Update Estate Planning Documents

When and Under What Circumstances Should You Update Your Estate Planning Documents??

We are often asked this question.

One of the first things you should check for in your revocable living trust and financial durable power of attorney, are Medi-Cal and government benefits asset protection provisions. In most instances, you should update your estate plan to a long term care plan, to provide for asset protection under the regulations to help you get qualified for Medi-Cal, in the event you are suffering from incapacity, such as from Alzheimer’s disease. By doing this, you are planning in your estate planning documents for not just what happens when you die, but for what happens if you don’t die and become ill along the way. Medi-Cal is alive and well in California, so you could dramatically lower the cost of a possible stay in a skilled nursing facility, if you have your ducks in a row for qualification. You will also want to include language in your documents to prevent possible recoupment by the state if you die after having been on Medi-Cal.

An important thing to look for in your revocable living trust for couples, are the mandatory A\B bypass provisions that come into effect after the first spouse passes away. These provisions were primarily included in older trusts to help save on estate taxes. The federal estate tax exemption amount is now $11.4 million per person, so these provisions are generally no longer necessary for estate tax purposes. These provisions are burdensome if one spouse passes away, and you are required to fund a bypass B trust, get a Tax I.D. number and file an annual fiduciary tax return. There may be however, other family reasons where the A/B language may be necessary. For instance, if one spouse passes away, and the trust has mandatory A\B bypass provisions, the surviving spouse can generally amend the trust to eliminate the A\B bypass trust provisions. If a single person has a trust, there will be no A\B bypass provisions.

Financial Durable powers of attorney should be updated at lease every five years, as a result of the “financial meltdown” in 2008/2009. Your financial durable power of attorney should have all of the provisions your attorney can include that would add “bona fides” to the document. These provisions include the lawyer’s certificate that he\she has explained the terms of the document to you, and its importance. Consider also whether you should make the power of attorney effective immediately, or effective upon your incapacity, which would be confirmed by a your medical doctor. For married couples, it is usually advisable to make the powers effective immediately.

If there is an early diagnosis of Alzheimers Disease, Parkinson’s Disease, or dementia in general, you should see your attorney as soon as you can. That may be the last chance you have to amend your various estate planning documents. The person with early signs of dementia may want to change fiduciaries such as trustees and attorneys in fact, and may want to provide instructions for various levels of care and how they will be paid for.

In general, you should review your estate plan every three to five years, and there are numerous reasons for this: Individuals you have named may have passed away; new people should be named because of births or adoptions; divorce or marriage or the acquisition or disposition of a large asset.