California Passes Right to Die Law

New Law Permits Terminally Ill Patients to End Their Lives.

Known as the End of Life Option Act, California’s newest law decriminalizes self-end to one’s life and allows terminally ill people to end their lives humanely.  The law becomes effective on January 1, 2016.

Read the Governor’s Letter.

After signing the new law, the Governor sent the Legislature a heartfelt letter explaining how he grappled with that decision.  It is short and well worth a read.   You can find it here: Governor’s Letter on Right to Die.

Details of the New California Right to Die Law.

To take advantage of the End of Life Option, several criteria must be met, including the following:

  1. The patient must:
    1. Be an adult
    2. Be a California resident as proven by one of the following:
      1. California driver license
      2. California state-issued i.d.
      3. Voter registration
      4. Proof of ownership or lease of real property in California
      5. Filing of California state tax return
    3. Have a terminal illness, as certified by an attending physician and a consulting physician
    4. Have mental capacity to make his or her own healthcare decisions. (An agent appointed under a “living will” or advance healthcare directive cannot consent for an incapacitated patient.)
    5. Fully understand his or her medical condition, options, and the nature of the act
    6. Voluntarily request “a prescription for an aid-in-dying drug”
  2. The patient must be able to self-administer the aid-in-dying drug
  3. The patient’s choice must be properly documented, evidencing that ALL of the following occurred:
    1. The patient orally requested the aid-in-dying drug
    2. The patient makes a second oral request no sooner than 15 days after the first request
    3. The patient makes a written request that is:
      1. Signed on a form prescribed by the law
      2. Witnessed by:
        1. Two witnesses
        2. Who sign at the same time that the patient signs
        3. At least one of whom is not related to the patient, employed by the patient, or be entitled to a portion of the patient’s property upon the patient’s death
        4. Neither of whom is the patient’s attending or consulting physician or mental health specialist
    4. The patient signs a final attestation certifying the patient’s choice, which must be signed no more than 48 hours prior to the patient’s self-administration of the drug
  4. The patient may have to undergo an examination by a mental health professional if the attending physician or the consulting physician feel there is any indication of mental infirmity, lack of understanding, or undue influence.

Common Questions

Can the patient change his or her mind?

YES. The patient may withdraw the request for an aid-in-dying drug at any time, orally or in writing and even if the patient is losing mental capacity.  Prior to dispensing the aid-in-dying drug to the patient, the physician must again ask whether the patient would like to withdraw the request.

Can the family be present?

YES.  If the patient consents, other persons (including family members and friends) may be present when the patient self-administers the aid-in-dying drug.  Mere presence is not a crime, provided that those present do not assist the patient in administering the drug.

Can I help the patient administer the drug?

NO.  Only the patient can administer the aid-in-dying drug.  No one — not even family, friends, or medical providers — may assist.  If the patient is unable to self-administer, then the End of Life Option is not available.  However,  it is permissible to help the patient prepare the drug for administration, as long as the actual administration is done by the patient alone.

I have an advance healthcare directive (living will).  Can I use that to direct my Agent to authorize use of an aid-in-dying drug? 

NO.  Only the patient can request the drug, the patient cannot be given the drug if the patient lacks mental capacity, and only the patient can administer the drug.

Do all doctors and hospitals have to allow the End of Life Option?

NO.  Doctors and hospitals may adopt a general public policy prohibiting the use of aid-in-dying drugs on their premises.

You can read the full text of the new law here:   California Right to Die Law

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DIY Death Transfer by Deed Is No Substitute for a Good Estate Plan

Joint Tenancy or California’s new “Transfer on Death Deed” May Help with Do-It-Yourself (DYI) Planning, But It Is Easy to Make Mistakes. 

Existing law allows a “joint tenancy with right of survivorship” deed (“JTWROS”), which gives two or more persons current ownership of property that then passes to the surviving owner(s) upon the death of one of them.  Many spouses hold title as JTWROS, which is usually not a problem.  But some people use JTWROS to put one or more of thSign 4eir children on title as a do-it-yourself estate planning effort.

California has passed a new law, effective in January 2016, allowing a person to designate a beneficiary to receive their home when the owner dies that differs from the JTWROS.

Despite this new option, neither form of deed is a substitute for a good estate plan.

Using a JTWROS as an Estate Planning Mechanism is Risky!

A JTWROS deed is not suitable for everyone and, in most cases, naming your children on the deed to your home is a very bad idea.  Among other things:

  • The named heirs own part of your property
  • They have the power to keep it for themselves when you die, even if you intended that they share it with other family members
  • You need their permission to sell it or give it to someone else
  • They have to sign for any new loans against the property
  • It’s a present gift that you cannot undo unless they gift it back to you
  • It may require a gift tax filing
  • The heirs know about the gift during your lifetime
  • It puts the property at risk for collection by the creditors of the heir
  • If all persons named on the deed die before you, then the gift will cancel and the property  will have to be probated in court.   In California, probate is a very tedious, expensive, and long process.Court 1
  • If one of the other owners dies, the property automatically passes to the survivors, not to the deceased owner’s estate or family.
  • Any of the named owners can “sever” the right of survivorship, causing their share of the property to pass to someone other than the owners named on the deed.
  • The JTWROS deed will control how your property passes when you die, not your Last Will and Testament (unless you are the last surviving owner).

The new Transfer on Death Deed (“TOOD”) differs from JTWROS, But Still May Not Be the Right Choice.

A.   The TOOD Cures Some of the Risks in Using a JTWROS Deed.

The biggest difference between a JTWROS deed and a TOOD is that the TOOD does not pass a current ownership interest to the intended heirs.  This is a big difference! Advantages of the TOOD over the JTWROS include:

  • No ownership interest is passed until your death, so no permission is needed to sell the property, change the gift, or get a loan.  No tax filing is necessary.  No creditors of the heir can reach collect from your own property.
  • You can change the identity of the recipient heir at any time until your death or incapacity
  • The heir does not need to be informed of the gift before you die.

B.   Warning! The TOOD Is More Difficult to Use and It’s Easier to Make a Mistake. 

Before you rush to the county recorder to use the TOOD, be warned!  There are several technical requirements that make it easy to mess up.  There are disadvantages that is shares with the JTWROS deed.  And there are limits to what it can do.  In the end, the TOOD may not perform in the way you expect.  For example:

  • You must name specific beneficiaries to inherit the property.  For instance, you
    cannot say “my children,” or “any grandchildren I may have at my death.”  You have to use specific names.
  • If a person you named dies before you, the gift will not pass to that person’s children.  Instead, it will first pass to the other heirs named as beneficiary.
  • If all persons you named die before you, then the gift will cancel and the property  will have to be probated in court.   In California, probate is a very tedious, expensive, and long process.
  • The TOOD must be recorded within 60 days.  If you wait longer than that, the d
    eed is void.
  • The TOOD can only be changed by recording a new deed or a formal revocation of the old one.  Providing for a different gift of your property in your Last Will and Testament will not revoke a TOOD.
  • A TOOD cannot be used for commercial property or vacant land.
  • A TOOD can only be used for residential property having one to four dwelling units, or up to 40 acres of farmland with a dwelling unit on the property.

A JTWROS or TOOD Is Not the Right Choice for Most People.

Other than passing property to your spouse, neither a JTWROS nor a TOOD is going to be the right choice for most people.   There is significant risk that your property will still wind up in court, and may pass to someone you did not intend.

You at Least Need a Will If…

If you want to accomplish the following, you at least need a Will:

  • If your child dies before you, you want his/her share to pass to your grandchildren
  • You have more than one heir and you want the property to pass in unequal shares
  • You have a JTWROS deed with your spouse, but want to plan for the possibility that will 3you and your spouse may die together
  • You have commercial property or vacant land
  • You do not want the State or Court to decide who inherits your property if all persons named on the deed die before you

You Should Have a Trust If…

For most things people want to accomplish, a living trust is the best answer.  There are many advantages to setting up a trust.  To name just a few, with a trust you can:

  • Protect heirs from getting too much at once
  • Protect heirs from losing their inheritance to creditors or divorcing spouses
  • Provide for management of your property during your incapacity
  • Avoid the California court system
  • Ensure that your property does not pass to your spouse’s new mate if you die first
  • Name beneficiaries and make changes without have to record documents in the county public records
  • Direct that property be sold and the proceeds divided to specific heirs after costs of sale
  • Direct that property be kept for future family use and provide instructions governing use and payment of expenses
  • Keep property for the use of minor children, then leave it to someone else once theyCollege 4. UM are grown
  • Restrict the use of an inheritance to specific purposes, such as paying for education
  • Planning for an heir with special needs
  • Planning for the care of pets

Don’t be penny-wise and pound-foolish.  Do-it-yourself almost never works without problems.  Spending some money up front to setup a good estate plan ultimately saves time, money, headaches, and heartache down the line.

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Supreme Court Upholds Same Sex Marriage

In a landmark decision issued June 26, 2015, the United States Supreme Court has upheld the right of same sex couples to marry in the United States.

My fellow members at Wealth Counsel issued a succinct summary of this ruling and what planning issues now arise for same sex couples. It is reprinted below, with permission:

Estate planning for same-sex couples
after Obergefell v. Hodges

 June 26, 2015
Matthew T. McClintock, JD
Vice President of Education, WealthCounsel, LLC

On June 26, 2015 the United States Supreme Court issued its opinion in Obergefell v. Hodges, the name assigned to a series of consolidated cases on same-sex marriage rights. The Court ruled 5-4 in favor of the petitioners, holding that same-sex married couples are entitled to equal protection under the laws, and that their marriages must be recognized nationwide.

Case background

Jim Obergefell & his longtime partner, John Arthur, sought to enter into a legal marriage. They were residents of Ohio and Mr. Arthur was terminally ill with ALS. They wanted to solemnize their relationship before Mr. Arthur’s death. They chartered a plane to Maryland, where same-sex marriage is legal, and they were married on the tarmac at a Baltimore airport. They then returned to Ohio as a married couple.

Soon after, Mr. Arthur died. The State of Ohio issued a death certificate that did not identify Obergefell as surviving spouse. Mr. Obergefell sued the state (naming Hodges, director of the Ohio Department of Health) to have himself named as Mr. Arthur’s surviving spouse, arguing that Ohio’s state constitutional ban on same-sex marriage – including nonrecognition of marriages solemnized in other states – violates the equal protection clause of the 14th Amendment[1]. Obergefell’s case was consolidated with a series of other related same-sex marriage cases to resolve two specific issues under the 14th Amendment.

Issues resolved by Obergefell Opinion

  1. The 14th Amendment requires states to issue marriage licenses to individuals of the same gender.
  2. The 14th Amendment requires states to formally recognize same-sex marriages of that state’s residents, when those residents entered into a same-sex marriage in another state where the marriage was legally valid.

Impact of Obergefell for same-sex married couples

State laws banning same-sex marriage are effectively invalidated. Same-sex spouses will now enjoy all state tax benefits and other spousal benefits that other couples enjoy. (Including marriage, divorce, adoption & child custody, separation agreements & QDROs, marital property, survivorship spousal death benefits, inheritance through intestacy, priority rights in guardianship proceedings, contract rights, etc., as referenced above.)

After Obergefell, same-sex couples are afforded the same spousal rights that other couples enjoy. Some of these occur independent of proactive planning, like:

  • Adoption or child custody proceedings, even in states that previously did not recognize two persons of the same gender as a child’s parents (at issue in some of the cases that were consolidated with Obergefell);
  • Divorce proceedings, if necessary, now that states must recognize the validity of the marriage wherever solemnized;
  • Spousal priority in matters concerning an incapacitated spouse’s care, or recognition in the event guardianship or conservatorship proceedings are necessary;
  • Spousal survivorship rights under state pension or other retirement benefits, even in states that previously did not recognize same-sex marriage;
  • Spousal inheritance through intestacy (when a spouse dies without a valid will or trust);
  • Spousal identity or priority in the event will or trust proceedings are contested after death;
  • The ability to file taxes jointly as a married couple;
  • Spousal privilege in criminal proceedings where a spouse is a defendant;
  • Any other spousal contract right where the contract is construed under the laws of a state that did not recognize the marriage.

Couples absolutely should still proactively plan. Just because states recognize marriage doesn’t mean couples should not take control of their will and trust planning, and clearly set forth their wishes in enforceable legal documents. All the good reasons to plan apply just as much to same-sex married couples as well as opposite-sex couples:

  • Proactively expressing their wishes concerning their medical care during periods of incapacity (through durable powers of attorney);
  • Structuring the distribution of their property – ideally in protective trusts – for the benefit of their surviving spouse and children after death;
  • Establishing trusts to preserve privacy, and to avoid the delay and expense of guardianship or probate proceedings during incapacity and after death;
  • Providing mechanisms that allow flexibility in administering those trusts to account for changes in the law, or changes in beneficiary circumstances after death (through carefully-tailored choice of law, decanting, or trust protector provisions);
  • Providing clarity and discretion to a trustee to make strategic tax decisions through trust administration after death (through various investment powers, and accounting and tax provisions);
  • Providing for family members other than a spouse or child through their estate plans;
  • Making gifts to religious or other charitable organizations through their estates;
  • Allowing orderly operation and transition of businesses or professional practices through incapacity or death

Obergefell likely represents the last word on same-sex marriage, elevating these relationships to equal stature with other marriages. While same-sex married couples are now entitled to equal protection under the laws of every state, the efficacy of those laws in ensuring dignity in disability and death, and orderly and structured distribution of property after death is very limited for all couples. Families should always take control of their planning and leave as little to state law interpretation as possible. That is best done through careful planning with experienced professionals who can intelligently guide the family through the process.

WealthCounsel is a nationwide association of trust & estate attorneys. WealthCounsel provides its members with everything they need to elevate their law practice — best-in-class legal drafting technology; virtual and live education forums with an extensive online legal library; and practice development and law firm management programs.

[1] The 14th Amendment applies the 5th Amendment equal protection clause to the states. (Note: Same-sex couples already receive equal treatment under federal law after U.S. v. Windsor. For all federal tax purposes and other benefits under federal law (ERISA, etc.), same-sex couples are treated the same as any other married couple.)


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Remember: Update Insurance Policies When You Put Property In Your Trust

HouseKeep Your Real Estate Titled to Your Trust.

Good planning includes having a Trust and keeping your major assets titled to yourselves as Trustees of the Trust.  (This does not apply to retirement account assets.)  Failing to maintain proper titling can result in unintended consequences, such as triggering a probate court proceeding or resulting in a disposition of your property to persons other than as you had intended.

Real estate is a good example of the type of asset that should be kept titled to your Trust.  Instead of “John Doe and Jane Doe, Husband and Wife,” it should be “John Doe and Jane Doe, as co-Trustees of the Doe Family Trust dated XYZ.”

For most clients, this is accomplished by the attorney in the estate planning process.  Where things “go south” is when the clients later refinance the property — which usually results in the bank retitling the property to “husband and wife.”  If you have refinanced your property since making your estate plan, you should contact your attorney or a title company to be certain that your property is still titled to your Trust.

Update Your Insurance Policies to Reflect the Titling to Your Trust.

Titling is not the end of the story.  You should also update your homeowner policy and your title insurance policy to reflect the change.  Some court decisions cast doubt whether the insurance company is still obligated to provide coverage after a transfer to a revocable trust unless an update is made.  While this is usually not a problem, it is always “better safe than sorry.”

The homeowner policy can easily be updated by contacting your insurance agent and asking that the trust be added as an additional insured.  In the above example, the additional insured would be “John Doe and Jane Doe, as co-Trustees of the Doe Family Trust dated XYZ.”

You should also consider updating your title insurance policy.  This is the policy you purchased in conjunction with the purchase of the property.  It insures the validity of your real estate title against certain risks from others claiming to have an ownership or lien rights in the property.

If you purchased your property prior to 2006, you can obtain an endorsement (called a Form 107.9) from the title company that issued the original policy.  Most title companies charge a fee of $150 for this endorsement, but it is a one-time expense and remains valid so long as you own the property through the trust.  If you purchased your property in 2006 or later, you are probably already covered.  Most policies issued since then already include language to cover you as trustees of a revocable living trust.


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Dangers of Do It Yourself Wills and Trusts

Will 1. SignIn a previous post, I discussed An Example of What Can Go Wrong When You Make Your Own Will, as well as an article, Consumer Reports: Write Your Own Will? We tested 3 software products that claim to help you do it.

The Florida Supreme Court was recently faced with a similar situation. The deceased used a do-it-yourself Will form. She intended to leave her estate to a brother, but there was a defect in the Will. Because of the defect, her nieces claimed a right to a significant share of her estate. Litigation ensued and the lawyers got rich. In the end, the nieces were awarded the share, even though the court acknowledged that the deceased most likely had not intended that. The share had to go to the nieces because the Will did not meet the formal requirements needed to authorize a different result. (Aldrich v. Basile (March 27, 2014), Florida Supreme Court, Case no. SC11-2147.)

In a concurring opinion, Florida Supreme Court Justice J. Parienta noted:

“While I appreciate that there are many individuals in this state who might have difficulty affording a lawyer, this case does remind me of the old adage “penny-wise and pound-foolish.” Obviously, the cost of drafting a will through the use of a pre-printed form is likely substantially lower than the cost of hiring a knowledgeable lawyer. However, as illustrated by this case, the ultimate cost of utilizing such a form to draft one’s will has the potential to far surpass the cost of hiring a lawyer at the outset. In a case such as this, which involved a substantial sum of money, the time, effort, and expense of extensive litigation undertaken in order to prove a testator’s true intent after the testator’s death can necessitate the expenditure of much more substantial amounts in attorney’s fees than was avoided during the testator’s life by the use of a pre-printed form.

I therefore take this opportunity to highlight a cautionary tale of the potential dangers of utilizing pre-printed forms and drafting a will without legal assistance. As this case illustrates, that decision can ultimately result in the frustration of the testator’s intent, in addition to the payment of extensive attorney’s fees—the precise results the testator sought to avoid in the first place.

Sadly, the deceased had an appointment to see a lawyer about her Will, but put it off until it was too late.

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An Example of What Can Go Wrong When You Make Your Own Will.

Do-it-yourself Wills: a sad story of planning gone wrong.  Here is a case study by Janet L. Brewer, detailing some of the bad things that can happen when you make your own Will. Read about John, widow and father, faced with unexpected expenses and lack of privacy when his wife, Mary, died with an online Will she made herself.

Wills often do not do what many people think they do. Consult with a lawyer Alone 3about your Will and estate planning. Investing now in a good plan can save your loved ones significant money and a lot of heartache and hassle when you’re gone.

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What to Do with Your Business When You Die or Retire

Business Succession Planning

Business succession planning is the process of providing for the passage of ownership and control of your business to others when you decide to retire, or if you should die or become incapacitated. Business 1Planning for the succession of your business is an important part of being an owner, but one often overlooked by entrepreneurs. Here are some of the most common options and considerations. Keep in mind that they often overlap and the best answer is usually some combination of the options available to you.

1. Sell Your Business to Someone Else.

If your greatest concern is to be sure you get paid for the value of your business – in other words, you want the cash and may the chips fall where they may – then this is usually the safest option. If you find a willing third party buyer, you may be able to negotiate the deal to require the buyer to obtain their own financing and pay you up front.

The downside is that settling upon an agreed value for your business can be a time consuming and expensive process, involving accountants, tax experts, lawyers, realtors and potentially other experts.

If this is an option you think you would pursue, start documenting value now! Keep meticulous business and accounting records. Track repeat customers, referrals, customer comments and other indications of your business’ reputation and good will in the community. Commit to efforts to retain long term employees. All of these factors will make your business more attractive to potential buyers and favorably impact its perceived value.

That said, keep in mind that it can be very difficult to find a good buyer, willing to pay an acceptable price and on terms that you can live with. Valuation is often the most difficult aspect of a business sale.

2. Leave the Business to Your Kids.

If you are planning to go this route, it is important to bring your kids in early and let them learn the business from the ground up. Start them out in an entry level position. Let them learn several of the jobs needed to run your company, one job at aBusiness 6 time. Let the other employees get to know your kids as trustworthy, hard workers who are committed to the company. Don’t just show up one day with your child and announce that he or she is suddenly running the company.

Consider the wants and needs of your children as well. Much as you might not like hearing it, your kids may not want your business. Don’t force it upon them if they aren’t interested. Most small businesses fail by the second or third generation. Leaving the business to kids who don’t want it is a sure way for your business to join that statistic.

Another big mistake is to divide the business equally between several of your kids, even though only some of them are actively involved in the business. Fair is not always equal. Give the business to the kids that are active in the business and leave some other asset of equal value to the disinterested other kids.

3. Promote from Within and Transfer the Business to Employees.

Think about your existing employees. Are there any whose loyalty and commitment to the business stand out? Any who seem able to handle more responsibility. Any with the skill and judgment to carry on when you’re no longer involved?

Promoting from within and mentoring a replacement is an attractive option, especially if you have built the business yourself from the ground up and you don’t want to see it end or go to “just Business 8anyone.” Mentoring gives you the opportunity to pass along your know-how and your work ethic to a willing audience, provides for greater continuity of management, and gets you a successor as personally interested in the continued success of your business as you are.

The trick with this option is that you may have to finance some of the “buy out” yourself. New owners, especially younger ones without a track record of proprietorship, are often unable to obtain full financing to purchase a business. A combination of third party financing and your own “pay over time” arrangement will likely be necessary. This may include an arrangement for you to have some degree of continued participation in the business as a “consultant” to help with transition, or a profit sharing arrangement in exchange for more favorable terms on the buy out.

Of course, this option is not without risk. A sale to a third party is less likely to require that you self-finance. Sponsoring the buyout of an employee purchase means that you may not get paid if they run the business into the ground. Depending on your circumstances, however, this risk can often be somewhat minimized by slowing the transition process and allowing you to retain more control until the successor has a more proven track record.

Another alternative is to use an Employee Stock Ownership Plan (ESOP), which allows the employees to earn ownership interests in the company.

4. Close the Business.

For many business owners, closing the business is the least desirable option. They have put their heart and soul into building that business, with much blood, sweat and tears. To watch it just close up is, for them, like watching the death of their dreams. Other owners find closing up shop to be a liberating experience with the least amount of hassle. The key to making this a good experience is for closure to be an option not something forced upon you because you have no choice.

Putting in place the strategies described above is the way to keep control of the decision. Failure to plan is planning to fail. If you have no plan in place, it is far more likely that you will have no choice but to close up and move on. If you are one of those who prefers that option, you’re not done yet. When you close, be sure you pay attention to closing formalities and that you provide for payment of the business debts – especially if you have personally guaranteed payment, which is very common for business loans and lines of credit.

5. Put a Business Buy Sell Agreement in Place.

A business buy sell agreement is an agreement between the owners of a company (owners, shareholders, members, partners, etc.) that settles what will happen if certain events occur. For example, a buy sell agreement can decide when one owner gets to buy out another, or when the company has the right to reacquire shares. It spells out how the company will be valued, what happens if someone gets divorced, and what to do when someone dies. Getting this settled up front can save a lot of time, hassle and expense when events later happen.

6. Get Key Man Life Insurance.

“Key man” life insurance is a life insurance policy, usually owned by the company, that insures the life of any key executive — someone whose death would gravely affect the business. The insurance provides liquidity to fund a stock repurchase, hire a qualified replacement, pay taxes, and other needs.

No matter what option you find appealing, the key is to get a plan in place and to do it as soon as possible.  Remember:  failing to plan is planning to fail!

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Poll: Why don’t people make their Wills?

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Name the Right Life Insurance Policy Beneficiary

How Not to Name a Life Insurance Beneficiary

In estate planning, there are right ways and wrong ways to designate beneficiaries for your life insurance.  Here are some common mistakes people make:

♦ Assuming a Will or Trust controls the beneficiary designation.

      This point cannot be hammered home often enough. Neither your Will nor your Trust will control or “trump” a beneficiary designation made with the insurance company. If you make a designation on the insurance company form, that is the one that will control what happens to the insurance money. All insurance companies require you to complete a beneficiary designation when you sign up for the policy, so you most likely do have a designation — whether you remember it or not!
      The only way your Will is going to decide who gets the policy is if you either have no designation made (again, that is highly unlikely), or the person you designated is already deceased and you did not designate a contingent beneficiary. Only then will the policy pay out to your estate and be governed by the probate of your Will. Your Trust will not decide things unless the policy pays to your estate and your Will leaves it to your Trust, or the Trust is the designated beneficiary with the insurance company.

♦ Failing to name a contingent beneficiary.

      A contingent beneficiary, sometimes called a secondary beneficiary, names the person or persons you want to get the policy if your first choice dies before you do. This is like naming a backup. Many people fail to do this. It usually happens because, when they bought the policy, they wanted to “think about it” and the insurance company only required that they name the primary beneficiary.
      A lot of folks fail to go back and designate the contingent beneficiary. When the primary beneficiary fails to outlive the insured, who then dies without having named a backup, the policy pays out to the insured’s estate. This usually means that a probate will be required, which can be a very expensive and time consuming process. If you also failed to make a Will, the state will decide who gets your insurance money!

♦ Never updating the beneficiary designation.

      Has it been a long time since you bought the policy and setup the initial beneficiary form? If so, it’s probably time to review that designation and see if changes are in order. People you had named may have passed away, children may have grown, circumstances may have changed. Don’t rely upon your memory either — many people are surprised to see who the designated beneficiaries are when they order a copy of the beneficiary form from the insurance company.

♦ Naming a minor child as beneficiary.

      This can be a recipe for disaster. The insurance company will not pay out to a minor. A court proceeding will probably be necessary and, depending upon the size of the policy, the court may require that it be held in a special court-supervised account until the minor reaches age 18. At that time, the court will distribute the funds to the young person. At age 18. Is that really what you want?

♦ Naming a person with special needs as a direct beneficiary.

      If you have a loved one receiving needs-based government assistance (SSI, Medi-Cal, etc.), then you probably already know how careful you need to be to ensure that you don’t accidentally cause ineligibility.
      Naming the recipient as a life insurance beneficiary is a sure way to cause a problem with non-exempt income and countable resources. If nothing is done, the person will probably lose all government benefits until the life insurance money is spent, and then may have to re-qualify for benefits (which may or may not be awarded again!)
      To prevent this, a court proceeding will be necessary to setup a special trust to hold the money and use it for permitted purposes during the recipient’s lifetime. This is time consuming and expensive, during which the recipient’s benefits are still threatened. Moreover, anything left when the recipient dies will go to the government, not to other family members.
      An estate planning lawyer can help you setup a special trust that can be the direct beneficiary of the policy, use proceeds for the recipient, yet still pass the remainder on to your family when the recipient dies.
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Top 10 Mistakes People Make in Estate Planning, Wills and Trusts: # 1 – Waiting Too Long

Procrastination 1
Procrastination is the number one mistake people make in estate planning. Everyone knows that death is certain to occur but uncertain as to timing. Despite this, numerous surveys suggest that more than half of adults in the U.S. fail to make a formal estate plan. I say “formal” because even having “no plan” is having a plan — the State’s plan! If you die without a Will or Trust, the State will decide for you. Is that what you really want?

Even armed with knowledge, people still delay. Few things are more unsettling than contemplating one’s own mortality. Thinking about the possibility of incapacity, such as dementia or Alzheimer Disease, is equally difficult. But delay will be your undoing. “Coulda – Shoulda – Woulda.” Don’t let this happen to you.

It may surprise you to know that most people find that the actual planning process was not as bad as they imagined and experience a great sense of relief and security once a plan is in place. This can be especially true if you have a good estate planning attorney willing to take the time to really educate you about what it is that’s being done and why. Don’t settle for a “just sign here” approach. Some estate planning concepts are a lot to take in, but you should understand what you’re doing. Even if you later forget the explanation, at least have the assurance that you understood it when you signed it and it reflected the result you wanted.

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