California Estate Planning Practice Blog

WSJ: Adult Guardianship Cases Rise

The Wall Street Journal recently published some really good tips for avoiding or preventing conflict in adult guardianship proceedings. This came out in their Personal Journal section on August 17, 2006, for those of you who have online subscriptions to view the article on site.

Adult guardianship proceedings are called conservatorships in legal terminology.

Some of the WSJ tips, paraphrased below, include:

• Create a financial Durable Power of Attorney document to name a trusted loved one to manage your financial affairs if you are unable to make them.
• Create an Advance Health Care Directive designating an agent to make medical decisions for you and document your medical wishes in the same document or a living will.
• Create a Living Trust and transfer your assets into it and designate a trustee to manage trust property if you become incapacitated.
• Talk about your wishes with your agents and trustees as well as other family members.

Reverse Mortgages.

Here is a lengthy, but very clear  introduction on what reverse mortgages are as explained by Byron Warnken, Esq.  at Reverse Mortgage Page. A few of my clients are getting reverse mortgages. Be sure that if you have a reverse mortgage that your home is back into your Living Trust once the reverse mortgage is funded.

First, what a reverse mortgage is NOT:

• A reverse mortgage is not “a way for the bank to get your house”
• It is not a traditional home equity loan
• It is not based on income or credit levels
• It is not available to homeowners under the age of 62
• It is not free money
• It is not a cure-all
• It is not a decision to be taken lightly

What a reverse mortgage is: a good tool for financial planning and flexibility in the golden years.  There are only a very few requirements for eligibility.  The borrower must own and live in the home as a primary residence and be 62 years of age or older.  If husband and wife are both on the title, both must be over the age of 62.   

In addition, the home itself must be of a type that qualifies for the reverse mortgage program.  The vast majority of single family homes qualify, as do most condominiums, town homes, 2-4 unit owner-occupied dwellings and manufactured homes.  Your income and credit levels, however, do NOT matter.

To go through the process of getting a reverse mortgage you will need to speak with a reverse mortgage originator or provider.  This person will guide you through the preliminary steps, including counseling, home appraisals, inspections, and choice of loan specifics.  It is very important to feel comfortable with your lender.  Feel free to speak with as many people as you need in order to gain information and feel comfortable.  Click here for reverse mortgage lenders. 

There are a number of options for how to “structure” the money received.

1. Receive a one time lump sum.
2. Receive the money monthly.
3. Receive a credit line that provides flexibility.
4. Use a combination of the above methods.

Once you receive the money, there are virtually no restrictions on the way in which it can be used. But you must repay existing debt, including the existing mortgage.

You can:

• Make Home Improvements
• Finance Regular Living Expenses
• Ease Healthcare Costs
• Take a Trip to Somewhere You’ve Always Wanted to Go
• Give Gifts to Your Family and Friends

It almost seems too good to be true.  There are, however, as with everything these days, costs involved.  There is an origination fee, closing costs, a servicing fee, mortgage insurance, and interest.  These costs come from the proceeds of the loan.  You pay very little directly out of your pocket. 

You should also know that you cannot lose your home at any time during the life of the loan for failure to make payments.  THERE ARE NO PAYMENTS TO MAKE.  The loan does not come due until you permanently leave the home or the last borrower dies.  The home must be kept up to reasonable standards, it must be insured, and the property taxes must be paid. 

Default risk is one of the ways in which a reverse mortgage differs from a traditional mortgage or home equity loan.  With those traditional products there is a risk of default and therefore a chance you could lose your home.  On the other hand, there are no payments to make with a reverse mortgage.  Therefore, as long as the property is kept to a reasonable standard, you will always have somewhere to live.

In addition, you can never owe more than the value of your home.  Even if you have been paid more than your home is worth, you can only owe the value of your home.  When the loan comes due, you or your heirs can either pay off the loan with existing funds or sell the house in order to satisfy the loan.  Excess proceeds from the sale go to your or your estate.

Can I Help My Aging Parent?

Elder law as an area of law is fraught with sadness and many issues. Watching loved ones age and not be able to handle their affairs as well as they once did is very hard.

If you start to sense that your parent is not doing well or seems to have a harder time managing their life, please consider asking him or her if they have estate planning documents in place.

Estate planning documents like a Will, Living Trust, Durable Power of Attorney and Advance Health Care Directive are very important. Having these 4 documents in place can make it easier to manage someone's affairs while they are still alive, but are slowly losing their ability to manage their own life.

A Durable Power of Attorney allows someone to manage someone else's financial affairs while they are still alive.

An Advance Health Care Directive allows someone to manage someone else's health care decision making in the event they are unable to make their own decisions. It is also where you indicate wishes with respect to end of life choices, funeral wishes, primary care doctors, organ donation and autopsy.

A Will is a document to name who should get what when you pass away. You also appoint an executor to handle your affairs when you die. A Will is only effective when you die. A Will goes through probate though.

A Living Trust allows someone to privately manage the assets in the Living Trust in accordance to your wishes while you are alive but not doing well and upon your death. A Living Trust avoids probate.

Generally, having all 4 documents allows your loved ones to manage your overall well-being without court involvement.

So, be the brave one and ask your dear parent if they have their documents in place? If not, kindly suggest that they contact an estate planning attorney to get their affairs in order while they have their wits about them.

Worried About Your Elderly Relative At Their Home?

If you are worried about a parent or another elderly loved one who lives in a different area from you and it is too far for you to check in on them, request a "well-being" check from local law enforcement. Contact the local law enforcement agency to request an officer or representative to visit your loved one and assess their "well-being." This is especially comforting if you are in the process of making long term caregiver plans, but have yet to put it in place.

Los Angeles Times Probe into Conservatorships.

Last November, the Los Angeles Times wrote a compelling, must read series delving into the ugly world of conservatorships involving private conservators. The series was titled Guardians for Profit. [A conservatorship is when someone seeks guardianship over an adult.]

Robin Fields was the lead reporter for this series. Today, I had the honor of listening to Ms. Fields at the Estate Planning and Trust Council of Long Beach. She spoke briefly about her three year experience working on this series and what she uncovered. Then she opened the floor for the members of the Estate Planning and Trust Council of Long Beach to talk about their observations and ask questions. It was a very interesting luncheon indeed.

If you have not read the series, please do so. The reporting is excellent, the writing is compelling and the analysis in subsequent articles begs for future action by California legislators.