TRANSCRIPT:

Hi. I’m Matthew Crider. Well, we’ve done our initial meeting, and the next meeting is our design meeting.

During that meeting, we’re really going to drill down and ask you a lot of questions about how you want your estate plan to work. There are a couple of things you need to think about before the design meeting. The first thing to think about is who you want to give property to. You may want to give it to family members such as your children, your siblings, or your parents.

You may want to leave your property to other people, so you need to think about who you want to be the recipient of your estate when you pass away. The next thing to think about is how you want to give your property to those people. Now, there are two general ways that you can give property to people.

The first is what’s called a residual gift, and that’s what most people think about. For example, if they have three children, they might say that each of the three children will get an equal share of the estate upon their death. There is another way to give property, and that’s what’s called a specific gift.

You can give a specific amount of money. You can give a specific bank account. You can even give real estate to specific people, whether they are your blood relatives, your family, or entirely different people. You need to think about whether you want to leave specific gifts to specific people, and if so, what those gifts are.

You can also leave gifts to charity, and there are two ways to do this. The first way is to leave a percentage of your estate. You might, for example, say that you want to leave 10 percent of your estate to charity. You could also leave a specific gift to charity, and this works very similar to a specific gift to an individual.

You designate a specific piece of property such as a bank account, investment account, or so on, and then you name the charity that you want to receive it. Or you could leave a specific dollar amount to charity as well. Now, there are a couple of important roles in your estate plan.

If you have a revocable living trust, you will be the initial trustee of your trust, meaning that you will be in complete control of your trust. We’re going to talk about trustee in more detail, but you want to name successor trustees as well. You want to name a person or people that you can have to take over management of your trust estate if you become incapacitated or when you pass away.

Now, there are other important roles as well. For example, we’re going to prepare a durable power of attorney for you. This is where you designate somebody to make financial decisions for you for the property that’s not in the trust if you can’t manage your day‑to‑day finances. This power of attorney will become effective if you become incapacitated.

You need to think about who will be in that important role. Who will be your financial agent if you’re not able to manage your day‑to‑day affairs? We’re also going to prepare a healthcare power of attorney. In California, that’s called an advance healthcare directive.

Just like with the financial power of attorney, with an advance healthcare directive, you can designate a person or several people to make healthcare decisions for you if you’re not able to make healthcare decisions for yourself. You need to think about who that person or who those people are. Now, let me make a comment about those important roles.

Typically, most people will designate one person at a time. For example, you could have person A as a successor trustee, or as an agent under a power of attorney, and then if person A is not available, you could have person B next in line. If person B is not available, then you could have person C next in line, and so on.

It’s also possible to have people serve at the same time, and so, for example, you could have person A and B serve jointly as your successor trustee or as the agent under a power of attorney. You could have that as well. It’s really up to you about who you want in the important roles.

Now, it’s common for a lot of people to have the same person, or the same people, as their agents under a power of attorney and an advance healthcare directive as they have named the successor trustee.

In other words, they’ll have one list of people that they want to be in the important roles, and that list is the same for the trust, for the power of attorney, and for the advance healthcare directive. However, it’s not required that you have the same people in those roles. You could have entirely different lists of people to serve in each of the roles that I just mentioned.

Another thing to think about is, who gets to decide whether you’re incapacitated? We recommend that you name, of course, an attending physician to decide whether you’re incapacitated. You also might want to have your spouse or a close relative or loved one to talk in conjunction with the attending physician.

In the alternative, you can have two attending physicians who would make that decision jointly. You could also name an attending physician and a neurologist. Again, these are the people, this is the panel of people that will make the determination about whether you have capacity or whether you’re incapacitated.

Then either the successor trustee to take over, or the agent under a power of attorney to take over. Those are the major things that you should think about in preparation of our design meeting. If you have any questions, feel free to reach out. We’re happy to talk with you in advance of our meeting. Again, my name is Matthew Crider, and I look forward to talking with you.

TRANSCRIPT:

Hi. I’m Matthew Crider. Thank you for asking us to help you with your estate planning.

Whether you’re brand new to estate planning or it’s been a number of years since you did your planning and you want to update or change your plan, I wanted to talk with you a bit about what estate planning is.

Imagine a ladder leaning against a building. You’re standing in front of the ladder, facing the building. If you’re standing on the ground, most people will think that they don’t have a plan. Actually, you do have a plan. Even if you haven’t signed formal documents, you have the State of California plan and the IRS plan. You’re not going to like it, but it’s there for you if you do absolutely nothing and don’t take any action.

Since you’re coming in to meet with us, you do want to take one step up the planning ladder. If you’re on the very first wrung of the planning ladder, that’s where you have a will as the primary document to distribute your assets when you pass away.

A will is a document that you create during your lifetime. When you pass away, it distributes the property to the people that you’ve listed in the will. There are some problems with the will. The first problem and the main problem is that it has to go through a probate. A lot of people have heard that probate is something that you want to avoid in California. That’s certainly true.

Probate is a court process where the judge is empowered to act as a referee. As the referee of the will, the judge will make sure the property goes to the correct people, the people who were listed in the will.

There are several problems with probate. The first problem is that it’s a very slow process. On average, it takes anywhere between 12 and 18 months from the time the will is first submitted to the judge until the judge signs an order, saying that it’s OK to distribute property to the people listed in the will. That’s a very long time, particularly if you have family members who might be relying on that distribution.

The second problem with probate is that it’s very expensive compared to other estate planning tools that you have. For most people who are incredibly wealthy, they don’t have an issue with estate tax. It’s not that the estate will be taxed by either the, federal government or the State of California.

What the cost of probate reflects is that the person that you name as an executor under a will can charge a fee for his or her services. This makes sense because that person, the executor, is going to be managing your assets and they have to figure out everything that you own. They have to alert the beneficiaries. There can be a lot of work involved with that. The law says that they’re entitled to a fee.

The fee is a percentage of the total probate estate. What that means is it’s the fair market value of the probate estate on the date of death but without subtracting any debts. If your house, for example, is worth $500,000 but has a mortgage of $400,000, the probate fee will be based on the $500,000 fair market value. It can be very expensive.

As an example, if somebody has a million‑dollar estate, the executor’s fee could be $23,000. The executor can also hire an attorney to help him or her administer the estate and go through probate court. The attorney is paid the same way. The attorney is paid as a percentage of the gross estate value.

As with the estate worth a million dollars, the executor’s fee could be $23,000, and the attorney’s fee could be $23,000. That’s a lot of money. The third problem with probate is that everything that happens in court is a public record. The will gets filed with the court clerk. Anyone who wants to see it can go take a look at it.

The very last thing that the executor does is file an inventory, listing the property that you own on your date of death, along with the value. On the one hand, you have who’s going to get your property, who will inherit it. On the other hand, you have what it’s worth and what it is. That’s a lot of information to have out there in the public domain.

The fourth problem with probate comes from the fact that the law will take care of a beneficiary if that beneficiary is a minor. If that beneficiary is, say, 16 or 17 years old, the court will take affirmative steps to protect their inheritance. If somebody is legally an adult, the law says that they are entitled to the distribution outright, regardless of circumstances.

You could have a scenario where, perhaps, a beneficiary is 18, 20, even 25 years old and might not be very financially mature. If they inherit 20, 30, 50 thousand dollars, that can be very bad. They’ll probably blow through it pretty quickly.

Those are the four problems with probate. It’s a very slow process. It’s an expensive process. Everything is public record. You lose a lot of control. That’s the first wrung of the planning ladder that I mentioned. Most people want to avoid probate so they will take one step up the planning ladder. Once they’re on the second wrung of the ladder, that’s where we get into a revocable living trust.

A revocable trust or revocable living trust is a contract that you write with yourself about how your property will be managed, both during your lifetime and when you pass away. A lot of times, I describe a trust like being like a bucket, like one of those five‑gallon buckets that you might buy at Ace Hardware or Home Depot.

As the person creating the trust, you create the bucket. You are the initial trustee during your lifetime. You hold a handle to the bucket. You, as the trust owner and the trustee, you could transfer property into the bucket. You can take property out of the bucket. You have complete control over what’s in the bucket and how the bucket is managed.

When you pass away, you hand the handle to the bucket off to somebody else. They know what to do with the property that you’ve left them in the trust or in the bucket because you’ve left them instructions on the outside.

That essentially is how a trust works. You designate a successor trustee to take over in the event that you become incapacitated or once you pass away. That successor trustee will have management and control over the property that is named or owned by the trust. That’s how a trust works.

Then if we take one step further up the planning ladder, that’s where we get into an irrevocable trust. An irrevocable trust, as the name suggests, is a trust that can’t be revoked. It can’t be changed unless you go to court and convince a judge that the trust should be changed.

The reason that people create an irrevocable trust is because they have a specific estate planning goal. An irrevocable trust is very similar to a revocable trust. The difference though is that whereas the revocable trust is like a bucket that you hold the handle to the bucket, the irrevocable trust is like a bucket with a lid on it.

Once you create the trust and once you transfer property to the trust, typically, a separate trustee, namely a trusted family member or loved one or very trusted family friend, will take over management and control as trustee of the trust.

The reason that people will create an irrevocable trust is usually because they have a specific estate planning goal. An example could be, for instance, if they want to try to get qualified for medical or to get certain types of veteran’s benefits from the Veterans Administration. Those are some of the purposes that we use an irrevocable trust for.

That essentially is the planning ladder. If you’re standing on the ground, you haven’t done any planning. You’ve got the State of California plan that you might want to avoid.

If you take one step up the ladder, that’s where you have a will as the primary tool to distribute your assets. We talked about some issues with that.

If you take one further step up the ladder, you have a revocable living trust as the tool to distribute assets.

Then finally, if you take another step up the ladder, you might have an irrevocable trust to help you get qualified for certain long‑term care benefits.

There are other documents that are part of a comprehensive estate plan. The first is a durable power of attorney. The durable power of attorney is where you designate somebody to make financial decisions for you if you’re not able to do so yourself. If you’re not able to manage your day‑to‑day finances, you can have somebody make those decisions and somebody manage your assets for you.

Another document is sometimes called a power of attorney for healthcare. It’s also called in California an advanced healthcare directive. An advanced healthcare directive is where you designate someone to make healthcare decisions for you if you’re not able to make healthcare decisions for yourself.

If you become incapacitated, instead of having to go through conservatorship, which requires going to court, you can plan in advance to have somebody make financial decisions for you and to have somebody make healthcare decisions for you.

That is a general overview of the estate planning process. That’s a comprehensive estate would include all of those types of documents, usually a revocable trust, a power of attorney, and an advanced healthcare directive.

If you have any questions, please let me know. I look forward to talking with you at our very first meeting to talk about estate planning and what your goals and objectives are. Thank you very much. I’m Matthew Crider.