Wine is Serious Business

Tasting, pairing, appreciating, collecting; your individual level of interest may vary, but wine is ubiquitous. Whether you have a rack, cabinet, or cellar; those bottles have value, and they should be addressed in your Estate Plan.

Now you may ask, “do I really need to make some wine provision in my will or trust?” The answer is yes, but how extensive the provision really depends on what you want to happen to the wine.

Avid and serious collectors alike put time and effort into their bottles. If you want to ensure the same effort and care is taken by your executor or trustee, it makes sense to let him/her know how you would prefer for the collection to be treated.

Wine is considered personal property. Personal property is an afterthought in many Estate Plans, but that is a mistake. Personal property, especially in the eyes of children and other family members, can and often is the most coveted property because of its sentimental value. Wine is no exception, but some wine may also have monetary value too. 

The most common convention is to leave all personal property to a spouse and then to children in the alternative. That may create many issues, where not everyone is married or has children. More direct to our discussion here though, what if your children aren’t wine drinkers? They may not value it at all, but your neighbors (who you may or may not have shared several bottles with over the years) would.

If the collection includes valuable bottles that need proper appraisal and valuation, it makes sense to include that on the personal property memorandum to ensure your executor will know.

Large collectors, cellar-types, may also have other considerations. If the cellar is built into your home, what will happen to the collection when the house is sold, rented, or donated to charity? Does the recipient of the collection have the facilities to store it? Does the recipient even like wine? As with any asset, as folks get older, they will often start gifting items to friends and family to alleviate the stress on an executor or trustee. 

At Tresp Law, our Trusts all include language that allows for the client to create a personal property memorandum to address the distribution of personal property. This gives the client the flexibility to update their wishes as often as they like without the need to amend the Trust every time. 

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Attorney VS. DIY Online: How One Person Can Make All the Difference

The expense of consulting with an Estate Planning will certainly be more than do-it-yourself online document preparation services. No question that is true. For Estate Planning, the problems come later; and those problems will inevitably be much more expensive for your loved ones. Families are different, circumstances are unique, and life events change. All of these can be perilous for Estate/Trust Administration and engaging an excellent attorney in the preparation of your Estate Plan will minimize the risk of your plans going awry after you have passed. The central goal of basic estate planning is to avoid the need for a court-supervised probate administration.

Time-consuming, expensive, and complicated, the probate court process is entirely unnecessary if you are proactive. This means avoiding all of the related filing fees, executor fees, attorney fees, and year or longer administration required to simply distribute your estate to your loved ones or charities (the “beneficiaries” of your estate).

Like any legal representation, the main purchase is advice. For an Estate Planning attorney, that advice is crucial to ensure your wishes are followed and to avoid the probate process. Even simple estates can save thousands of dollars later by ensuring their documents are correct and current.

Take home as an example. For even a modest estate, where the only asset is a home valued at $500,000 (below the median home value in San Diego County), passes through probate, the executor and attorney fees set statute by the California legislature would be $13,000 each under the current probate code. That is a total of $26,000 of fees that directly reduce what your beneficiaries will receive, and that does not include court costs and expenses than can be in the thousands. And errors in your estate planning documents can lead to litigation that may cost tens of thousands of dollars on top of the statutory costs.

Low-cost options such as websites or quick turnaround firms may have been created by attorneys or overseen by attorneys, but it is unlikely an attorney actually sitting down with you to discuss your family, assets, and wishes. This is the weakness in their mode, and the only ones harmed will be you and your loved ones, which is why meeting with an experienced estate planning attorney is always the best policy.

Tresp Law, APC offers free consultations for all Estate Planning clients. We can let you know what plan works best for you and address any particular concerns you may have about the process and what it entails. We also handle Trust Administrations, Probate Administrations, and Trust and Probate Litigation. This is advantageous to clients because our experience litigating issues after someone passes away enables us to plan better to avoid litigation. We know how well-drafted documents stand up to court challenges.

Set up a consultation today to speak with a real attorney about your real situation. Leave the online business to those who think of estate planning as only an expense, and not an investment.

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The Benefits of Including Your Life Insurance Policy in Your Estate Plan

Life Insurance, like all assets owned by an individual, should be included in your estate plan discussion and used as a tool for future planning.

 At its base level, life insurance is used to provide for those who depend on you, whether that be children, a spouse, or other family members. However, even if you are single with no dependents, life insurance can still be a useful tool to store and access wealth. 

Simple term life policies that have a death payout benefit are usually transferred upon death to a designated beneficiary. That beneficiary is selected by the owner of the policy and once the insurance company has verified the death, they will pay out the policy to the beneficiary. This type of policy does not need much more interaction with your estate plan, with one main exception.

What if you have underage children? If the children are named as beneficiaries, the proceeds of the policy will need to be overseen by the probate court through a guardianship proceeding. This situation can easily be remedied by creating a revocable trust and making it the beneficiary or contingent beneficiary of the policy. This structure would allow your chosen trustee to administer the money for your children under the terms of the trust, and without the need for court intervention, cost, or approval.

Whole or universal life insurance operates a bit differently than a term policy. Under these types of life insurance, the premiums paid to the insurance company provide for the same death benefit as a term policy, but they also accumulate a cash value. This cash value can then be accessed to supplement retirement income or used as a personal loan to the owner, as opposed to using a bank line of credit or a credit card. 

In addition to the issues with underage children, there are other strategies for the use of life insurance that can be a great benefit to your estate. Life insurance is a great source of funds for paying final expenses, debts, and taxes. This type of planning is crucial if the decedent has many assets but little cash.

Wealthy individuals can employ more sophisticated tactics such as creating a dedicated irrevocable trust, called an Irrevocable Life Insurance Trust (ILIT), which would then allow for the owner to pay the premium during their life and then control the distribution when they die by the terms of the trust. This structure has the added advantage of removing the value of the policy from the decedent’s estate for Estate Tax purposes. The number of individuals who will benefit from this strategy is less and less every year though because of the extremely high exemption from the Estate Tax, currently $11,580,000 in 2020.

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Incapacity and What it Means for Your Estate Plan

In California, drafting a Will, Trust, or alternative Estate Planning document has three basic requirements. First, you must be alive; second, you must put the drafting in writing; and third, you must have the capacity to make testamentary decisions. But what exactly is “capacity to make testamentary decisions?”

Capacity can be a gray area, especially with older individuals, because later in life is usually when dementia and other memory disorders begin to manifest. An important note is that capacity has nothing to do with intelligence, rather, capacity deals with a person’s understanding and ability to know the result of the actions they take. For estate planning, this means they understand the nature and consequences of the decisions they make, and those decisions are made by them alone. Otherwise, they are incapacitated.

The criteria for determining incapacity are listed in California Probate Code Section 6100.5, and to paraphrase the code, here are the requirements:

1.  Understand you are creating a will or trust.

2. Understand and remember what property you own and its condition.

3. Understand and remember your family structure and relationships.

 As you can see, the central theme to the above list is that the person creating the documents is that the person must know the result of their actions. They need to know they are creating a will, must know what property will be controlled by the document, and must know if there are any family members not included.

Determining capacity is the first thing estate planning attorneys should assess when meeting with a client.

Often, a simple conversation may reveal that the criteria are met, but in some cases, the attorney will need to delve deeper to ensure the criteria are met. The important takeaway should be that sooner is always better when it comes to creating any Estate Planning documents. This is definitely a case of an ounce of prevention being worth a pound of cure. Documents drafted by individuals who may have an issue with any of the criteria are much more susceptible to challenge in court if the beneficiaries of the estate plan disagree.

If you need an estate plan, contact Tresp Law, APC and ask about your personal property memorandum. We will ask the right questions and help you get the estate plan that is right for you

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