When your parent is no longer mentally competent, it's too late for their estate planning.
Have Your Parents Done Their Estate Planning?
Your parents need an updated living trust estate plan to avoid conservatorship and probate.
It's critical that you do your estate planning to protect your family and your assets. An effective estate plan includes a living trust, schedule of trust property, pour-over will, durable power of attorney, advance health care directive and HIPAA and trust transfer deed. These are the fundamental documents of a California estate plan.
But what about your parents? Chances are you will outlive them. And if they don't have an estate plan, or if their estate plan is outdated, you and your siblings will be left to deal with the consequences. The consequences may include:
If one of your parents becomes mentally incapacitated, he will need a durable power of attorney to allow you to manage his financial affairs. But the durable power of attorney must be signed while he is still competent. Once he crosses the line - be it Alzheimer's or dementia, it may be too late.
And when it is too late, you must petition the court to appoint you as his conservator. This is usually expensive and a big hassle. Some call it a living probate.
Don't wait until it's too late. Ask your parents if they have an updated estate plan.
If your parents do not have an updated living trust estate plan and their probate assets have not been transferred to their living trust, you will have to take their estate through probate when they pass away. California probate is expensive and time-consuming - and unnecessary if they had an updated and funded living trust estate plan.
Beneficiaries on IRAs and Life Insurance
Make sure your parents have updated their beneficiary designations on their IRAs and life insurance policies. Often, a spouse will name his wife as the primary beneficiary but forget to name a contingent beneficiary. If his spouse dies first, then he has no beneficiary. When he dies without a beneficiary, the IRA or life insurance death benefit will be subject to the terms of the IRA contract or the life insurance policy. Sometimes the default beneficiary is the surviving family members based on the California probate code - spouse, then children. Sometimes the default beneficiary is the estate, in which case the account or death benefit may have to go through probate.
Either way, it is an unnecessary complication that can easily be avoided by reviewing and updating IRA and life insurance beneficiaries.
We'd be glad to help your parents set up their living trust estate plan or review and update their existing living trust estate plan.