Shafae Law

Shafae Law

Shafae Law is a boutique law firm providing comprehensive estate planning, trust, estate, probate, and trust administration services located in the San Francisco Bay Area.

What is... Incapacity?

This is part of an on-going series of blog posts titled the "What Is..." series, where we attempt to explain, in simple terms, common estate planning terms and concepts. To read other posts in this series, click here.

When people talk about “estate planning,” many times the focus is on death. However, there is another event that we recommend planning for: incapacity. The first thought people have about incapacity is that it means being in a coma. To many people’s unfortunate surprise, incapacity can and will happen under much broader circumstances.

  1. Incapacity can be a temporary condition

If something happened while you were under anesthesia and someone needed to contact your health insurance company or withdraw money from your bank account, do you have any documents in place to allow someone to do that? Most people don’t. Or what if you had a bad reaction to prescribed medication? Who has the legal authority to act on your behalf? If you’re married, and you’re relying on your spouse to step in, being married does not automatically allow your spouse to do these things for you.

We had a client recently who had a bad reaction to medication. He had to go to the hospital and was not exactly coherent during that time. Additionally, he did not WANT to have to make financial and healthcare decisions during that time. He did not feel able to do that. And, frankly, he had more important things to focus on. He’s fine now! But during that time period, he was incapacitated. He was very happy to have documents in place to allow for someone else to handle those other issues on his behalf.

2. Incapacity can happen suddenly

Think of any car accident you saw on your way to work. The people involved did not plan for that accident to happen. One of the people may have been hospitalized either short term or longer term, during which they may have been incapacitated. They certainly didn’t plan on needing the use of their powers of attorney that day, but that’s why it’s important to plan ahead.

3. Incapacity can be longer term, or even permanent

Yes, incapacity can also involve a coma or dementia or any number of conditions that simply do not improve. Some of these conditions can be seen from a distance away (e.g. a slow onset of dementia), and sometimes they can’t be (e.g. a stroke, or catastrophic brain injury).

The problem with waiting to know that a future incapacity will occur (like dementia/Alzheimer’s disease) before executing estate planning documents is that the person must have capacity to execute documents. If there is any question about an individual’s capacity to execute documents, it may require a doctor’s confirmation and/or further legal proceedings. It’s a bit of a catch-22: when we have capacity, few people feel like they’ll ever lose capacity. When you’re already incapacitated, it’s too late. Your loved ones are stuck.

Bottom line: plan while you can. Once you have your plan in place you have the peace of mind in knowing that you and your loved ones will be taken care of properly. Contact us for a free consultation to help you construct the plan that’s best for you.


What is... Probate?

This is part of an on-going series of blog posts titled the "What Is..." series, where we attempt to explain, in simple terms, common estate planning terms and concepts. To read other posts in this series, click here.

You’ve probably heard the term probate, and you know there’s something that’s not good about it. But what is it?

Probate refers to the division of the Superior Court of California that handles issues related to conservatorship/incapacity, guardianship, or death. Each county in California has its own probate division.

Conservatorship: Conservatorships are legal proceedings that refer to a scenario where an adult can no longer make her own decisions, such as in the case of dementia or coma. If a loved one becomes incapacitated (e.g. through a sudden car accident, or stroke), someone will need to petition the probate court to be granted the legal authority to act on the loved one’s behalf. With this authority, that person (called a conservator) is able to call the insurance company or handle your loved one’s finances. A few considerations:

  • Conservatorships take time. Each county typically has only one probate judge. So if a crisis arises, and someone needs to be conserved, it can often take 6-8 weeks in a busy county to get that first court hearing.

  • Conservatorships are also expensive. The conservator must show the court that the incapacitated person’s money is being wisely spent. These accountings can take $3,000-$5,000 to prepare. And they’re required to be filed every year, or every other year. That’s not even mentioning the legal fees for hiring the specialized attorney you would need for these types of proceedings.

  • Conservatorships are also public court proceedings. It can often be humiliating to the person being conserved.

Thankfully, you can avoid the need for a conservatorship by planning ahead and creating a durable power of attorney and a trust.

Guardianship: Guardianships are legal proceedings that refer to minor children (anyone under 18 years old) who have either become orphaned or removed from their parents. Those children now need someone with the legal authority to act as the child’s parents. Only a court can give someone such legal authority. By planning ahead, you can nominate in your will who those guardians are in the event guardianship proceedings are necessary for your young children. You certainly do not want to leave such an important decision to the busy members of the probate court who do not know you or your children.

Death: When someone dies, the state needs to ensure that the person’s debts are handled (e.g., outstanding credit card debt, other loans, utilities, funeral and medical expenses), and that any remaining assets reach the dead person’s rightful heirs.

  • Like any other court proceeding, this is a public forum in which your debts and assets are uncovered.

  • Probate takes a long time. It often takes 18-24 months for heirs to receive any of the deceased person’s property. That means that if there are young children relying on their parents’ property to survive, it can take months or years before they see a penny.

  • In addition to the lengthy time that probate takes, it can also be costly. Probate fees--the compensation due to the representative of the estate and her attorney--are set by statute and are calculated based on the gross value of the estate. For example, a $1 million estate in California may generate as much as $46,000 in probate fees!

Most people want to avoid the time, expense, and public humiliation associated with probate court. By creating a comprehensive estate plan, including a trust, will, and power of attorney, you can avoid probate altogether at a fraction of the cost. Don’t wait until it’s too late.


What is... a Living Trust?

This is part of an on-going series of blog posts titled the "What Is..." series, where we attempt to explain, in simple terms, common estate planning terms and concepts. To read other posts in this series, click here.

At its core, a trust is a legal arrangement that deals with the ownership and management of property, both real estate (like your home) and personal property (e.g., jewelry, cash, bank accounts, your socks). The trust defines how property named in the trust is owned, who can control and manage it, and what type of control can be exercised over it. A trust also directs what happens to the property in it after the person or people who made the trust dies.

While there are different types of trusts, this post focuses on a “living trust,” also known as a “revocable trust,” because it is the most common type of trust used in estate planning. It’s a type of trust that you can amend, or make changes to, during your life.

One way to think about a living trust is that it is a box that you put your property in. After you put property into the box,  the box now has the value of everything you put in it. The box is controlled by a legal document with special instructions detailing who can reach into the box to add or remove property, how the property in the box must be handled, who benefits from the contents, and who ultimately gets the contents of the box. This legal document is the trust document signed by the person or people creating the trust. The trust document is just a fancy contract defining the rules surrounding property placed in the box.

Control and management of the property in the box is also very important. Initially, control is usually reserved for the people who put their property into the box. The people who put the property into the box are called “trustors.” The trust document specifies who can manage (sell, gift, invest, purchase) the contents in the box. The managers are called “trustees.” Because people who put property into the box usually want to control the contents while they are living, the trustors are usually also the initial trustees. You can have more than one job at the same time.

But what if something happens to the trustees--maybe they don’t have the ability to take care of the property in the box or they die? Who is going to take care of the property? In this situation the trust document will appoint what is called a “successor trustee” who is given access to the trust box contents when the initial trustees are unable. The trust document will also direct how the successor trustee must handle property in the box, and who should receive the property in it when the trustors die.

A typical living trust benefits the trustors (remember, those are the people who created the trust and supplied property into the box) while they are alive. So along with being the trustors and the initial trustees, they will also benefit from the contents of the box. They are the “beneficiaries” of the trust. Once the trustors have died, the trustors have described in the trust document who will become the beneficiaries of the contents of the box.

Ultimately, if created properly, a living trust ensures the property in the box will benefit the trustors during their lifetimes, that the property will be safely in the hands of trustees that will care for the property, and that the property will be distributed to beneficiaries according to the trustors wishes when they die. It’s a seamless transition that avoids the time, expense, and public process that is probate court (which is a court process that takes place if you die with only a will or with nothing in place). If the trustors have young children when the trustors die, a living trust can contain a comprehensive set of instructions for how to care for those young children with the property in the box.

Of course a living trust has more nuances and complexities than is described here. The success of any estate plan depends on it being carefully crafted to address individual desires and situations. We provide a free initial consultation where we can help you decide whether a living trust, or other type of estate plan, will best serve you.

➤ LOCATIONS

303 Twin Dolphin Drive
Suite 600
Redwood City, California 94065

12100 Wilshire Boulevard
Suite 800
Los Angeles, California 90025

 

Office Hours

Monday - Friday
9AM - 5PM

☎ Contact

info@shafaelaw.com
(650) 389-9797
(310) 526-0298