Some advisors are raising concerns about the capital gains rules that are in effect until a new Estate Tax is passed and suggest that some additional planning may be in order.  This is not necessary for most people as the existing rules allow a $4.3 million exemption for capital gains assets passing to a surviving spouse.  And these rules are only in effect until Congress passes a new Estate Tax which may be only a few more months.

If you, or a relative, are seriously ill and have a large estate, it certainly would not hurt to review your Estate Plan to see if the repealed Estate Tax provides any opportunities.  The vast majority of people should wait until the new Estate Tax is passed and then consult with their advisors.

Failing to transfer assets into the Trust before death or incapacity occurs.

Failing to have a comprehensive Durable Power of Attorney for Financial Management (DPAF).

               Making sure all of one’s assets are in a Trust and obtaining a DPAF are very easy things to do and the costs are minimal.  In just a couple of hours you can do most of the Trust Funding yourself and you probably will not need an attorney’s assistance.  A good DPAF should cost no more than $200 to $300.   Unfortunately, the costs of not taking these steps can be significant and time consuming.

               Trust Funding.  The purpose of a Revocable Trust is to avoid Probate.  A Trust is a separate legal entity and when you die it continues in existence.  This avoids the need for a Probate Court to determine the proper title to your assets.  However, if all of your assets are not in your Trust, some form of Probate will be necessary.  If you are lucky these assets may be collected via an Affidavit, or Small Estate Probate Procedure.  But even these basic procedures can require some substantial attorney’s fees. 

               How do you complete your Trust Funding?  Review all bank and brokerage account statements.  The name on the account should be the name of the Trustee of the Trust and it should usually be followed by the date of the Trust.  If you find any accounts that are not in the name of the Trustee you need to contact the bank / broker and let them know.  They will want to see a copy of the Trust.  They may have additional forms that need to be filled out.  It is a very simple process and all banks / brokers are very familiar with the process.  Your social security number remains on the account.

               DPAF.  A Durable Power of Attorney for Financial Management (DPAF) provides your agent the ability to make financial decisions in the event you become incapacitated.  Most people will become incapacitated at some point in their lives as medical science is much better at preserving our bodies than our brains.  Ideally a DPAF will allow your agent to Medi-Cal planning and make amendments to your Trust.  However, even a basic DPAF can allow your agent to take the necessary steps to preserve your finances without Court intervention.  If you do not have a DPAF the only real alternative is a Court-Appointed Conservatorship.  This is a very expensive, time consuming and public process.  All of your assets will be inventoried and filed with the Court in Public Records.  There will be an independent Court investigator appointed and your estate will be responsible for their fees.  Your Conservator will need to retain an Attorney and will be required to file detailed annual accountings and reports to the Court.  The costs of a Conservatorship can be astronomical.