you don’t want to place in a trust, you should draw up a will to specify how those are to be distributed. A pour over will serves a very important purpose if your trust fails, by ensuring your beneficiaries will receive the assets that should have been distributed through a trust.

There’s also one important thing that a will can do that a trust can’t, and that’s to name a guardian for any orphaned minors. If the parents die with a trust but without a will, it will be up to the courts to determine guardianship for the surviving children. Usually the courts will look at close family members first. But to ensure the parents’ preference for guardians is followed, they must have a will.

Who Should Be Appointed Trustee of My Trust?

There are several considerations, and this topic should be discussed with an attorney. But here are a few basic things to keep in mind.

Trustworthy. The trustee must be someone the trustor can count on to carry out their wishes.

Strong personal financial track record. The trustee should not have a mixed financial background.

Communication skills. The trustee needs to communicate with a variety of people, including family members and beneficiaries.

Detail-oriented. The trustee will have to manage paperwork, accounting, and deadlines, and should be detail-oriented to succeed.

What Should I Do if I Need Help Developing an Estate Plan with Trusts?

Call Cava & Faulkner at 916-685-1225 for a free consultation. As discussed above, trusts are an excellent way to protect assets for future generations. Every estate is unique, and which trusts will most benefit yours depends on the specifics of your estate. We can review your estate and help you determine the best approach for protecting your assets and benefiting your inheritors going forward.

What Is a Blended Family?

A blended family is one created when spouses who were previously married to someone else and had children divorce and remarry, bringing the children from the previous family with them. This can be complicated on many levels, but it’s especially complex when considering estate planning.

Sometimes, one or both spouses already have an estate plan. But once they remarry and blend families, that plan is outdated and needs attention.

What Happens if There’s No Estate Plan and One Spouse Dies?

That’s known as dying intestate, and the decedent (person who died) who didn’t have a plan (or has an outdated one) causes the survivors to go through probate. Without a valid plan, it’s up to the probate court to determine how assets should be divided. The court may distribute assets in ways the decedent wouldn’t have chosen.

It can also open up legal challenges among the blended family members regarding who should rightfully receive what. If the estate is contested, it can be time-consuming and costly, meaning the assets could be drained before anyone actually receives them–something the decedent most likely wouldn’t want.

Sometimes, one spouse might believe it’s easiest just to leave everything to the current spouse, assuming they’ll distribute some of their inheritance to the children from the first marriage. But if that’s not part of the estate plan, the new spouse isn’t legally required to do so, which could lead to resentment and possible lawsuits from the children who are excluded.

What Do I Need to Know About Estate Planning with a Blended Family?

There are several factors to keep in mind when beginning the process. First, it should be something the couple has discussed as part of preparing to marry. Anytime there’s a major life event–marriage, divorce, death, birth–updating the estate plan is vital and should be done with the guidance of an experienced estate planning attorney.

One major consideration–and a primary reason to get an updated plan–is clearly delineating what property belongs to each spouse. A blended family usually has three types of assets or property.

• Separate property. This is property (including debt) acquired by one spouse prior to the marriage. If it’s not used to benefit the marriage, it usually belongs to the spouse who had it before the marriage.
• Community property. Any assets or debts acquired by one or both spouses while married.
• Commingled assets. When the two spouses take what was previously separate property and use it jointly. For example, each owned a house before marriage. They each sell their separate homes and use the money to buy a joint home. That’s now community property, not separate property.

What About Other Types of Assets?

It’s easy to think of property in terms of real estate, cars, or bank accounts, but there are other types of assets that need to be considered, especially if either spouse has specific wishes for how those assets would be distributed after their death.

• Life insurance. Life insurance policies should have a named beneficiary. If someone has divorced and remarried but didn’t change the beneficiary from the previous spouse, that could cause problems in probate. Or it may be that the person with the life insurance would rather it go to someone else, such as adult children. The insurance policy needs to be updated to reflect that.
• Pay on death. Many bank accounts offer the option of adding a beneficiary as a pay on death (POD) or transfer on death (TOD), which allows those funds to go directly to the beneficiary without having to go through probate. But again, the beneficiaries must be up to date.
• Retirement funds. By federal law, retirement funds must automatically be given to the surviving spouse.
• Other assets. If one spouse inherits an asset, such as real estate, they need to decide who should inherit the property on their death, especially if they don’t want the new spouse to receive the separate inherited property.

Should I Have a Trust?

There are many good reasons to have a trust, although it shouldn’t completely replace a will, especially if there are minor children in the family. A trust can’t name a guardian in the event of the parent’s death; only a will can do that.

But a trust can do many other things. For one thing, it essentially bypasses probate, meaning the distribution of the estate is likely to be quicker and less costly. There are many different types of trusts that have various purposes. To learn which type of trust might be most advantageous to your situation, contact an experienced estate planning attorney.

Some popular options in blended families include:

• Special needs trust. If one spouse has a special needs family member, they can set up a trust that will ensure the person will be cared for after the spouse passes.
• Qualified terminable interest property trust. This type of trust allows one spouse to provide for the other if the trust owner passes first, but it also can be set up to ensure children from a previous marriage receive assets and are not disinherited by the surviving spouse.

What Should I Do if I Need Help Developing an Estate Plan for My Blended Family?

Call Cava & Faulkner at 916-685-1225 for a free consultation. Estate planning involving a blended family can be complex and something you shouldn’t undertake without professional advice. Every estate is unique, and there’s no one-size-fits-all plan. We can walk through the specifics of your estate and provide advice as to the best approach that will meet your needs and protect your assets.