Hello, everyone. This is Robert Mansour. Today I want to make a brief video about the fundamentals of estate planning. I have my handy dandy whiteboard here. I'm going to give you like a "macro view," a "flyover" view of estate planning and what the basic components are all about.
In most estate plans, there are legal tools that we can create that can help you and your family in case something goes wrong. I call this the "legal toolbox." Inside this legal toolbox are a whole bunch of tools that people can reach for in case this happens, or this happens, or you pass away, or you have dementia or Alzheimer's disease, or you're in a car accident, etc. Sometimes we need to have legal tools to help ourselves, and to help others help us. A lot of people don't have a legal toolbox. If you don't have a legal toolbox, you might find yourself in court, seeking an order from a judge. If you have all these things set up in advance, you don't need to involve the court. You already have the legal tools that you need.
There are four major tools in most estate plans. The first one is this - The living trust. The living trust is the first major tool. A lot of people think the living trust is the estate plan. No, it's not. People call me all the time and they say, "We need you to do our living trust," and I say, "Do you mean an estate plan?" They're like, "Oh no, no. Just, just the living trust." I tell clients, "That's like buying the engine of the car and nothing else. No steering wheel, no wheels, no seats, no nothing." This is just a part - It's a big part - but it is a part of the estate plan.
The living trust has three major players in it. The first major player is someone called the "settlor." If there's two of them, they're called the "settlors." The settlors are the people who create the trust. You will always be the settlor of your own trust. The next cast member, if you will, are the "trustees." The trustees are the people who are in charge of the trust. In the very beginning, you are going to be your own trustee, or a married couple would be their own trustees.
After you pass away, or you can no longer handle your own affairs, you name people called "successor trustees" to manage your trust. The person who is the trustee, they get to manage every thing inside the circle. When I say "inside the circle," I mean that title to the asset actually says, "Smith family trust" or "Johnson family trust." The title on the asset has to be changed in order for something to be "in" your living trust.
The final cast members of the living trust are the people called the "beneficiaries." The beneficiaries are the people who benefit from the living trust. In the very beginning, that's going to be you, whoever sets up this trust. You're the settlor, the trustee, and you are also the beneficiary.
Before I get to the next one, I want to talk about three main reasons people set up a living trust. The first reason is this: Everything in the name of your trust avoids the court system. The reason it avoids the court system is because you've taken care of things in advance. Number 2: Your successor trustees (the people that you name) in the order that you name them are allowed to manage everything in your trust - Not anybody who wants the job, only the people that you've named. Finally, number 3: There are rules of your trust. At the end of the day, this is a legally enforceable document. What it says has to be followed. You get to set out the rules as to who gets what, and how they get it, and when perhaps they don't get it. The living trust can be a very powerful tool.
The next tool in our toolbox is something called the will. The will that goes with the trust is not any kind of will. Most people have a will that says, "Johnny gets this, Sally gets that, Vinny gets this, my brother Skippy gets that." Your will is going to do one thing only. It's going to direct everything back to your living trust. In fact, we call this type of will a pour-over will because everything "pours over" back into the trust.
People say, "Why would I even need this thing?" Here's why: Remember, I told you that assets in the trust avoid the court system. However, sometimes you might find an asset that was not in the trust. For some reason or another - a clerical error, you forgot, you didn't get around to moving that asset into the trust. The will catches that and directs it back into the trust. The person in charge of your will, by the way, is called your "executor." The person in charge of the trust is the "trustee." The person in charge of the will is the executor.
The next major tool is something called the power of attorney. The power of attorney is the next major tool. This person is called your "agent." Power of attorney simply means the following: You appoint someone, usually your spouse or a friend or a family member, as your agent. They get to act on your behalf in many different circumstances. Sometimes people tell me they say, "Wait a minute. That sounds like the trustee. Isn't the trustee acting on my behalf?" The answer is yes, they are. However, there are many things in our lives that have nothing to do with our trust. For example, let's say my wife needs to speak to my former law firm, my former employer, and she needs to get information. That's not part of the Mansour family trust. That's just some kind of HR file. She needs to act on my behalf. She can do so with a power of attorney. Or she needs to speak to a credit card company, or you need to help somebody with X, Y, or Z. You may need to use this tool to do that.
The final tool in the toolbox is called the Advance Health Care Directive. As the name implies, this person is also called your agent, this person makes health care decisions for you if you cannot. The thing that most people think about when I talk about this is they say, "Oh, this is the 'pull-the-plug' person." I'm like, "Well, kind of...I would say it's about 20% 'pull-the-plug' and 80% 'advocate'." There are going to be times when you are sick, when you need people to advocate for you. You need people who are going to get answers, talk to doctors, talk to hospital staff, make difficult decisions. These people that you've chosen, in the order that you choose them, get to serve in that capacity. Sometimes this is a very tough job.
There you have it. This is a macro view of the basic components. There are others, but these are the big four tools that go into most estate plans. I hope you found this helpful. If you'd like, you can call my office at (661) 414-7100 and set up an appointment to set up your own estate plan. Thank you very much.
When married couples create their estate plan, an issue that sometimes arises is whether or not certain assets are "separate" property or "community" property. In fact, the characterization of property can lead to disagreements.
Simply put, assets accumulated during a marriage are generally presumed to be community property, meaning the property belongs equally to both spouses. For example, lets say John and Sally buy a house together during their marriage. One day, John decides that he wants the house to go to his brother Stan after John passes away. John even goes to a lawyer and creates a will that says, "My house shall go to my brother Stan after I pass away." You see, that's not going to work because the house also belongs to Sally too. John can't simply give that house away unilaterally. It's not his to give away. The house is community property.
However, let's say that Sally's parents pass away and she inherits their vacation condo in Big Bear. In California, anything one inherits or receives as a gift is generally presumed to be the separate property of that person. Sally takes title to the condo but keeps it in her name. In Sally's will, she gives the condo to her cousin Fred if Sally passes away. Can she do that? She probably can because the condo is Sally's separate property. Generally speaking, a husband and wife can dispose of their separate property any way they wish. Sometimes, a husband or wife in a married couple inherits property and they want to make sure it stays on their side of the family. Characterization of property is very important.
Recently, I met a lovely lady named Susan. She had two children from a prior marriage. Many years ago, Susan's husband died. A few years later she married Tom and they lived together in Susan's house for 20 years. However, during that time, Tom made many improvements to the house, paid for repairs, helped pay the property taxes, etc. Susan wanted the house to go to her children after she passed away. I told her that would be fine, but it would be best to make sure that Tom agreed the house was indeed her separate property. It's not that Tom would have made a stink about it, but he had children of his own and I was concerned Tom's children might try to lay some claim to the home after all the money and time Tom spent on the house. Tom agreed and signed the separate property agreement. Susan's living trust provided that if she died first, Tom could remain living in the house until he died or decided to move out. Then the property would indeed be distributed to her children.
The inverse is also true. Roger and Betty got married late in life. When Roger died, his brother Skip showed up and tried to get all of Roger's artwork. Skip told Betty the paintings were owned by Roger before he got married to Betty, and therefore, the artwork belonged to Roger's side of the family. Well, when creating their estate plan, Roger and Betty had signed a community property agreement that specifically stated that all their belongings, including Roger's paintings, were "community property" and therefore belonged to Betty after Roger died.
A property agreement between spouses can be a very helpful legal tool when it comes to clearly designating property as community or separate. If your estate is facing similar issues, call our office to see if we can help.
We've all seen the movies - the old rich person is laying on their death bed, signing a will and other legal documents with the lawyer standing bedside. The entire family is waiting in the hallway, biting their nails.
In fact, most people think estate planning is for old people. Here's the truth - estate planning is not for old people. It's for wise people! Estate planning is about "planning" - creating legal tools that will be available in case something happens to you. You could be in your 20's, 30's, 40's. It doesn't really matter. You've got to sit down and come up with a plan for your estate. How are you going to protect yourself? How are you going to protect your family? These are questions that are not exclusive for "old people" or "rich people."
One reason people most people who create an estate plan are "old" is because they keep procrastinating. Some people think if they create their estate plan, prepare a will or living trust, they're going to die sooner. I have news for you - you're going to die anyway so you might as well make sure you are ready for it and you have a good plan in place so that you're protected.
Here's another myth I hear all the time - "Estate planning is for rich people." This is probably the biggest misconception. Estate planning is not just for rich people. While "rich people" do indeed create estate plans, we need to learn from their example. They're not rich by mistake. They are rich for a reason. They are rich because they use the very same tools that are available for average people. Average people just don't take the time to do it, and so most "average" people generally lose their family wealth within one or two generations. They think estate planning is for rich people and therefore, they don't bother learning about it.
Finally, there is a condition called "paralysis by analysis." Sometimes people can't agree on who their trustees are going to be, who their executors are going to be, or who they're going to name as guardians for their children. They spend so much energy "analyzing" things, they become paralyzed. Too much analysis leads to paralysis which leads to absolutely nothing. Thinking about creating an estate plan is not the same thing as actually sitting down, rolling up your sleeves, and creating one.
So here is my message to you: Estate planning is not only for "old" people or "rich" people. Those are common myths. Consult with an estate planning lawyer and learn how these legal tools can be used to protect you and your family. Yes, there will be tough decisions, but don't spend too much time analyzing everything or you risk doing nothing at all. You can always fine tune your plan as the years go on.
If you want help or wish to learn more about estate planning, call our office at (661) 414-7100 to see if we can assist you.
Hello everyone, this is Robert Mansour and today I wanted to make a brief video about a special kind of will that works in conjunction with your living trust. A lot of people ask me, they say, "Well wait a minute, I thought if I have a living trust why do I also need a will?" Sometimes they think it's one or the other, but then I explain to them that there is a special kind over will called a pour-over will.
You see most traditional basic wills essentially go into effect after you die, and they basically says Johnny gets this, Sally gets that, Billy gets this, my cousin Louie gets this. When you have a living trust you're going to have a different kind of will that works with the living trust. What kind of will is it?
It's called a pour-over will. Why do they call it a pour-over will? Think of this type of will as a net that sits under your living trust. Anything that is not in the name of your living trust may end up in court. It may end up outside the trust and therefore subject to the probate court. The first thing the judge wants to see if you got to probate court, is they want to see the will. Why does the judge want to see the will? Because in effect, the will is a letter to the judge. It basically says the following, "Dear Judge, I am dead. This is where I want you to put all my stuff."
Now remember, most wills say Johnny gets this, Sally gets that, et cetera, but the pour-over will does one thing. It says, "Your honor, everything pours over into my living trust," and that's where we get the term pour-over will. Everything pours over as if you're pouring it into your living trust.
If everything is properly titled in the name of your living trust or otherwise, the will is never going to see the light of day. It's going to be a nice tool that sits in your tool box and will never be necessarily used. However, if you do have to go to court your executors going to have your will and your will directs everything to your living trust. It pours over into the living trust.
The reason that you want everything to go to your living trust is because your living trust has all the rules about distributions of your assets. Who gets what and how do they get it and when do they get it and when do they not get it. Once again, that's why people will have a will as well as a living trust, but what you should realize is that it is a special kind of will. It's not a basic standard will, but one called a pour-over will. I hope you found this video to be helpful. My name is Robert Mansour, if I can be of assistance please don't hesitate to contact my office. Thank you very much.
Hello everyone. This is Robert Mansour and today, I wanted to talk to you about a special tool in the toolbox, the legal toolbox, known as the estate plan. I want to talk to you about something called a durable power of attorney. The legal toolbox is called the estate plan and it has many different tools in it and one of those tools is the durable power of attorney.
The person in charge of the durable power of attorney is somebody called your agent. It's not your trustee, it's not your executor, but somebody called your agent. Now, it might be the same person that you've designated for another job like trustee or executor but the hat that they are going to wear is the hat of the agent. Sometimes they use the term this person is my attorney in fact. I'm not a big fan of the words attorney in fact because people sometimes think that it actually has to be a lawyer. It does not have to be a lawyer. Hence, I like to use the term agent.
This person that you designate in your power of attorney can act as your alter ego in many, many different circumstances. People say, "But wait a minute, that sounds like my trustee. Aren't they acting on my behalf as well?" The answer is yes, they are acting on your behalf but only with respect to living trust matters. There's a lot of things in our life that had nothing to do with living trust. For example, this person can act on your behalf by talking to your credit card companies, by dealing with your human resources department at your job, by talking to your attorney or CPA, a variety of situations where you might need somebody to act on your behalf yet have nothing to do with your living trust.
Now, some people might say, "Well, that sounds like the person who makes health care decisions." That is a different tool in the toolbox. That's called an advance health care directive. That person is also called your agent but they are making decisions on health care matters. The way I explained it to clients is the person with power of attorney, the person as your agent under power attorney acts on your behalf with all matters that do not directly deal with health care and do not directly deal with your living trust. Essentially, that person is going to be acting under the durable power of attorney. That's one of the legal tools in the legal toolbox known as the estate plan.
I hope you found this video helpful. If you need any assistance with your estate plan, please do not hesitate to contact my office. Thank you very much.
If you have minor children, your estate plan should address who you will nominate as guardians for your children in the event you are no longer to care for them. If you pass away or are incapacitated, you want to make sure your plan addresses who will be in charge of your kids. In your estate plan, you do so by "nominating" a guardian.
So where do you nominate guardians for your kids? Generally speaking, the nomination of guardian(s) is found in your last will and testament. Also, you can also nominate guardians in a separate, stand alone document. Remember to select "primary" and "secondary" guardians for your children in case your first choices are unable to serve.
Just because you name someone doesn't mean they are automatically legal guardian over your children. Many people are surprised to learn that a nomination is simply just that - a nomination. The person you've chosen to act as guardian still needs to be appointed by the court. This is called a "Petition for Guardianship." Once the court approves your nomination, they are officially the legal guardian. The only way your nominee for guardian can become legal guardian is to be appointed by a court. A letter you write and give to them doesn't really give them any legal authority.
Therefore, armed with your nomination, your nominee must "petition" the court for guardianship. Then the judge will look at any specific instructions you may have put in your nomination, and may also make rulings regarding your wishes. The judge may not approve everything you request, but consider your nomination the place where you can at least make your general wishes and desires known. The court will consider your nomination but will also consider other factors affecting the welfare of your child. The latter is the overriding concern with strong consideration given to your nominations. Your children may also have a say if they are old enough.
Once appointed by a court, the guardian must generally regularly report to the court regularly about how the guardianship is going, provide an accounting, etc. If there are concerns, the court basically retains jurisdiction over the guardianship until the minor reaches age of majority. If a guardian is not doing a good job, they can be taken to court and questioned. Therefore, nominating a guardian or guardians for your minor children is a very important first step. Just make sure your nominees understand they must petition the court to officially be appointed guardian.
Hello, everyone. This is Robert Mansour, and today I wanted to shoot a brief video about the importance of a detailed estate plan. When I say detailed, I'm not just talking about lots of legalese. I'm speaking about an estate plan that handles many of life's circumstances that you may not expect. For example, what to do if there's fighting among the children, what to do with your real estate. What if there's a disagreement about what to do with your real estate? What if one of your children has an alcoholism problem or one of your children is a spendthrift, can't handle money? Who is going to be the trustee of your trust, and who is going to be the second person in line after that? What if you have co-trustees? What if there's a disagreement among those co-trustees?
The reason I'm bringing all this up is because many times clients come to my office and we work on the estate plan, and I ask them, "Well, what if this happens, and what if this happens, and what if this happens?" They invariably say, "Oh, my goodness. I didn't even think about all that." Here's the thing - The more detailed your plan is and the more issues it addresses, at least as close to completely as possible, the less problems you're likely to have on the back end.
Sometimes if there is a disagreement in the family or there is a question about how to handle something or what to do with the family's real estate, etc., if the estate plan addresses that issue, it makes it much less likely that it's going to be a problem. Let's say one of the children has an alcoholism problem and there's a question about how to distribute money to that individual. Are there provisions in the estate plan that address that situation? How and when does that individual, no matter what their challenge might be, whether it's a spendthrift that can't handle their money, a daughter-in-law or a son-in-law who might get their hands on the money, alcoholism, etc. The more detailed your estate plan is, the less likely you're going to have a problem on the back end.
You see, the trustees that you pick, they really want specific instructions about what to do and how to do it. If you leave too much to the imagination, sometimes that can lead to a problem. Now there are some families where everybody gets along famously and there's absolutely zero chance of anything going wrong, or perhaps a sole beneficiary; one child is going to be the beneficiary and nothing more. Then you might be able to get away with more general instructions, but generally speaking, the more beneficiaries there are, the more issues there might be, the more detailed you want that plan to be so that it addresses that issue - so it's less problematic for the family after you pass away.
This has been Robert Mansour talking to you about having a very detailed estate plan and the benefits of doing so. Thanks for watching.
If you need help with your estate plan, give us a call at (661) 414-7100.
This is a topic that has surfaced before, but it's happening more often these days because estate tax laws have changed dramatically. So here is the issue: Married couples call and tell me they "already have a living trust." Then I ask, "What kind of trust do you have?" They say, "What do you mean? Kind of trust? It's a LIVING trust!"
Couples are often surprised to learn there are several kinds of living trusts. They are all indeed "living trusts," but there are different "kinds" of living trusts. Like jelly beans, there are different "flavors" of living trusts.
I explain to clients that it's like walking onto a Toyota dealership lot. You don't just say, "Hey Mr. Dealer, give me a Toyota!" He's going to inquire what kind of Toyota you'd like, what suits your family, your specific concerns/needs, etc. Perhaps a simple Corolla would be good, maybe a Camry, or perhaps a Prius or a Sienna?
The problem is that many clients have no idea what kind of living trust they have. In many cases, in reviewing it, we find it's not the kind of trust they want. Why do they have a trust they don't want? Either the attorney who prepared the original trust simply gave them whatever "Toyota" he had on the lot (whatever standard living trust he/she used) or the attorney didn't ask the right questions of the clients so he/she can better recommend one type of living trust over another. In short, I have found that over 90% of the time, most couples who already have a living trust have no idea what kind of trust it is or what in the world the trust actually says.
If you're not sure what kind of living trust you have, or what the specific provisions of your trust actually say, or if it's simply been a very long time since you had your estate plan (including your trust) reviewed, call us today and make an appointment for an estate plan review. We want our clients to not only "have" an estate plan, but more importantly, to actually understand it! Wouldn't that be nice?
Hello, everyone. This is Robert Mansour and today I'd like to talk to you about putting your children on your bank accounts, on your real estate, et cetera. A lot of people try to handle their estate planning matters by basically adding children to their account. For example, somebody in their 60s or 70s might add their 30-year-old or 40-year-old daughter or son onto a bank account, an investment account, or sometimes they'll put the children on the real estate, on title with them. The thinking behind that is, well, with respect to bank accounts, they figure, well, this way the child can write checks, the child can make withdrawals, make deposits, et cetera.
The problem with that is that whenever you add a child to a bank account or an investment account or real estate. You have effectively added a bull's eye to that asset. How does that work? Let's say that son or daughter gets in any kind of trouble. Let's say they're going through a divorce. If they're going through a divorce, it is conceivable that the attorney for the soon-to-be ex spouse decides that they want a piece of that account, or they want a piece of that investment, or they want a piece of that real estate. The next thing you know, you're owning that asset with an ex son-in-law or an ex daughter-in-law, or you have to give them a portion of that.
Why? Because your son or your daughter is on the account. That means that they own the account, just like you. Let's say they get into some kind of creditor problems or a bankruptcy or a law suit. They're driving down the street one day and they hit a little boy on a bicycle. The next thing you know, that little boy's family is coming after your son or daughter, and everything with their name on it, including your asset. Sometimes you have to ask yourself, "Am I creating more trouble by adding somebody to my account?" There are other ways of handling this, and there's other avenues that you can pursue with a proper estate plan. Sit down with an attorney and come up with a plan that protects you, but also allows your children the tools, or gives them the tools, rather, to assist you if they have to. This is Robert Mansour, thank you for watching.
I can't tell you how many times clients tell me, "Yeah, I put my IRA in my living trust." You see, an IRA is an Individual Retirement Account. It is owned by an "individual" - not a living trust. It's the same thing with 401k accounts and 403b accounts and most other retirement accounts. They don't go "in" your trust.
In fact, in many cases, these types of accounts won't have anything to do with your living trust. The reason is that retirement accounts are distributed to a designated beneficiary. When you set up a retirement account, they will generally ask you to designate a beneficiary on a "beneficiary form" - someone who will get that retirement account when you pass away. Then you should designate a secondary/contingent beneficiary. You designate a beneficiary (both primary and secondary) by filling out forms these companies give you when you open the account.
Therefore, if you name your cousin "Sally" as your beneficiary, then your cousin "Sally" gets your IRA when you die. What you say in your living trust is irrelevant. The beneficiary form trumps your will or your trust. Imagine your IRAs are on an entirely different planet. The only thing that governs the distributions of a retirement account is the beneficiary form. So you see, these retirement accounts don't go "IN" your living trust. In fact, they generally have little, if anything, to do with your living trust.
Now, that being said, some people may choose to make their living trust the BENEFICIARY of their retirement account. Now that's what they might be thinking when they say their IRA is "in" their living trust. So while the IRA might be payable to a living trust as a beneficiary, the IRA is not "in" the trust as real estate, bank accounts, investments, and other assets actually titled in the name of the trust would be. Some practitioners are fond of advising their clients to name their living trust as the beneficiary of a retirement account . I'm not terribly fond of this approach for several reasons:
1) Naming a trust as the beneficiary of your retirement account may be entirely unnecessary. It puts an administrative burden on your trustee to make sure the required minimum distributions are withdrawn every year and distributed to the beneficiaries.
2) There may be negative tax consequences if you name a living trust as the beneficiary of a retirement account.
3) It's logistically much simpler to name human beings as beneficiaries of a retirement account. Naming the trust as the beneficiary can be an administrative nightmare and cause unnecessary complications.
I tell my clients that if they name their living trust as the beneficiary of a retirement account, they have to ask themselves WHY they are doing so.
So here's my basic advice when it comes to retirement accounts: Name your spouse as your primary beneficiary (it's usually required anyway). If you're unmarried, name anyone you want. Then name your children (or anyone else you want) as secondary/contingent beneficiaries.
Now this assumes your beneficiaries are in good shape and you don't have any major concerns about how they would handle an inherited retirement account. However, if you do have significant concerns, then you may indeed wish to name your living trust as the beneficiary. While it may cause a small administrative burden for your trustee, it might be better than naming an irresponsible beneficiary to your retirement account.
You can also change your mind over the years. For example, while my children are young, I've named my living trust as secondary beneficiary on my retirement accounts. However, once my children get older and have good heads on their shoulders, I will probably name them directly instead of naming the living trust. That would probably make life easier for everyone.
If you need help with your estate plan, feel free to contact us at (661) 414-7100.