Q&A: The argument for having different caretakers for healthcare and financial decisions

Dear Liz: My mother is 74 and her health is starting to deteriorate. She had a last will made up about 15 years ago when my stepdad left her. I found out that she named me executor and gave me power of attorney for healthcare decisions. After the last year, when she became very contentious about giving me any information to do this (such as sharing her credit cards numbers), we have decided it would be better to assign these jobs to another sibling. There are also big differences in what each sibling is to receive. This will cause huge problems with two of the siblings.

I do not want to be a part of that as these two cannot even be civil to each other right now. I am afraid that my mother will not get around to changing her will. Am I legally obligated to fulfill this? It is causing me extreme anxiety as I am dealing with her decline in health as well.

Answer: No one is forced to become an executor. If your mother doesn’t name an alternate, the probate court can appoint someone to take the job — and it may not be the person your mother preferred. Let her know that if she wants to have a say in who settles her estate, she needs to change her will.

You’re smart not to want to oversee a situation that’s bound to get ugly. It’s not clear, though, why you thought you needed access to your mother’s credit cards while she was still alive. The job of executor, which would require settling her accounts, wouldn’t start until after she dies. Healthcare decisions typically don’t require access to credit cards — although she should also have named someone to make financial decisions for her if she’s incapacitated.

If you’re worried about your mother’s ability to handle her finances, now or in the future, you can start the discussion by mentioning how important it is to have a power of attorney for finances as well as one for healthcare decisions. It’s not uncommon to name different people for these roles, because the skill sets needed are not the same. Someone who’s “good with money” isn’t necessarily equipped to carry out someone’s end-of-life wishes, which may include fights with medical providers about which treatments will and won’t be pursued.

Once you’ve covered that ground, you can segue into talking about what she would like to happen if she starts having trouble keeping up with daily money management tasks. Many parents add a trusted child to their bank accounts so the child can monitor transactions and make sure bills are paid. Or your mother may prefer to hire a daily money manager (referrals are available from the American Assn. of Daily Money Managers at www.aadmm.com).

Q&A: Don’t bequeath trouble to your descendants

Dear Liz: I have two grown children, neither of whom owns a home, and three grandchildren. I would very much like to keep my house in the family for all to use, if and when needed. It is not large, and it would be somewhat difficult for two families to live here at the same time. I have a trust that splits everything between the two children. I also have handwritten a note and had it notarized explaining I would like the house kept in the family and not sold or mortgaged. Can you advise me?

Answer: Please think long and hard before you try to restrict what the next generation does with a bequest, particularly when it’s real estate. Is your desire to keep the house in the family worth causing rifts in that family?

It would be hard for two families to share even a large home. You could be setting up epic battles, not only over who gets to live there but how much is spent to maintain, repair and update the home. It’s difficult enough for married couples to own property together; siblings are almost certain to disagree about how much to spend and the differences may be even greater if only one family is actually using the house.

If your house is sold, on the other hand, it could provide nice down payments for each family to buy its own home. Alternatively, one family could get a mortgage to buy out the other and live in the house. Or the home could be mortgaged to provide two down payments and then rented out. Your notarized note wouldn’t prevent your children from doing any of these things, but it may cause them unnecessary guilt and disagreements about honoring those wishes.

Q&A: Proposition 13 considerations

Dear Liz: I read your column with some interest since I just had a client who received a life estate from his long-term partner. They neither married nor formed a registered domestic partnership, either of which might have saved my client some bucks.

The Los Angeles County assessor reassessed the property at its full value even though the remainder will go to my client’s partner’s children on my client’s death. The property was originally purchased in the 1970s. I’d like to think that I or any other estate planning lawyer could fashion a satisfactory work-around for this potential problem faced by folks who wish to give a life estate to someone without Proposition 13 protection and the remainder to someone with that protection.

Of course, one must always bear in mind that the tax tail should not wag the business dog, so a weighing of burdens and benefits is always in order in any plan.

Answer: Here’s another case where stinting on an estate planning attorney’s fee probably cost the heirs vastly more.

For those of you who don’t live in California, Proposition 13 limits property taxes to 1% of the assessed value, and assessments typically can’t increase more than 2% a year until the home changes hands. The lower “Prop. 13” value of a home can be inherited by the children, which means their tax bill would be a fraction of that owed by someone who purchased a similar property more recently.

Instead, the property in question lost its Proposition 13 protection and its tax bill more than tripled.

Q&A: Transferring property after death

Dear Liz: Just a quick comment on the woman who contemplated transferring her house to her partner and daughter as joint tenants. One must always consider the property tax impact on such transfers. In Los Angeles, real property that is transferred to a transferor’s significant other who is not the spouse or domestic partner will ultimately be reassessed by the county assessor. There are a number of property tax reassessment exclusions on transfers, such as from a parent to a child, from a person to his or her revocable trust and between spouses. This is why all factors must be considered before such a transfer is made.

Answer: A revocable transfer on death deed allows real estate to avoid probate in many states, but this option shouldn’t be used before thoroughly researching the consequences and consulting an estate planning attorney. Read on for an actual case where an ill-considered transfer had big financial consequences.

Q&A: Does moving to a new state necessitate a new living trust?

Dear Liz: My husband and I have a revocable trust that was drawn up in Florida. We live in California now. We are renting and don’t own a house. Do we still need a trust if we don’t own property and have just one adult child to leave our financial funds to? One tax planner wants to charge us $1,800 to revise our trust to comply with California laws. That sounds high to me. What do you recommend?

Answer: Any time you move across state lines, you should have your estate documents reviewed and — probably — revised. State laws differ, and in this case you moved from a common law state to a community property state, where the rules differ a lot. Property acquired during marriage in a common law state isn’t automatically owned by both spouses, while in community property states, it typically is.

“Property,” by the way, doesn’t just refer to real estate. It refers to pretty much all your assets, including financial funds.

A relatively simple revocable living trust typically costs $2,000 and up, so the price you were quoted does not seem high, but you can check with one or two other estate planning attorneys if you want to compare costs.

Q&A: What to consider when deciding how to bequeath your home

Dear Liz: I’m at 74-year-old retired woman living in a completely paid-off condo in California. I hold title in my name only. I would like to add my partner of 20 years and my married adult daughter to my home title so they will not have to go through probate if something happens to me. What would be the easiest way to do that? Someone told me a quick deed to each person giving them a third of the condo. I want it as joint tenancy so the condo would just go to the survivors. My parents always held title with my brother and myself. Do you see a problem with this?

Answer: The “quick deed” to which you refer is probably a quitclaim deed, which would transfer your entire interest in the property to someone else and possibly create gift tax issues. That’s not what you want.

Another option is a revocable transfer on death deed. Like many other states, California now offers this option so that real estate can bypass probate. You would retain ownership of the condo until you die, when it would pass to the people you designate.

But please think carefully before bequeathing a home to two people, especially two who aren’t related or married. What if your daughter needs to sell the house to raise cash and your partner doesn’t want to move? What if your partner needs to remodel the home as she ages but your daughter refuses to share in the costs? Would one have the wherewithal to buy out the other?

Another way to avoid probate would be to create a revocable living trust that allows your partner to live in the home until her death, said Los Angeles real estate attorney Burton Mitchell. The property then could be transferred to your daughter. It may not be the right solution, especially if your partner and daughter have similar life expectancies, but it’s one of many you should explore with an experienced estate planning attorney.

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Q&A: Stepmom alters terms of dad’s will

Dear Liz: My father recently passed away and his will named my stepmom’s daughter as executor along with my brother. My stepmother just informed my brother that she removed him from that role, telling him it’s easier to just leave her daughter as the executor as she lives much closer. Is this legal to remove him after my father’s death? The rest of his five children have not been able to see that will.

Answer: Your stepmother doesn’t get to alter the terms of your dad’s will after his death. As mentioned in a previous column, a probate case should be opened in the county where your dad died and the will is among the paperwork that should be included in that case. It would become public record at that point so you would all be able to read it.

Your stepmother’s unwillingness to play by the rules indicates that you may need some legal help to make sure your dad’s wishes are carried out. The five of you should consult a probate attorney.

Q&A: Naming co-executers

Dear Liz: Is it legal for my parents to appoint me co-executer of their estate, along with my sister, without asking me first if I was okay with this, and keeping me as co-executer after I told them I do not want the responsibility? My sister is more intelligent and competent than I am and would do a better job of this by herself.

Answer: Your parents can name pretty much anyone they want, but that doesn’t mean you’re legally obligated to accept the role when they die. You’ll have the right to decline.

If your parents don’t name an alternate, your sister may be allowed to serve on her own or another executor may be appointed by the court, depending on how the will is written.

Obviously, your parents are being short-sighted by trying to force you to serve when you’ve made your feelings clear. Being an executor can be a time-consuming, complex and often thankless task that shouldn’t be foisted on anyone who’s not willing. If they don’t trust your sister to function alone, they should name someone else—and get that person’s permission before they do. It’s smart to name an alternate or two besides, in case their choices also decide they don’t want to serve.

Q&A: Amending a living trust

Dear Liz: My husband and I had a lawyer draw up a revocable living trust and a pour-over will six years ago. We need to amend a couple of areas, and I found it could be done with a form from a self-help legal site. Also, we need to add our home into the trust. My husband doesn’t want to use a lawyer. Can we legally do the amendment and addition of the home without a lawyer?

Answer: Sure. But your heirs may pay for any mistakes you make.

The big red flag is that you haven’t transferred your home to the living trust, even though you’ve had six years to do so. If it’s not in the trust, it will be subject to probate, the court process that the trust is meant to avoid. You need to be extremely diligent if you’re going to try to create a do-it-yourself estate plan, and you’ve already proved that you aren’t. All you’ve done is undermine the estate plan you paid for years ago.

Amending the trust, and having a lawyer help you transfer your home into it, probably will cost a fraction of what you paid originally. It also would give your attorney an opportunity a chance to review the documents in case other changes need to be addressed. A relatively small investment could pay off in peace of mind that the job has finally been done right.