Guest Presentations

Estate Planning

Rafael Jimenez lead the members in the Pledge of Allegiance and then Bob Leininger gave an overview to the members present about the City Council’s recent and upcoming actions relating to the lowest cost medical plans for retirees and the November ballot measures regarding Police & Fire binding arbitration, and establishment of two-tier retirement plans for new employees.

SJREA welcomed Roy Litherland, Attorney at Law, for his very thorough and informative presentation on Estate planning. Some salient statistics included the estimate of 70% of Americans who don’t do any planning for their death or disability at all – no will, no nothing. Those who do get a will may be interested in Roy’s statement, “Where there’s a will, there’s a probate.” Who knew that in Santa Clara County, there is a single probate judge to handle our population of nearly 2 million? Wills tell the probate judge how to distribute property, but wills do not avoid death probate fees which are calculated on the GROSS VALUE of property.

The seminar continued with information about long term care. Approximately 81% of health care costs nationally go toward long term care, and yet most people don’t plan for these costs…in Santa Clara County, the average cost ranges from $6,000 to $8,000 per month. If people think they will be covered by Medicare, think again. Medicare (following a stay) covers only 2% of the population with skilled nursing services covered in full for the first 20 days, then for day 21 through 120, Medicare requires a co-pay of $135 per day, and after 120 days, nothing is covered by Medicare.

Many people rely on Medi-Cal, which is a state program designed to help pay costs for those who are 65 or over, blind or disabled, and meet asset limits and income tests. Keep in mind, however, that Medi-Cal will often require payback of all benefits paid on behalf of the person in long term care prior to distribution of any remaining assets.

A Living Trust, which changes title for assets so the individuals no longer have legal title to the assets is the “Standby Device” to avoid death probate. In addition, Roy includes special provisions in the living trust that he calls “Medi-Cal Triggers,” which grants trustees the authority to do Medi-Cal planning in the event of mental incapacity. He also uses a “Medi-Cal” deed which can allow transfers to children in order to avoid long-term capital gains. This establishes the fair market value at date of death as the step-up basis for tax purposes.

Mr. Litherland cautioned that not all assets go into a Trust. A Power of Attorney is required to make decisions for an incapacitated person’s IRA, 401K, or employee stock options. For example, a “Pour Over Will” is needed to work with a Living Trust to handle other important estate needs. A well-executed trust ensures that assets can be transferred in trust and protected from creditors for up to ninety years in California, through use of trusts by subsequent generations of beneficiaries.

In summary, all the pieces of a well-planned estate are:

• Property Management Power of Attorney
• Health Care Power of Attorney
• Community Property Agreement
• Pour Over Will
• Living Trust

A lively question-and-answer session followed the presentation.