Stock Market Volatility and The Effects on Your Estate Plan

Stock market volatility is unnerving because the drastic and dramatic changes in value from one day to the next creates uncertainty about the future. When talking about ways to lessen the impact of market volatility, diversification of your assets over several different types of assets is a popular route to ensure the impact on the whole portfolio is less for any one type of asset decline. This diversification is the job of the financial advisor or portfolio manager.

In addition to the type of assets held, the structure of an Estate Plan can also create unwanted and unanticipated results if not done properly. Take the following examples.

John and Barbara have two children. They each have an IRA of roughly equal value and instead of worrying about splitting both accounts between their children, John leaves his account to one child, and Barbara leaves her account to the other child. Seems like an equal distribution, right? It may now, but what happens if John and Barbara have different investments, and by the time they both pass away the accounts are substantially different? The answer is that the children are left unequal distributions which is not what John and Barbara wanted to happen.

Jack and Cindy have one child and have a combined net worth of about two million dollars. In their estate plan, they want to leave two hundred thousand dollars to their local church as a charitable gift with the remainder going to their daughter. Over the next 25 years, Jack and Cindy substantially increase their net worth, and upon their deaths, they have close to ten million dollars. Because their estate plan left a specific dollar amount to the church, that gift will not change. As a result, the gift to the church decreased relative to their net worth from 10% to 2%. The converse of this problem can also be true, if their net worth decreased to five hundred thousand as a result of medical expenses, the gift to the church would end up comprising 40% of their total distributions!

To avoid these types of unwanted situations, provide the estate planning attorney as much information as possible about current assets and intent for distribution. It may be that you intend your children to receive different beneficial interests, or that you only want a fixed dollar amount to go to charity, but there are ways to draft these provisions to ensure your exact wishes are carried out.

The Meek Shall Inherit Your House? Leaving Your Estate to a Pet

There is no doubt that pets bring joy and happiness to the lives of their owners. Whether a dog, cat, horse, monkey, tortoise, snake, or fish; all pet owners love their pets and have formed a special bond together over the years. Although a difficult subject to approach, have you ever thought about what will happen to your pets when you can no longer care for them? Who will pay for them? Who will provide them with the same care you have? 

The common thinking is that a close friend or family member who knows the pet will step in to provide care, but depending on who is available to take action when the time comes it may be a burden to that person financially or just in their life circumstance. We have all heard stories of celebrities leaving their estate to a beloved cat or dog, but does that actually work?  The answer is, yes!

The California Probate Code specifically allows for the creation and administration of Pet Trusts under §15212, and the requirements are quite simple. The money you set aside for the pet, in a pet trust under the provisions of a trust or will, must be held for use by the personal representative or trustee exclusively for the care of that pet until the animal is no longer living. When the trust terminates, any funds remaining will be distributed as directed by the creator of the trust or under the residual clause of the creator’s estate plan.

Of course, your Pet Trust will only be a part of your larger estate plan, but they are still a component to highly consider. There are many other decisions to make regarding the end of life and the disposition of your property when the time eventually comes. We at Tresp Law, APC can help with every facet of estate planning, from Wills and Revocable Trusts, Powers of Attorney for Health Care and Financial purposes, and Special Needs or Pet Trusts. We can advise you on the best practices for establishing your life insurance, retirement plans, and asset titling to ensure your estate will be distributed to your exact requirements continuing your legacy for years to come. 

Call Tresp Law, APC today to schedule your consultation and begin planning for your future. We now offer face-to-face consultations utilizing video conferencing technologies such as FaceTime, Duo, and Zoom.

ESTATE PLANNING – NOT JUST FOR WEALTHY PEOPLE OR PARENTS

There is still a notion in America that only those with children or those who are “well off” need to think about estate planning.  But wealthy or not, child-free or not, we all have stuff (our “assets”) and we all have people, causes, or institutions we care about.  Few of us want state law and the courts to decide who will take care of us and our legal affairs when we no longer can, or who will inherit our assets we spent a lifetime building. 

Simply put, estate planning is really about making these very personal choices for ourselves and then spelling them out in legal documents designed to keep our most private affairs out of the court’s hands. So, now that you understand that this type of planning might be useful, below are a few suggestions to help guide you through the estate planning thought process.   

INCAPACITY – TAKING CARE OF THINGS WHEN WE NO LONGER CAN

Most of us grow up thinking adulthood means we are independent and in charge of our lives.  It is hard to wrap our minds around the idea that a day may come when we might lose the ability to make legal or medical decisions for ourselves.  It can happen in an instant because we get into a terrible accident. It can happen over time because dementia sets-in robbing us of our judgment and decision-making skills.  No matter how or when it happens, it is important to plan for it. 

Let’s say that over time dementia sets in and loved ones notice that you are just not able to make your own decisions anymore.  What happens? If you haven’t planned, your loved ones will need to initiate a court proceeding in the probate court. A judge will appoint someone you may or may not know to make your decisions for you.  But with appropriate planning, you will have legal documents prepared (like a durable power of attorney and health care directive) naming people you trust to take charge of your legal affairs and carry out your medical wishes when you are no longer able.   

TRUSTS

Most people have heard of a will as a way to pass property when you die.  You may have even heard of a trust. Some people mistakenly believe that only wealthy people use trusts to pass assets to their kids and future generations.  While parents can choose to use a trust this way, those without kids can benefit too. Holding assets in trust during life allows those same assets to pass without probate when you pass away. 

Why does this matter you might ask?  Well in most states, and especially here in California, probate is a public, cumbersome and expensive court-guided estate administration process. In most states, a last will and testament are not enough to avoid the probate process.  Trusts are a great way to make sure your assets are taken care of during your lifetime when you are incapacitated and then transferred properly when you pass away. 

HOW TO DECIDE WHO WILL GET MY ASSETS

Deciding who will get our assets when we pass away is a personal journey.  Sometimes, those without children struggle with this decision. Where do you start?  Listen to your heart. Perhaps you have family or friends to whom you would like to leave a legacy.  There might be organizations that have enhanced your life and you would like to benefit (your alma mater, for example). Maybe there is a charitable cause you feel passionate about and would like to further their mission.  Some couples and individuals without children have pets they love. Planning for your pets’ care if something should happen to you is an important component of your estate plan. 

ESTATE PLANNING

Whether or not you have children, you deserve to have peace of mind to know that your affairs are in order and that your legacy will be preserved for those who you feel will benefit most.  Tresp Law, APC is here to help you create the kind of estate plan that will best serve you.

Call Tresp Law, APC today to schedule your consultation and begin planning for your future. We now offer face-to-face consultations utilizing video conferencing technologies such as FaceTime, Duo, and Zoom.