Life Insurance to Cover Estate Expenses

One excellent use for life insurance in the area of estate planning is to cover estate expenses.  Typically, even a small policy can aid here.  The policy pays out on the decedent’s death, and provides a quick lump-sum payment to heirs to fund many expenses, including:

1. Estate, income, and capital gains taxes
2. Real estate payments, such as mortgages
3. Real estate transactions, such as home sales
4. Commissions for liquidating assets (stocks, bonds, etc.)
5. Cash to sell or run a business
6. Cash to pay off business loans or personal debts
7. Court costs and other legal fees

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Life Insurance and Small Estates / Young Families

I represent many young families.  These are couples in their twenties to early forties with small children and small estates.  Typically, they have no home or a home with limited equity.  Their major concern, after nominating a guardian for their children, is how would the family cope financially if one of them were to die unexpectedly.

Life insurance is a fantastic tool for these families.  While they remain relatively young and healthy, life insurance can be inexpensive and easy to qualify for.

We recommend obtaining life insurance sufficient to care for your spouse and children for a period of two years without that spouse working.  It’s difficult to overstate the debilitating effect the grieving process can have on a young family.  For two years, free your spouse from the need to (1) work to pay bills and (2) obtain and pay for outside child care.  By obtaining a term life policy for $500,000, $1 million, or even $2 million, a young parent can make sure that their spouse and children are well cared for while they recover.

Please understand – we don’t sell life insurance and we make no money off referrals to life insurance agents.  We’ve just seen how limited assets can compound the devastation of a young person’s sudden death.

Another type of insurance to consider while you’re young is long-term care and disability insurance, to cover events that disable a parent without causing death.

If you can’t decide what type of insurance you might need, or the levels needed, call the Law Office of Daniel K. Printz at (858) 740-4370, or a local life insurance specialist!

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Life Insurance and Estate Planning

I can’t over-emphasize the importance life insurance can play in your estate plan!

Often, a person or couple will delay buying life insurance until they feel they can better afford it. However, that’s not wise. The older you get, the more expensive new life insurance policies become and the less insurable you become. At some point, life insurance will become unavailable to you, either due to age or to a medical condition. The best time to buy life insurance is while you are relatively young and healthy.

Why to buy life insurance? As a tool in estate planning, life insurance can:

1. Create an estate for your spouse or children.
2. Provide cash needed to settle your estate or pay estate expenses.
3. Allow you to give to charity without depleting your estate.
4. Cover estate tax expenses.

Contact our office with any questions – we’re always happy to talk to you!  (858) 740-4370.

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What does my Will cover?

Your Will controls the distribution of your real and personal property on your death. This includes your home, land, mineral rights, and any other form of real property, as well as your cash equivalent assets: stocks, bonds, CDs, and mutual funds not held in a retirement account.

But the easist way to determine what property a Will covers is to determine what it doesn’t cover.

Personal Property: Often, property including cars, jewelry, clothes, furniture, etc., will be covered by an ancillary document called a “letter of last instruction” or “letter of instruction.” Alternatively, personal property can be assigned to a revocable living trust in a writing called an “assignment.” If neither of these exist, your personal property will be covered by your Will.

Assets with Named Beneficiaries: When you sign up for some products, like insurance, pension plans, IRAs, etc, you’re asked to name a beneficiary for that policy. Because there is a named beneficiary, the account holder will pay out directly to that beneficiary on your death, thus avoiding the Will (and potential Probate).

Assets in most Trusts: If you have assets held as trustee for a Trust beneficary, such as in an Irrevocable Trust or a Revocable Living Trust, then the assets will distribute in accordance with trust instructions, and will not be covered by the will.

Assets in Joint Tenancy: If you own an asset in Joint Tenancy, every joint tenant owns 100% of that asset. When you die, your name will be stricken as an owner but the others will remain.

Review your documents with The Legacy Lawyer, or an equally qualified attorney!

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Estate Planning Checklist

Estate Planning begins with the following steps:

1.  List your Assets:  Make a list of everything you own, including all bank accounts, investments, real estate, insurance policies, and any other valuable items of personal property.  Split the list into assets with named beneficiaries (such as insurance policies and retirement plans), jointly held assets, and assets you own personally that do not have named beneficiaries (such as cars, boats, collections, etc.).

2.  Assign beneficiaries:  Determine who you would like to receive each asset when you pass away.

3.  Write a Will:  Working with a qualified attorney, write a will that specifies where your assets should go and who should serve as guardians for your minor children, if necessary.

4.  Write Incapacity Documents:  Prepare an Advance Health Care Directive and a Durable Power of Attorney for Property Management, each of which “springs” into effect if you become incapacitated and can’t make your own health care or financial decisions.

5.  Consider Probate:  Work with an attorney to understand the Probate process, how it would affect your loved ones, and what can be done to avoid it.

6.  Consider a Living Trust:  If you think a trust might be right for you, consult and attorney and/or a financial advisor.

7.  Update your Insurance Policies:  If you have dependents, consider increasing your Life Insurance to the point where your spouse and child could live without income for two years – start by multiplying your annual income by five and see how that works.  If you’re in your 50’s or older, consider long-term-care insurance.

8.  Review your Advance Estate Planning needs:  If you have $3.5M or more, consider transferring assets out of your estate: charitable trusts and giving; advance gifts to children; grantor retained annuity trusts; etc.

9.  Plan for Business Succession:  If you own a business, consider which children (if any) you would like to inherit the ownership.   Otherwise, plan for the sale or transfer of your business or equity on your death.

While you can do some of these tasks yourself, why not consult an experienced attorney?  Daniel K. Printz, Esq. has represented San Diego families for nine years, and teaches “Estates, Wills and Trusts” at the University of San Diego.

Call him at (858) 740-4370 for a free consultation today!!

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Estate Planning Checklist

Estate Planning begins with the following steps:

1.  List your Assets:  Make a list of everything you own, including all bank accounts, investments, real estate, insurance policies, and any other valuable items of personal property.  Split the list into assets with named beneficiaries (such as insurance policies and retirement plans), jointly held assets, and assets you own personally that do not have named beneficiaries (such as cars, boats, collections, etc.).

2.  Assign beneficiaries:  Determine who you would like to receive each asset when you pass away.

3.  Write a Will:  Working with a qualified attorney, write a will that specifies where your assets should go and who should serve as guardians for your minor children, if necessary.

4.  Write Incapacity Documents:  Prepare an Advance Health Care Directive and a Durable Power of Attorney for Property Management, each of which “springs” into effect if you become incapacitated and can’t make your own health care or financial decisions.

5.  Consider Probate:  Work with an attorney to understand the Probate process, how it would affect your loved ones, and what can be done to avoid it.

6.  Consider a Living Trust:  If you think a trust might be right for you, consult and attorney and/or a financial advisor.

7.  Update your Insurance Policies:  If you have dependents, consider increasing your Life Insurance to the point where your spouse and child could live without income for two years – start by multiplying your annual income by five and see how that works.  If you’re in your 50’s or older, consider long-term-care insurance.

8.  Review your Advance Estate Planning needs:  If you have $3.5M or more, consider transferring assets out of your estate: charitable trusts and giving; advance gifts to children; grantor retained annuity trusts; etc.

9.  Plan for Business Succession:  If you own a business, consider which children (if any) you would like to inherit the ownership.   Otherwise, plan for the sale or transfer of your business or equity on your death.

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What property does my Will cover?

Your Will controls the distribution of your real and personal property on your death. This includes your home, land, mineral rights, and any other form of real property, as well as your cash equivalent assets: stocks, bonds, CDs, and mutual funds not held in a retirement account.

But the easist way to determine what property a Will covers is to determine what it doesn’t cover.

Personal Property: Often, property including cars, jewelry, clothes, furniture, etc., will be covered by an ancillary document called a “letter of last instruction” or “letter of instruction.” Alternatively, personal property can be assigned to a revocable living trust in a writing called an “assignment.” If neither of these exist, your personal property will be covered by your Will.

Assets with Named Beneficiaries: When you sign up for some products, like insurance, pension plans, IRAs, etc, you’re asked to name a beneficiary for that policy. Because there is a named beneficiary, the account holder will pay out directly to that beneficiary on your death, thus avoiding the Will (and potential Probate).

Assets in most Trusts: If you have assets held as trustee for a Trust beneficary, such as in an Irrevocable Trust or a Revocable Living Trust, then the assets will distribute in accordance with trust instructions, and will not be covered by the will.

Assets in Joint Tenancy: If you own an asset in Joint Tenancy, every joint tenant owns 100% of that asset. When you die, your name will be stricken as an owner but the others will remain.

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San Diego Paralegal Association MCLE

The San Diego Paralegal Association (SDPA) is pleased to announce the following:

MCLE EVENT – 6:00 – 7:00 p.m.

“Recent Tax Legislation and Estate Planning Practices,” presented by Daniel K. Printz, Esq.

Date: Wednesday, June 3, 2009

Location: San Diego County Library – North County Branch 325 S. Melrose Drive, Suite 300 Vista, CA 92081-6697

Cost: $15.00, SDPA Members; $20.00, Non-SDPA Members

DINNER IS INCLUDED IN THE COST OF THE EVENT.

THIS IS FOR 1.0 MCLE HOURS.

The Compliance Period for California Paralegals to earn 4.0 hours of general education and 4.0 hours of ethics is from 01/01/2009 – 12/31/2010. Start earning those hours early!!! For more information and to enroll, please go to www.sdparalegals.org

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California Probate Fees

What are the fees to Probate an estate?

In California, both the personal representative (an executor or administrator) and the personal representative’s attorney are entitled to compensation.  If the Will specifies the compensation, then that’s all they can receive (P.C. 10812).  If the Will doesn’t specify, then the personal representative and the attorney are each entitled to fees for ordinary services (P.C. 10810) and fees for extraordinary services (P.C. 10811).

Fees for extraordinary services must be approved by the Court and are in an amount that the Court considers “just and reasonable”.

But fees for ordinary services are set according to the gross value of the estate, without reference to encumbrances or other obligations.  In other words, if your home has a fair market appraisal of $1,000,000 then the fees are set on that amount, even if you have a $900,000 outstanding mortgage!

 Here is the fee table, based on gross value of the estate:

Fee Percent	Of What Amount?	Max Executor Fee	Max Lawyer Fee	Total Fees	Minimum Loss
4%	First $100,000	4,000	4,000	8,000	8% of total estate
3%	Next $100,000	3,000	3,000	14,000	7% of total estate
2%	Next $800,000	16,000	16,000	46,000	4.6% of total estate
1%	Next $9,000,000	90,000	90,000	226,000	2.2% of total estate
0.5%	Next $15,000,000	75,000	75,000	376,000	1.5% of total estate
“reasonable amount”	Over $25,000,000	Unknown	Unknown	Unknown	Unknown

 What does this tell us? First, that everyone needs to avoid probate.  Second, that the smaller the estate, the harder the beneficiaries will be hurt by probate fees. 

Contact a qualified estate planning attorney in your area, or call the Law Office of Daniel K. Printz at (858) 740-4370 to make an appointment.

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Free online estate planning?

Today, I saw a posting about doing one’s will and trust online:

“What about going to http://www.SuzeOrman.com and clicking “will and trust kit” on the left side of the screen. She said on a recent show to use the password “peoplefirst” to get the documents for free.  I bought this package at a KPBS fundraiser a few years ago and it’s the one my family is using. “

After a certain knee-jerk emotional reaction, I decided that I’d better check out the Suze Orman package before I criticized it.  After all, she’s strongly in favor of estate planning (a position I certainly agree with), and I’ve quoted her admonitions for years to clients.  I certainly would select Suze Orman over, say, legalzoom.

So I went online to check out her program. 

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