Estate Planning Pop Quiz in under 10 minutes

VIDEO TRANSCRIPT:

Hello everyone. This is Robert Mansour and today we are going to do an estate planning pop quiz. All my contact information is on the screen right there for you. First, an estate plan is not a living trust or a will. A lot of clients think that their living trust is their estate plan. An estate plan includes several legal tools, including wills, powers of attorney, healthcare documents, living trusts, beneficiaries, and a lot more. All of these things are tools in your legal tool box. So what you should know is that an estate plan is the toolbox and a living trust or a will is just one component of that. So let's have our pop quiz:

In California, what do we call the document people use to designate a person to make healthcare decisions for them? The answer an "advance health care directive." A lot of people think it's a living will - many states still use that term. In California, we call it an advance health care directive. And there is no "D" at the end of the word advance.

Number 2 - Jimmy and Sue own a home. They have no estate plan. They passed away in a car accident. Their home has to go through the probate court. The lawyer says the process could take a year or more. Does the mortgage payment on their home need to be paid during the probate process? The answer is "Yes, it does." Just because you died doesn't mean the mortgage company doesn't want their monthly payment. If your family is stuck in court for two years, that's not going to be a lot of fun for them. So the mortgage payment is still due after you pass away on a monthly basis.

Number 3 - Charlie has five siblings. Charlie's mom has $500,000 and put him as a joint owner on all of her accounts so he can help her pay the bills. She also wrote a will that states, "All my children shall share my estate equally." She even videotaped herself saying the same thing.  When Charlie's mom dies, how much does each child get? Well, let's see...there are five siblings, so let's do the math. The answer is "Charlie gets all the money." Why? Because Charlie is a joint owner on all of the accounts. So Charlie gets the money. It doesn't matter what the will says or the videotape.

Number 4 - A will is generally effective upon your death. True or false? The answer is "True." A lot of clients have a will and they think they're all set. What a lot of people don't know is that a will generally goes into effect after you die. It doesn't do you much good while you are still alive. Keep in mind a will is simply a "letter" to the judge telling the judge where you want all of your assets to go.

Number 5 - Mary is in a troubled marriage and is contemplating divorce from her husband Todd. Mary's parents died and left her $750,000. Mary decides to file for divorce five years later. Will Todd get any of the $750,000? Well it depends what Mary does with the money when she inherits it. When you inherit stuff from your family, that's your "separate property," unless you choose to treat it as community property. So if Mary takes the money and deposits it into a joint account or a trust account with her and Todd on it, that's going to be a problem for Mary when she gets a divorce five years later because Todd is probably going to want a piece of that.

Bob and Sally have two kids. They own their home as "joint tenants." Mary dies and Bob remarries years later, Bob puts his new wife Susan on title with him as a joint tenant to the house. Bob dies a few years later. Who gets the house? Well, you would hope that Bob's kids get the house, but the answer is "Susan" - the new wife is going to get that house because Bob put her on as a joint owner with him on the property. The kids get zero. Now, Susan might choose to give the kids the property, but that's a whole other discussion.

Number 7 - John and Mary owned their home as "tenants in common." Mary has an old will that gives everything she owns to her former boyfriend, Jimmy. When Mary dies, who owns the home? Well, when Mary dies, John is going to be owning the property with Jimmy. Why? Because Mary's will gives her share of the property to Jimmy. Notice that it's "tenants in common" - not joint tenants. So that's the trick. The verbiage on the deed is critical.

Laurie has two minor children. One is 10 years old, and one is 16. She also has a life insurance policy for $500,000. She listed her living trust as the beneficiary of her life insurance policy. Why would she do that? The reason it is is because Laurie smart - she doesn't want that money going to a 10 year old and a 16 year old because once they turn 18, they're going to have full access to that money and they're probably going to blow it. So she has it payable to her living trust, and her trustee that she's chosen will be in charge of that money and distribute it to the children in a responsible manner.

Number 9 - Kenneth added his son Mark to his home to make sure Mark inherited the home after Kenneth passed away. Neither Kenneth or Mark have any estate planning documents. Mark got into a car accident and became incapacitated. Kenneth now needs to sell the house in order to pay health care bills. Can he do so? The answer is "It's gotta be tough." Why? Because his son Mark is now incapacitated and is on that deed. Mark can't sign anything. So if he can't sign anything, Kenneth cannot sell the house because the title company is going to be looking for two signatures. That's going to be a problem.

Number 10 - Bob's sister Ann got into a car accident and was unable to handle her affairs. Bob went to Ann's bank with Ann's durable power of attorney so he can withdraw some money for her medical expenses. They said they could not honor the power of attorney because it was "springing." What does this mean? That means that the power of attorney that Ann has probably requires her to be declared incompetent first before Bob can do anything. Sometimes I see documents requiring two or even three physicians to declare the principal individual incompetent before the persons named can do anything. So Bob now has to cart Ann all around town, trying to find doctors to declare her incompetent.

Number 11 - Mary was the named beneficiary on her boyfriend John's life insurance policy. John and Mary broke up a year ago. Last month, John wrote a will giving all his assets to his siblings in equal shares. When John passes away, who gets his life insurance money? The answer is "Mary does." Why? Because he listed her as the beneficiary of his life insurance policy. It doesn't matter what the will says.

Number 12 - John and Mary die leaving minor children and no estate plan. The children will inherit $500,000. Mary's estranged brother has taken any sudden interest in the kids, and he petitions the guard for "guardianship" of the children and control over their inheritance. Can her brother do that? The answer is "Yes he can." Anybody can petition the court for a guardianship of the children. What matters is if John and Mary took the time to nominate guardians for their children. If they didn't do that, then generally speaking, the first person to the courthouse who impresses the judge might end up with those kids and also might end up controlling the money.

Number 13 - Sharon is 65 years old. She decided to add her son Brian to her house as a joint owner so he can get her home when she dies. Brian later got sued for causing a bad car accident. Can they get to Sharon's home? The answer is "Yes they can." Why? It's because Brian's name is on the house. Anytime you put somebody on property with you or on a bank account or anytime you add a name, you've added a massive "bulls-eye" to that asset. So any trouble that Brian gets into is now Sharon's problem. That's another reason to think two or three times about adding your kids or anybody to your property or to your assets.

One more question: James and Cheryl got a divorce because James was verbally abusive and financially irresponsible. They have minor children, and Cheryl took out a $1 million life insurance policy to make sure her children would have enough money when she died.  If she dies, who will likely end up with the kids and have control over their money? The answer is James.  The reason for that is because James is the natural father. Now, he probably would petition the court for guardianship over the children or get automatic guardianship depending on the divorce. However, Cheryl may not want James to control anything, in which case Cheryl should have created a living trust - perhaps naming somebody else to be responsible for that $1 million of life insurance. So just be very careful when it comes to a divorce and things of that nature.

So once again, this was an estate planning pop quiz and less than 10 minutes. Thank you very much for watching. I really appreciate your patience. My name is Robert Mansour. My website and my phone number are on the screen. Take care. I hope you enjoyed the pop quiz.