My thanks to Patti Handy (www.PattiHandy.com) for conducting this interview about estate planning issues after losing a loved one. You can click on the link above for the audio.
Patti Handy: Hi and welcome to Money Rules 101. I'm your, host Patty Handy. In studio today, I am very excited to have my good friend Rob Mansour with us, and our topic of conversation is starting over after the death of a spouse. We're specifically discussing estate planning and how important that is to protect those loved ones left and to bring peace of mind for everybody.
Rob Mansour: That's right.
Patti Handy: So Rob, start us off with some of the things that you recommend in your conversations that you have with your clients.
Rob Mansour: Well, I think the first thing is that there is no rush. This is funny, sometimes I'll get a call from the client on their way to the mortuary. On their way to the funeral, and they're saying, "Hey Rob, my spouse just passed away. What should I be doing?" My answer to them is always, "You should be grieving, is what you should be doing. You just lost your husband. You just lost your wife. You don't need to be doing estate planning at this moment. Go take care of the funeral. Call me in a few weeks when things have settled down. Everything that was true the day before your spouse died will still be true a couple of weeks from now." So I always tell clients don't be hasty. Don't make rash decisions in the middle of all the emotional turmoil that you're going through.
Patti Handy: Yeah. Makes sense.
Rob Mansour: Yeah. So the first thing is you got to grieve. There is no rush. There's rarely a rush. The second thing that you might want to do is obtain death certificates, because you're going to need those to establish the death of your spouse. You can't just go to the bank and say, "My spouse died" They're not just going to take your word for it, you're going to have to present a death certificate. So that might be one of the only things that you need to do right away. Then, during this time, you need that downtime to reassess your situation. You need to kind of take inventory of all the assets that you and your husband or you and your wife had together, and start making a list of two types of assets.
There's regular assets like real estate, bank accounts, investments, and then other kinds of assets are retirement accounts, life insurance policies, things that pass by way of beneficiary. So take stock. Whatever you do, don't start moving money around, liquidating funds, calling in the IRAs, calling in the life insurance policies. Go meet with professionals first and then make your moves, because it's so much better when you're equipped with the information. I know a lot of people go into action mode right away, because that's part of the grieving process.
They defer the grieving, and instead they start moving bank accounts and distributing things, and I say, "Just take your time. Assess the situation." Now, after you've prepared an inventory of all the assets, you need to ask yourself how was title held to all those assets. Were there any assets in the name of your spouse alone? Were there some assets that you held jointly? Were there some assets with other people on them? Who are the beneficiaries of all the assets, the ones that pass by way of beneficiaries? You need to kind of ask yourself those questions first.
Are there any assets that are in a living trust? Maybe you and your spouse had a living trust together and some of those assets may be titled in the trust, in which case we may need to remove the spouse from those assets, and there is a procedure for that. If there are any assets that were only in your husband's or your wife's name, you may have a problem. Because some of those assets may exceed the $150,000 mark, which is the California limit, and you may find yourself in court because those assets were not in a trust or were not held jointly, or something like that. So we do that.
We also have to ask ourselves were there any debts owed by the deceased person? So if my wife passes away and she has $50,000 worth of hospital bills, those are my problem now. They're not personally, technically my problem, but they are the problem for the estate. But after all, my wife's estate is my estate. So I can't just throw those bills in the trash. I can't just disregard the credit card bills and all the bills that are coming in. So one of the other things that you should be doing, not only taking asset inventory, but also taking inventory of any and all debts that your spouse may have owed. If you're married, those debts belong to the community. Belong to the married couple. So you can't just walk away from those, you have to re-examine those. You may be able to negotiate some of them as well.
If you and your spouse had a prior estate plan, you need to examine what the trust says after the first death. Most living trusts for married couples will say what happens when the first person dies, and there's many variations on this. Some of it says that their surviving spouse gets to be in control. They still drive the bus until that person dies. Or it might say that the trust is supposed to split into two parts. I can't tell you how many people have those kind of trust, where it says when one person dies, the trust now splits into two portions, and a lot of people don't know that. Sometimes people did that for tax purposes, sometimes they did it because they had blended families.
There were many reasons to do that. Or some people have it because the attorney who drafted the documents didn't know what else to give them, and that's what they got. That is something that the clients need to look at. Another variation I see is it says that when the first person dies, no changes can be made to the trust. So we have to take a look at that document and see what it says is supposed to happen when the first person dies. The trust maybe still be revocable and amendable or it may not. So we have to take a look at that.
For the prior estate planning documents, powers of attorney, healthcare directive, wills, a lot of clients still have their spouse in the number one position on all of those documents. They'll say my spouse is my agent under power of attorney. My spouse can make healthcare decisions for me. What we need to do is we need to maybe revisit those documents and put other people in those roles, now that our spouse is no longer with us. Or a lot of people will only have their spouse and nobody beyond that. So they might say my husband Harry shall be my agent, but then no-one is beyond Harry. In which case, yes, it's time to probably redo those documents.
It might be important to redo the documents if they're over ten years old anyway, just because those documents are going to get older and older and older, and it might be a good idea to revisit all of that and put new people in all of those positions. Let's see here. Oh, are there any retirement accounts that your spouse had? You need to collect those IRAs, those 401ks. But don't make the mistake of liquidating them. Sometimes you'll call the IRA company and you'll say, "Oh, my husband died." They'll say, "Oh, would you like us to send you a check?" A lot of the clients say, "Yeah, sure. That sounds great," and they get this check in the mail, and what they don't realize is now there is a taxable event. That they have to pay taxes because they just got a check.
Instead, they need to do a spousal rollover. So they roll it into their own 401k or their own IRA. That's why I always tell clients to be careful about that. Then of course you want to talk with a CPA about any tax consequences, any pension benefits that you might be due, any life insurance proceeds that you might be due. You need to apply for those. Once you inherit those assets, now it's your turn to make sure you have the proper beneficiaries there. So when you get the IRA from your husband or from your wife, you need to make sure that you take the time now to designate the appropriate beneficiaries on your account.
One other thing, by the way. I think it's important. If the client is elderly, or maybe not even elderly, they're just not very good with money. I have seen a lot of people taken advantage of after their spouse dies and new people come into their lives, and I say, "Sometimes you might want to put a co-pilot with you." So let's say you do have a trust and you and your husband were handling that. It might be a good idea to put one of your children on now as your co-trustee with you. Especially if you are worried about other people coming into life and influencing you, or ... I had one client, she met a guy on Match.com and they started dating. They dated for a year, and he bamboozled her out of $300,000.
Patti Handy: Ouch.
Rob Mansour: He was a pro, and after he bamboozled her, he moved on to the next widow.
Patti Handy: Oh dear.
Rob Mansour: So from now on, my client and her son are co-trustees together. So that if a new guy ever comes along, he now not only has to go through her, but he has to go through her son as well, who's also standing guard, if you will, at the moat. So sometimes it is a good idea to name a co-trustee with you once your spouse is no longer there to assist you. But those are the kinds of things that I talk to clients about after the death of a spouse. I mean, there's much more to it than that, but those are some of the main points we cover.
Patti Handy: Yeah, those are good points and, you know, it sort of reinforces the importance of having a team with you. Whether it's a divorce, a death, or whatever it is, a life-changing event. Having a team. Having an attorney. Having a financial planner. Having a CPA. Having these professionals guide you, because you're not in a position to think, necessarily, logically when you're in the middle of this emotional, complete chaos.
Rob Mansour: Right, and you may not know all the options.
Patti Handy: Yeah. We're not specialists in law and in accounting any everything else so important. Really quickly, one thing that I made note of. You were talking about all the accounts, knowing where all the retirement accounts are and assets and whatnot. That's so important to know even before you're elderly. That should be discussed upfront so that the spouse knows where's all of our assets? I mean, the husband or wife could be killed in a car accident coming home, and if only one spouse was the money manager, that could be very dangerous. Because the other spouse has no idea what accounts are where.
Rob Mansour: It's overwhelming.
Patti Handy: It ... totally overwhelming. So it's important and it's fair for both of you to have a file of some kind with every account, every account number, current statements, so that there's no unknowns, and during that time of difficulty your child, somebody can come in and go, "Okay, where's that file? I'll take care of this," and then you can just go on from there.
Rob Mansour: That's right, and then now it's your responsibility to make sure that the new people that you're naming, your children or your siblings or whoever you're going to be naming in charge, they need to know where everything is, too. Because if something happens to you, now they're going to need to come to your aid, and you don't want them wondering what's going on, where everything is exactly.
Patti Handy: Yeah. Yeah. Great information. Thank you Rob. I know there's so much more to talk about this, and I think people will have a great resource in you for questions. How can they reach you?
Rob Mansour: Well, there's two ways. They can just pick up the phone and call the office, which is 661-414-7100. But if they really want to reach me 24/7, they can just hop on to my website, which is www.mansourlaw.com, and Mansour spelled M-A-N-S-O-U-R, the word law, dot com, and my website has tons of resources, tons of videos and articles that many people find to be very helpful.
Patti Handy: And it's all free.
Rob Mansour: And it's all free, exactly.
Patti Handy: That's a beautiful thing. All right. Thank you so much Rob.
Rob Mansour: Thanks Patti.
Patti Handy: Liked having you here.
Rob Mansour: Thank you.
Hello everyone. This is Robert Mansour, and I wanted to make a brief video today about blended families. More and more clients are coming to me where the husband and the wife have children but sometimes the husband has his own children from a previous relationship, and the wife has her own children from a previous relationship. So this gets a little bit complicated, but let's talk about some of the possible solutions for a family like this.
One solution is to create a living trust that has all of the assets in it. We can call it the "Smith Family Trust." So the Smith Family Trust. There's the husband and there's the wife. Let's say the husband has three kids from a previous relationship and let's say the wife has two kids from a previous relationship. Well, this, as you can imagine, could be a problem. So let's say the husband passes away first. All right? Let's say the husband passes away first and everything is with the wife. Now these children down here are waiting to see what happens. Aren't they? Well what if the wife decides to change the Smith Family Trust? What if she says, "You know what? I don't really like these kids," or somebody enters her life like a new husband, maybe, or a boyfriend or whatever, and they come and they get her ear. Frankly, it could be these children who get her ear, and she decides, "You know what? I want to change the Smith Family Trust. I don't want these children to get anything anymore."
Well that's entirely possible. So what can we do? Well, I sit down with a husband and a wife and I talk about this and I tell them, "Look. Either you're okay with that," and in some cases they are. A lot of times the husband and wife say, "You know what? If my spouse wants to change everything, then so be it. That's okay with me," but then I have some clients who say, "Oh, no. That doesn't sound okay with me." So what are some other options? Well, what we can do is we can say when the first spouse dies, the surviving spouse, the wife in this particular scenario, cannot make any changes to the trust. No changes at that point. So even if somebody tried to pressure her or tell her to do something, she cannot legally make any changes to this trust. It's going to split the way she and her husband originally designed.
Another idea that we can do is the trust can split into two parts. So let's see how that one works. So here's the original Smith family trust. There's the husband and there's the wife. Let's say in this particular scenario the wife dies. What happens is we split the trust into two parts. We put 50 percent on this side and 50 percent on this side. Now it could be different percentages, but this is essentially how it works. This side is called the "A" side and this side is called the "B" side. Now sometimes we call this the survivor's trust because of the surviving spouse and sometimes we call this the decedent's trust. Either way, it's an A, B split. So we take, let's say there's $100 in the trust. We take $50 and put them here and $50 and put them here. So somebody might say, "Well, how does this help?" Here's how it helps. This trust over here, the "B" trust, you can't change. You can't make any modifications to it. It's going to distribute the way the husband and the wife originally designed it. The survivor's trust on the "A" side, the surviving spouse can do whatever he or she wants with that. So this is one solution to that problem.
Also, another way we can do it is we can say that another person will serve as a co-trustee with the surviving spouse. Like one of the kids from the decedent's side of the family maybe can be a co-trustee and make sure that the wife or the husband honor the original agreement. As you can see, things can get a little bit dicey when you have a blended marriage.
That's why it's a good idea to visit with an estate planning attorney, sit down, and map out a plan. Remember, it's called estate planning. There's a reason for that. Having a plan is better than having no plan at all. All the children from both sides of the marriage will certainly appreciate the time that you took to protect everybody involved. Please feel free to give me a call and set up an appointment if you'd like to talk about your estate plan. Thank you very much.
My thanks to Patti Handy (www.PattiHandy.com) for conducting this interview about estate planning issues after a divorce. Click above to hear the interview.
Here is a transcript of the interview:
Patti Handy: Hi, and welcome to Money Rules 101. I'm your host Patti Handy. I'm super excited today to have my good friend Rob Mansour in house. Rob is a estate planning attorney, and we're gonna talk about starting over after divorce, and specifically regarding estate planning. And I can just speak from my personal experience, when I went through my divorce, my son was 18 months old, and first and foremost, I wanted to make sure that he was protected. If, God forbid, something happened to me and I wanted to make sure that my ex had nothing, no claims to my funds, and I wanted to make sure he was protected 100%.
Rob Mansour: Right.
Patti Handy: So the plan was one of the first things I did post-divorce. So, Rob, start us off with some of the things that you, when you talk to your clients, what you share.
Rob Mansour: Well first of all, let me say I'm very happy that you're super excited, because estate planning is rarely super exciting, so it's always nice and refreshing to have somebody super excited.
Patti Handy: I'm always excited to see you, Rob.
Rob Mansour: Well, thank you. Most people are very excited to see me. But, that aside, one of the things ... I get calls all the time, clients, either they had a divorce, or they are going through a divorce. It's easier to handle the estate planning part if they're coming to me after the divorce. Because things have kind of finalized, the dust has settled. And now they kind of want to get their house in order. There's not so much I can do during the divorce because there's, California law basically puts a hold, if you will, on estate planning while you're going through a divorce. You can't make changes to wills, changes to beneficiaries, changes to executors, trustees, while your divorce is going on. So, it's better sometimes just to wait until after you're done.
So if you've had your divorce, and now you've separated from your spouse, and you have your assets, one of the first questions I talk to my clients about is, what assets do you have? So the divorce is final, okay, he has his stuff, you have your stuff. What is your stuff? What do you own? Where are your bank accounts? Do you own any real estate? Do you have any retirement accounts? Because the advice that I give the client has a lot to do with what assets they have at the end of the day.
Patti Handy: Mm-hmm (affirmative).
Rob Mansour: We might find that a simple will is good enough. Or we might say, you know what, I think a living trust would be more appropriate for you. Also, with respect to every asset, we have to look at how title is held to those assets. So, if let's say a gal named Sally comes to see me, and she says, "I just got a divorce." And then we see that her sister's on all of her accounts.
Patti Handy: Mm-hmm (affirmative).
Rob Mansour: I would tell her, "Well Sally, that means when you die, your sister gets all of those accounts." And that may not be exactly what they have in mind. Or some people will put their children on all their accounts, again, not a very wise idea. That may not be what they want to do. So we have to examine title to all the assets, and then once we've done that, then we can make recommendations to the client. If they don't have an estate plan, the client never had a will or a trust or anything like that, they really should get one. I mean you, Patti, saw the wisdom in setting yourself up and taking care of your house. Putting it into order to protect yourself and your son. Especially because you didn't want everything to be controlled by your ex-spouse.
Patti Handy: Right.
Rob Mansour: So, that's a very important reason. You want to get an estate plan in effect if you don't have one, if only to protect yourself and your children, if you have any. Also, we have to ask ourselves, is there a divorce decree? So at the very end of the divorce, there's a court order signed by a judge, and it says XYZ. So we can't always just do whatever the heck we want to do. We have to sometimes take a look at that divorce agreement, and see, make sure that whatever we are doing with your estate plan doesn't run afoul of what your divorce papers say.
Patti Handy: Mm-hmm (affirmative).
Rob Mansour: So that's something that I also consider when a client comes in. The estate plan of course, we talked about wills and living trusts, but there's other parts of it too. For example, power of attorney. Who has the legal authority to act on your behalf after your divorce? So perhaps if you already had an estate plan, maybe your ex-husband is still on those documents. Maybe your ex-husband still had the authority to make healthcare decisions for you.
Patti Handy: Mm-hmm (affirmative).
Rob Mansour: For your advanced healthcare directive. That's probably not what you want.
Patti Handy: Right. Right.
Rob Mansour: And if you have other people in mind, you really should revoke those prior documents and start new documents with the people that you want. Now you also may have some accounts, like retirement accounts, and life insurance policies, where you have what's called a beneficiary on those. And so you want to make sure you revisit all of those accounts, and make sure that you don't have your ex-spouse as the beneficiary of your life insurance policy.
Patti Handy: Yeah.
Rob Mansour: I recently had a client who passed away, and she had an IRA. And she passed away, and her husband was still the beneficiary of that. It was not exactly an IRA, but it was a retirement account through her work, and he got all the money after she died.
Patti Handy: The ex-husband?
Rob Mansour: The ex-husband.
Patti Handy: Oh, dear.
Rob Mansour: And she had wanted that to go to her children. Unfortunately-
Patti Handy: Ugh.
Rob Mansour: I mean, it wasn't a tremendous amount of money. It was about $20,000, which is a lot. But that went to her ex-spouse because she didn't bother to revisit her beneficiary designations on all of those accounts. And then of course, the other very important issue is the minor children, if there are any minor children. I had a client one time, his name was Tim, and then he says, "Listen, what if I do nothing?" I said, "Well, if you do nothing, and you stay unmarried, everything is gonna go to your child." And he's like, "Super, that's fantastic." And he started to walk out the door. And I said, "Wait a minute. How old is your kid?" He goes, "Oh, she's eight years old." I said, "Well, the life insurance isn't gonna pay $500K to an eight-year-old. They're gonna pay it to the guardian of that eight-year-old. And who is that?" He says, "Oh, that's my ex-spouse."
Patti Handy: Oh, dear.
Rob Mansour: So I said, "Okay, that's obviously not what you want, so we need to set up something so that somebody else controls the money for your child, not your ex-spouse."
So, and the last thing that you might want to do after a divorce is make sure that you have the proper guardianship nominations for your children, because you may not want your children ... especially if ... I don't know what the custody arrangement is after the divorce, but you may not want your child going to your ex-spouse for one reason or another. You may have somebody else in mind to raise your children.
Patti Handy: Mm-hmm (affirmative).
Rob Mansour: And you should put that in your will or your nomination of guardian at some point. You should make sure that you nominate who you want to care for your children, so that at least you have a voice in the matter after you've, if you should pass away.
Patti Handy: Mm-hmm (affirmative).
Rob Mansour: So those are the kinds of things that I review with a client after a divorce. Dot our i's and cross our t's.
Patti Handy: Yeah. Great advice. You know, it's so important, especially like you said, with minor kids who can't speak for themselves.
Rob Mansour: Right.
Patti Handy: It's just that they're really tiny, like two, three, four years old.
Rob Mansour: Mm-hmm (affirmative).
Patti Handy: They can't speak up. And then having that guardian in place just gives you peace of mind, knowing that it's not going to the ex, if that ex was abusive or ... you know, there was issues with drugs, alcohol, or whatever.
Rob Mansour: Yes.
Patti Handy: That's-
Rob Mansour: As a matter of fact, there's something ... we kind of call it anti-nomination. Where for example, in your nomination for guardian, you could say, "I want my sister Mary to be the guardian of my minor children. And I don't want the guardian to be my ex-spouse for the following reasons." And you can list out those reasons. He was abusive, or he was verbally abusive, or demeaning to my children. Whatever you ... he was arrested several times, whatever the case may be. You can sometimes explain why you don't want your child going to the ex-spouse in that nomination of guardian.
Patti Handy: Yeah, nice. That just gives you peace of mind as mom or dad.
Rob Mansour: Sure.
Patti Handy: I think that's great advice.
Rob Mansour: You do your best.
Patti Handy: Yeah. Great advice. Thank you, Rob. So, I know there's gonna be so much more to talk about this, and people may want to reach out to you personally. So how can they reach you?
Rob Mansour: Well, my website is always available 24/7, which is nice. 'cause I do have to sleep sometimes. But it's ... you can find that in www.MansourLaw.com. So that's my last name Mansour, spelled M-A-N-S-O-U-R, the word law, dot com. Or they can call the office at 661-414-7100.
Patti Handy: Wonderful. Thanks so much, Rob.
Rob Mansour: Thanks, Patti.
Hello, everyone. This Robert Mansour, and today I want to talk about making changes to your living trust. Let's say you have a living trust that says what happens with your assets and things like that after you pass away, who manages your assets if something should happen to you etc. Let's say you want to make a change. What do we call that? That's called an "amendment" to your living trust. If you make an amendment to your living trust, that's fine. Basically, you can say "Paragraph C, section four, shall now read as follows..." and you get rid of the old section C subsection four and you put in the new paragraph. Then a couple of years later, you do another amendment and you say paragraph D is going to be changed.
Then two or three years later or five years later, you decide to make another amendment. If you keep doing this as the years go on, it starts to get very complicated. Then the next thing you know, you've got 10 or 15 different documents and you're trying to figure out what's what. That makes things very difficult for your family and for your trustees to manage.
At some point, I might recommend, as well as other lawyers might recommend, something called a "restatement." A restatement is basically one massive amendment that "restates" all the terms of your living trust from scratch. Let's say you have the "Smith Family Trust" from 1985 and you want to change the whole thing or you've had way too many amendments and now it's like putting patches on pants.
If you have too many "patches" on your to fix a hole here and to fix a hole there, at some point it makes a lot of sense to buy new pants. That's what a restatement is. It's a brand new living trust. Now even though all the provisions of the restatement are different or new rather (all the provisions are new), there is one thing that stays the same - the name of your original trust. It's still called the "Smith Family Trust" dated such and such 1985 and you'll still hold all your assets in the same name, but all of the provisions of the trust have been restated. That's why we call it a restatement or a restated amendment.
If your trust really needs to be gutted, and you need to start over, sometimes it makes sense to do a restatement rather than do yet another amendment. I hope you found this video helpful. My name Robert Mansour and thanks for watching.
Rebecca Robins: Hello. I am Rebecca Robins, and I am the host of the Santa Clarita Valley Local Leaders Show. I am a local leader here in Santa Clarita, and the business owner of Robins Financial. I provide tax and financial services. To learn more about me, my business, and my services, please visit Robinsfinancial.com. That's Robins, R-O-B-I-N-S, financial.com.
But without any further delay, I would like to introduce my guest today. I am so excited to have with me Robert Mansour, who is an attorney of the Law Offices of Robert Mansour. He specializes in estate planning, probate, tax administration, and personal injury law. How are you today, Rob?
Robert Mansour: Good, Rebecca. Thank you very much. Thank you for having me.
Rebecca Robins: Thank you for being my guest today. Can you tell us a little bit more about yourself and what you do in Santa Clarita Valley?
Robert Mansour: Sure, I'd be happy to. Thank you. Let's see here. The best way to start is with a little bit of history. I've been a lawyer since 1993. For a good portion of my career, I was a defense lawyer, a litigation attorney, working for the insurance companies, defending personal injury cases. As such, I was a trial lawyer. I was in front of juries a lot, taking depositions, arbitrations. Basically fighting with people all the time in adversarial kind of settings.
After, oh gosh, maybe 10 years of that, I got really tired of the fighting, and decided to look to a different area of law that was a little bit more constructive. One area that had always appealed to me was the area of estate planning. Sitting down with a family and working on legal documents such as wills, living trusts, powers of attorney, healthcare directives, things like that, and helping the family come up with a plan that suited them. It was so nice to sit across the table from actual clients, a husband wife, or whomever I'm sitting across the table with, and working with them to create a plan that they felt comfortable with, and that they felt reflected their values. I got away from the adversarial trial lawyer work that I had done.
For the last several years I've had my own practice, after leaving the big firm that I was with. It has been a very interesting transition. Most of my practice now is devoted to estate planning. I have about 25% of my practice deals with personal injury cases, such as car accidents, slip and fall accidents, things of that nature. That just kind of happened because of my background, having worked for the insurance companies as a defense lawyer, I found it kind of natural to put on the other hat, if you will, and represent victims of those accidents, since I have a very good understanding of how the other side approaches those kinds of cases.
Those are really the two areas of law that I do specialize in. I shouldn't say specialize. That's something that the bar doesn't like us to use unless, it's kind of a term. All right, I should say those are the areas of practice that I work on. I will say also that I help people with post-death matters such as probate. Or for example, somebody's the trustee of their family's trust, and they don't know what to do, and they need some guidance. I help people with also those post-death matters as well.
Rebecca Robins: Well, that's wonderful. Thank you for sharing with us, Rob. Now I'd like to actually focus on probably what you were referring to earlier, was that estate planning. Can you explain to us what is meant by estate planning?
Robert Mansour: Of course. I think the first thing that we should do is talk about this word estate. That, I think, turns a lot of people off, and they figure, "Estate planning is not for me." Because the first thing they think of when they think of the word estate, is they think of somebody living in a big mansion, somebody who is very, very wealthy, who plays polo on the weekends, and speaks with a fake British accent. That is not, the word estate, I think, tends to mislead a lot of people.
The way I tell people is to think of the word estate as simply being equivalent to the term stuff. Everybody has stuff. You might have $50 to your name. You might have $50 million to your name. That is your stuff. It could include real estate. It could include checking accounts, savings accounts, any kinds of bank accounts, investment accounts of any sort, jewelry, clothing, all of the things that you own. Stocks, bonds, all of those things, are part of your "stuff."
That's all estate planning is. It is planning what to do with your stuff, and there's two components, essentially. Number one, planning who is going to be in charge of your stuff, if you will, if something happens to you. Never mind the issue of death. Most people think of estate planning, and they think about dying. It's really about a lot more than that. It's about empowering people to act on your behalf in case something ever happens to you, whether it is a car accident, dementia, Alzheimer's disease, a coma, something happens where you're no longer able to handle your affairs, you want to make sure that you give people the legal tools that they need to be able to assist you.
Then, of course, the other component is after you pass away, you get to control where your stuff goes, and to whom it goes, and in what manner. By preparing these legal documents in advance, by creating this estate plan with your stuff, you get to control a lot more of what happens, rather than just leaving things to chance.
Let me just also address one more thing here, Rebecca. People always say, "Isn't this what wealthy people do? Don't wealthy people do estate planning? Why should I?" I say, look, yes, wealthy people do estate planning. Wealthy people know how to stay wealthy. That's one of the things that they do very well. We, as average folks, if there are any average folks listening to this, I consider myself average folks, we need to learn from the wealthy people. We need to do what they do. They are using the very same legal tools that are available to everyone. But most people don't think it's for them.
Then what happens in this country, I read an interesting article, most of the wealth in this country, especially in the middle class, is lost between one and two generations. It's gone. That is because the average people don't know how to transfer wealth from one generation to another. They don't know how to preserve it. They don't know how to ensure against problems and things of that nature. Wealthy people know how to do that, and we need to learn from them and do what they do, and preserve the wealth in our family and make sure that it gets to the right people.
Rebecca Robins: So Rob, what you're telling us is, no matter if our stuff is worth, in our mind $50 or $50 million, we should consider sitting down with someone and doing an estate plan. Is that correct?
Robert Mansour: That's exactly correct. One of the things that people tell me is they say, "Look, I don't have enough money to do estate planning. I don't have enough to protect." I tell them, the truth of the matter is, wealthy people like, let's say, the example that I often use is about Bill Gates. If Bill Gates lost a million dollars from his estate, he'd probably be okay. But if an average person loses a good portion of their estate to legal fees, or attorneys, or the court system, or hospital bills, or whatever the case may be, that will hurt that person, much more than it would hurt a very wealthy person. So you're absolutely right.
Rebecca Robins: One of the things, too, that's important in estate planning is, if you have children. Will you address that for us? Why is estate planning important if you have minor children?
Robert Mansour: Well, minor children can't really own anything. I mean, they can, for example, if my wife and I were to pass away without any planning whatsoever, our home would eventually go to our children, yes. I have two kids. It would eventually go to them. But children cannot own real estate. They are minors. They have to be 18 years of age or older in California. One of the problems is that they can't own real estate.
They can't own, for example, here's another problem I'll tell you. This is a very common problem, life insurance policies. Let's say somebody has a life insurance policy and they put their children as a beneficiary of that life insurance policy. The insurance company's not going to write a check to a 10-year-old kid. They're not going to write a check to an 11-year-old kid. They're not going to do that. What are they going to do? They're going to tell the kid to wait until they're 18 years of age, and then the child will get everything at that time.
So for example, I have a million dollar life insurance on my life. If I were to pass away, and my wife were to pass away in a common accident with me, my children, at the age of 18, would each get $500,000, a check made out to them free and clear. That's not exactly the best way to transfer wealth. Because I know, given my own history, and my youth, I don't think they will handle the money very well at that age.
There's just so many other reasons. For example, a child will have to go to court and have a guardian appointed to them. That can be a very lengthy and expensive process as well. I'm not a big fan of, I mean I am a big fan of estate planning, especially when it comes to protecting kids, and making sure that they are taken care of.
Also, this has nothing to do with money. You get to name the guardians for your children. In an estate plan, in any good estate plan, people with minor children should take the time to name guardians for their kids. That way, you get to choose who takes care of your kids, and not the state of California or some judge. Because the truth of the matter is, anybody can get in line to be the guardian of your kids, and sometimes that can lead to family problems, in-fighting. It is much better for you to choose who's going to take care of your children in advance, and you can be as specific as you want in your documents as to where you want your children to grow up, if you want them to live together, if you want your children to be raised in a particular faith, any kind of information regarding education of your children. All of that can be included in your legal documents. So absolutely, taking care of kids is one of the biggest reasons for doing an estate plan.
Rebecca Robins: Rob, with that, we're going to have to take a break. But we'll be right back with Robert Mansour, Attorney, and we'll be talking more about estate planning. Stay tuned.
Hello, this is Rebecca Robins, and I am your host of the Santa Clarita Valley Local Leaders Show. I am back with Robert Mansour, Attorney, of the Law Offices of Robert Mansour. Robert, we are talking about the importance of estate planning today. I wanted to ask you, what happens if someone does absolutely nothing?
Robert Mansour: Well, if somebody does absolutely nothing, first of all, I should say that that is probably the most popular estate plan, basically doing nothing and just kind of hoping things work out, crossing your fingers and hoping things work out for the better. Also, it is a free plan, so you don't have to pay any money to do nothing, which is another reason why people like it. But I'm being facetious because it is something that really we should spend a couple of minutes talking about.
First thing, let me give you a couple of examples of how doing nothing may not work out. I had a client who came to me, and he had just gotten a divorce. One of the reasons that he got a divorce was because his wife was spending far too much money. He would make a dollar. She would spend two dollars. He comes to me and he says, "Look, Rob. We had financial problems. We got a divorce. What if I do nothing?" That's what he tells me.
I said, "If you do nothing, the state of California already has dictated what's going to happen with your spouse." If he remains unmarried, everything is going to go to his daughter. He said, "Well, that's terrific. That's exactly what I want." He said, "I have real estate, and I have a life insurance policy for $500,000." I said, "Great. All of that is going to go to your daughter." Then he goes, "Super. I guess I'll do nothing." I said, "Hold on a minute. How old is your daughter?" He says, "Well, she's eight years old."
I said, "Eight years old?" I said, "Tim, no insurance company is going to write a check to an eight year old." I said, "Your house will not go to an eight year old." I said, "It's going to go to your child's guardian." I said, "Who's your child's guardian?" Guess what? It's his ex-wife. So if he did nothing, all of his work and money and estate is going to go, basically, to the control of his ex-wife.
Another example that I have that I often use to illustrate doing nothing. A very wealthy client called me and she says, "Look, what if my husband and I do nothing?" I said, "If you do nothing, then once again the state of California will tell where your assets go. It'll go to your kids."
She says, "Well, we don't have any kids."
I said, "Well, then it'll go to your parents."
She says, "Oh, our parents have passed away."
I said, "Well, the next in line would be your siblings."
She kind of pauses and she says, "Well, I have this one brother."
I said, "Well, then everything would go to him."
She said, "We're coming to see you right away, Mr. Mansour." Because she did not want everything to be going to her brother. Because they don't have a good relationship. She didn't want everything that she and her husband had worked for to end up going to her brother.
Sometimes by doing nothing, everything could end up in the wrong hands. I think that that's probably the best thing to say about that, that state law will dictate where your assets go. Also, if you do nothing, you could end up in court, going through the probate process. The probate process is simply the court supervising the transfer of your assets. That's very costly. It costs about 5% of the gross assets. So just on a $700,000 home, you could be looking at about $35,000 in fees just for the court to help and assist in transferring an asset from you to whomever it needs to go to, when if you plan ahead, you can avoid the court system entirely, especially if you use something like a living trust, or another kind of vehicle.
Rebecca Robins: Rob, would you recommend, if someone's thinking about doing nothing, at least invest an hour of their time with an attorney who can specifically tell them, if they do nothing, this is your situation. It's going to go to your child. It's going to go to your brother. It's going to go to your ex. Would you recommend someone at least sit down with an attorney for an hour and find out their individual situation?
Robert Mansour: One of the things that I provide for my clients, Rebecca, is a free consultation. If they have no documents, we sit down and we map out, "What's going to happen if you guys do nothing?" We basically take a look at that scenario. We ask ourselves if we're comfortable with that. Nine times out of 10, or even more so, they are not comfortable with that, and we end up creating a plan. If you don't create a plan, it's just going to happen the way California law dictates. So yes, it's a good idea to sit down with a professional and walk through it and see how the plan might help avoid the disaster of doing nothing.
Rebecca Robins: Okay, and with that note, we're going to take a break, and we will be right back with Robert Mansour, Attorney of the Law Offices of robert Mansour. Stay tuned.
Hello, this is Rebecca Robins, your host of the Santa Clarita Valley Local Leaders Show. I am back with Robert Mansour, Attorney, of the Law Offices of Robert Mansour. We are talking about estate planning. Rob, I wanted to ask you, what are your thoughts about joint ownership of assets?
Robert Mansour: Joint ownership of assets is a very popular approach that a lot of people use, especially married couples use joint ownership by default. They basically own their bank accounts together. They own their real estate together. They own investment accounts together. It's basically, husband's name on the account and wife's name on the account, or the real estate. However, I really caution people, because joint ownership, in my opinion, is one of the leading causes of people losing their wealth in this country, money going to the wrong people. It ends up with people that you never imagined would have your wealth. Here is basically some of the common dangers of joint ownership.
Number one, it is dangerous because the last person alive gets to control the entire asset. I call it Last Man Standing, although it's Last Woman Standing as well. So last man standing gets full control over the asset. If my wife and I own real estate together, if I pass away, my wife has full control over what happens with that real estate. If I own real estate with my brother, for example, if I pass away, he has full control over where that asset goes. I lose control. Once I pass away, I have no say where that asset goes.
For example, sometimes I get clients and they inherit a house from their mom and dad. So there's two siblings that end up owning this house. Then one of those siblings dies, and the remaining sibling gets the whole house. The sibling who passed away, their family gets nothing. That is one of the biggest reasons for what we call unintentional disinheritance, the money ending up with the wrong people.
Also, some people see joint ownership as a way of avoiding probate. They figure they'll just put somebody on title with them, and when they die the person will get the property. That's true. But at some point, there's going to be one person left. You're simply postponing probate. That's all you're doing. You're just putting it off for a while. Because if I pass away, and my wife remains on the house, at some point, she's going to pass away. Then that house will, indeed, be going through the court process.
The other thing that people should really know is that whenever you put somebody on title with you, you are adding a bulls eye to your asset. A common thing that I see is an elderly person who's perhaps in their 70's or 80's. They entertain the idea of putting one of their children on title with them. They'll say, "I know, I'm going to put my son Bobby on title with me."
I say, "Hold on a minute. Are you sure that's a good idea?" Because if Bobby gets into any trouble whatsoever, let's say Bobby is driving down the street and he hits a little boy with his car. That little boy's family gets a lawyer. Anything with Bobby's name on it is fair game, including Mom's home, or Mom's accounts, or anything with Bobby's name on it. By putting people on title with you, you are adding bulls eyes to it.
The other thing that is very, very important is the issue of remarriage in this country. People are getting married two, three, four times in some cases. This is a very dangerous thing, because here's how it works. My wife and I have two kids. I've got my son and my daughter. Let's say my wife and I are on title together, and then my wife passes away. If my wife passes away, maybe a few years later it's possible I might meet somebody new and get remarried. If I put my new wife on title with me, on all of my assets, just like most people do, one day what if I die? Guess who owns everything that my original wife and I worked so hard for? My new wife owns everything. She could conceivably take all the assets and do whatever she wants with them. My children, my son and my daughter, get zero. Again, another example of unintentional disinheritance through joint ownership.
There's a whole other bunch of reasons that joint ownership is not a great idea. There are tax reasons that are too complicated to get involved in with here. I would recommend people talk with you about those things. But I think that covers some of the main dangers of joint ownership, Rebecca.
Rebecca Robins: Okay. Lots of times, when people do have joint ownership of assets, they are looking to a document that's called a living trust. Can you explain to us more what a living trust is?
Robert Mansour: Well, a living trust is nothing more than a contract. It's nothing mysterious. People get kind of mystified by this term living trust. It is a legal document that you can create, either by yourself or with your spouse, or with anybody else, really. The legal contract says the following.
Number one, it tells everybody who you are. It tells everybody what you own. It tells everybody, if anything happens to me, I've chosen the following people to take care of my stuff in case anything happens to me. Finally, after I pass away, this is where I want my stuff to go, and to the following people, and in the following manner.
By reducing that to an example, my wife and I don't own anything. Robert and Laurie Mansour don't own anything. What owns everything? The Mansour Family Trust, this document, this agreement that my wife and I made together. Our house is owned by our trust. All of our bank accounts are owned by our trust. Our investment accounts are owned by the Mansour Family Trust. Not by me or by my wife. The reason that's significant is that if I pass away, the Mansour Family Trust continues to own the assets, continues to govern those assets. If my wife passes away, same difference. The Mansour Family Trust continues to own and govern the assets, and the distribution of those assets.
There are three major benefits to having a trust, Rebecca. The first one, anything in the name of your trust, whether it's real estate, bank accounts, or investments, whatever you put in, is avoiding the court system. That's number one. Number two benefit, anything in the name of the trust can be controlled by your trustees, people that you've chosen in advance to control your assets. The number three benefit is that anything in the name of your trust will be governed by it. So whatever rules you have in your trust will govern the distribution of your assets.
For example, my children are not going to receive their inheritance right away. They're going to receive their inheritance over the years. They're going to receive one-third at 25, one-third at the age of 30, and the balance at the age of 35. Because I don't want them to squander their inheritance by receiving it at such a young age. A living trust is a very important tool under this larger umbrella of estate planning. Does that help?
Rebecca Robins: It does, absolutely. You know, Rob, in segment one we were talking about the possibility of having incapacity. Who's going to help me take care of my stuff even while I'm still alive. Because we all know the probability of incapacity is sometimes greater than the probability of death.
Robert Mansour: Yes.
Rebecca Robins: It sounds like this living trust helps take care of that while you're still alive and for some reason you're not able to take care of your stuff. This living trust then will kick in. Is that correct?
Robert Mansour: Absolutely. One of the serious issues that we need to understand is that one of the things a good trust should outline is the mechanism of succession. How do I know when the next trustee gets to come in? How are we going to define that? There are so many nuances in a good living trust. There are many different kinds of trusts, by the way, not just one kind. A lot of people think it's some kind of a drug that you take an everything is fine. Just like there are many different kinds of automobiles, there are many different kinds of living trusts. You're absolutely right. Anything in the trust can be governed by the successor trustees, people that you've chosen in advance to manage your assets for you.
Rebecca Robins: Very, very good. In segment one, you also mentioned something called a healthcare directive. I was wondering, could you go over other documents that would be part of a typical estate plan?
Robert Mansour: Oh, absolutely. A living trust is part of a larger estate plan. That's something people should know, because they often think it's just a trust. Other important documents are wills for the clients. A will that serves as a back up to the trust. In case something has to go through the court system, the will will direct all of the assets back to the trust in order for them to be governed by the trust.
Another very important document you just mentioned is something in California we called the Advanced Healthcare Directive, where you select people to care for you and to make healthcare decisions for you in case you cannot. You can be as specific as you want to be in that document. There's a lot of nuances that go into that. But again, there's too many to get into on this call.
Another important document, I would say, the big four are the living trust, the healthcare directive, the will that I just talked about, and finally, in my opinion perhaps the most important, is the durable power of attorney, where you select someone in advance to act on your behalf in virtually every other circumstance. This person can talk to the credit card companies, can talk to your former employer, can talk to your lawyer, can talk to your CPA, can talk to the IRS. It goes on and on and on. A very good, durable power of attorney is part of a solid estate plan.
There are many other documents, for example, nominating guardians for your kids, business agreements, community property agreements, especially among married couples, whether there are any separate property issues that we need to address. All of those go into the larger umbrella, if you will, known as estate planning.
Rebecca Robins: Rob, I wanted to ask you the question. Lots of times people come to an attorney, and they set up a living trust. But you were talking earlier about titling your home in the name of the trust, titling your bank account in the name of the trust. What happens if somebody just comes to you and sets up a living trust and their assets aren't put in the trust?
Robert Mansour: What you're hinting at here, and not even hinting at it, you're telling us, essentially, this is probably the biggest reason that living trusts fail, Rebecca, is that people fail to take the time, once they create their trust, to change title to their assets. They come to me and they say, "But the trust says this, and the trust says that."
I say, "It doesn't matter." Because title trumps at the end of the day. If you own everything jointly with somebody, it doesn't matter what your living trust or your will says. It's irrelevant. Because the title to the asset trumps. If I own everything jointly with my brother, for example, if I pass away, my brother gets everything. I don't care how many living trusts I have. I don't care how many wills. You must take the time to transfer your assets into the trust, and assets that you acquire in the future should be put into the name of the trust as well, in order for them to be governed by it. Very good point.
Rebecca Robins: Then the other thing. Let's say somebody comes to an estate attorney like you, Rob, and they sit down and they do the living trust, and they do the advanced healthcare directive, and they do the will, and they do the durable power of attorney. What happens if nobody is aware of it? Nobody knows where the documents are.
Robert Mansour: This does sometimes happen, too, which is why it's critical that people tell the people on their team that they're on the team. If you're going to pick trustees and agents and people to be guardians of your kids, you've got to let them know. What I tell my clients is, tell the people on your team where your binder is, where all your documents are. Let them know where they are. It doesn't help you just to keep it all a secret, or to put it under your bed somewhere and nobody can find it. I also keep copies of my clients' documents as well.
But, by the same token, I don't always know when my clients pass away or if they get sick. They really need to let their family members know where their documents are. They don't have to give them the documents to read. They can keep that private. But at the very least, tell everybody who needs to know, where the documents can be found.
Rebecca Robins: Rob, would you think it would be a good idea to put all these documents in a safe deposit box?
Robert Mansour: I'm against that, Rebecca. I think that usually leads to inability to access the documents. Some people do that, and then all of a sudden the family's trying to get into the box, but they can't, and you're stuck. I have my estate plan sitting in a binder on my bookcase in my home. Everybody who needs to know knows where it is. I also keep a copy of it on a disk in my desk at the office. The people who need to know are aware of that as well. That's really, I think, the best thing to do. I don't want to make it hard for people to find my documents if they need to find them.
Rebecca Robins: Absolutely. Because lots of times, these particular documents we're talking about are going to need to kick in on a moment's notice.
Robert Mansour: Right.
Rebecca Robins: They really need to be accessible.
Robert Mansour: One thing, a trick that I tell some folks with their healthcare directive, I say, "You might want to make a copy of your healthcare directive. Give it to the person that you've chosen, who's known as your agent, by the way. Give it to that person and have them keep it in their glove compartment in their car." Because if they need to drive to the hospital or to act on your behalf, it would be really nice if they had a copy of your healthcare directive readily accessible to them in their glove compartment. That's one way to do it.
Another way to do it is to put your healthcare directive on your refrigerator. Because a lot of healthcare professionals, paramedics, etc., are trained to look on the fridge, because a lot of people do keep their documents there.
Rebecca Robins: Okay.
Robert Mansour: I know it sounds silly.
Rebecca Robins: Yeah, but like I'm saying, you never know. Oftentimes things happen on the spur of a moment, and you want to be able to grab these important documents, so that your wishes can be carried out.
Robert Mansour: Exactly.
Rebecca Robins: On that note, we're going to take a break, but we'll be right back with Mansour, Attorney.
Hello, this is Rebecca Robins, and I am your host of the Santa Clarita Valley Local Leaders Show. I am back with Rob Mansour, Attorney, of the Law Offices of Robert Mansour. Rob, we've been talking about the importance of estate planning. Now, if there's someone listening out there that is interested in getting an estate plan, what is the steps that they need to take?
Robert Mansour: That's a great question. If they're working with me or any competent attorney, they should expect the following steps. Number one, they should call the lawyer. The hardest point is making that phone call. It really is. Because once you've made the phone call and the appointment, in my estimation, everything is downhill from there, because you've taken the most difficult step. So place a call. Make an appointment with the attorney's office. It usually is going to be about three or four weeks down the line. Because the lawyer is probably either going to send you, or connect you with some kind of a questionnaire.
I have all my clients fill out a questionnaire that's available on my website, or we can mail it to them, or both. This questionnaire is going to walk you through all of the things that we talked about. Who do you want as your trustee? Who do you want to make healthcare decisions for you? Who do you want your guardians or your children to be, etc., etc.? Once you fill out that questionnaire, you really should send it back to the lawyer's office, along with copies of any assets that you have. Because the lawyer's going to want to analyze not only your questionnaire, but also estate tax issues, and any other important issues with respect to title. Then the lawyer will be well equipped to provide you with a productive initial meeting.
During that initial meeting, mine usually last about an hour and a half, where we sit down together. We come up with a plan. We address the client's concerns, and everybody feels good at the end of the meeting, because we have a good direction of where we're going to go. After that, about three weeks later, the clients will receive drafts of their documents in the mail. I also include a summary of those documents for the clients, and I highlight particular passages in the documents that I want them to pay attention to, especially specific attention to.
Then if everything is working fine, the clients come in to sign the documents at the very end. At that point, at least in my office, we scan all the documents to the computer. We give the clients a disk of all of their documents, as well as the original hard copies for them in a nice binder that's organized for them. It's also full of instructions for not only them to read, but also their successor trustees to read as well. That's kind of an overview of the process.
Rebecca Robins: Then Rob, how may people reach you?
Robert Mansour: Well, they can always call the office. The phone number is local here in the Santa Clarita area. It's (661) 414-7100. Or there's also an 800 number, which is 800-799-7449. Of course they can also find me on the internet. I have two websites. The reason I do that is because I have two areas of practice, so I kind of divide them up into the two sites. The first website is my last name, mansourlaw.com, so Mansour spelled M-A-N-S-O-U-R, then the word law, L-A-W, .com. That website is dedicated to the estate planning part of the practice. Then I also have a different website for my personal injury practice, and that one is www.valencialawyer.com. Those are the two easiest ways to reach me.
Rebecca Robins: Rob, you are located in Santa Clarita Valley. What is your address?
Robert Mansour: Oh, yes. I'm off of Copper Hill. Copper Hill is near Newhall Ranch Road, in that area. My address is 28212 Kelly Johnson Parkway, Suite 110. That's in Valencia, California, 91355. There are also directions on my website, as well as the address as well.
Rebecca Robins: Very good. Rob, we have about one minute. Would you like to do any type of additional wrap up for our listeners, as to why estate planning is so important?
Robert Mansour: I really just want people to just take five minutes or 10 minutes, and take a look at their situation, and ask themselves, am I okay with this? Should I really? I think the best thing to say is that they really should talk to a lawyer. Ask the lawyer. I mean, sometimes clients come to me and I say, "Look, you don't need to do this. You don't need to do X, Y, or Z. You only need to do part of it." But even a good healthcare directive is better than nothing. There are some free resources that I can tell clients about if they call my office, that I can direct them to as well. They're not great, but it's better than nothing. Just be proactive. I guess that's the best thing I can tell folks.
Rebecca Robins: That is great advice. If you'd like to get in contact with Rob, all you have to do is go to www.mansourlaw.com, M-A-N-S-O-U-R Law L-A-W .com. Also, is phone number is (661) 414-7100. He will help you plan for your stuff, and for your family, and for your children. Rob, I want to thank you so much for being my guest today.
Robert Mansour: It's been a privilege, Rebecca. Thank you very much.
Rebecca Robins: Thank you. May you all have a great day.
Hello everyone, this is Robert Mansour, and I wanted to make a brief video today about what it means to "have" an estate plan versus what it means to "understand" your estate plan. Sometimes I get in conversations with clients and they say, "Oh yeah, we have an estate plan," or, "We have a living trust," or, "We have powers of attorney. We have healthcare documents." Then I ask them some questions about those documents and they have no idea what I'm talking about.
I'll say, "Well what does your estate plan say?" They say, "I don't know." We'll say, "What kind of living trust do you have? What features does it have?" "Oh, we don't know." "When is your power of attorney effective?" "We don't know."
That's not very good, because having an estate plan is great, but if you don't know how to use it, and if your family doesn't know how to use it, your trustees don't know where it is, your healthcare agents wouldn't know the first thing about what to do, that's not very helpful. What I do is I try to help my clients understand not only having an estate plan, but what it actually says. What does their living trust really say? What happens when someone passes away? When are these documents effective? Under what circumstances should they be used?
As a matter of fact, in most cases I ask my clients to bring their trustees and their agents and their executors to the final meeting so I can brief the entire family about what this estate plan says, what it does, how it's used. Answer all questions, because it's nice to have everybody on the team there. So again, ask yourself, "If I have an estate plan, do I even know what it says?" And shouldn't you?
So if you want to understand what your estate plan says, or you want to get an estate plan, and really know what you're doing and understand the meaning of the legal tools that you are creating give my office a call and we'll do our best to help you. Thank you very much for watching this video.
If you need help with your estate plan, call us at (661) 414-7100 to see if we can assist you.
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.