Nearby: Ideally, your trustee should live close to you, so he or she can perform duties efficiently and economically. However, not every family has this luxury. But if your trustee has other qualities listed here, they still may be the best person for the job.

Tirzah Woodward is an attorney with Gianelli & Polley

Responsible: Choose someone who can handle his or her own financial affairs. It is a good indicator whether they can handle yours. There will come a time when your trustee will handle your bank accounts, paying your bills and maintaining your insurance, etc. While your trustee does not need to be an expert in all the financial and legal matters involved, he or she must know when to seek guidance from an attorney, accountant, or a financial advisor.

Organized: Make sure your trustee doesn’t have stacks of disorganized bills piled on his or her kitchen table. Your trustee must be organized, so that trust account balances and all bills, invoices, and other documents are handled promptly and properly.

Practical: Common sense is valuable in administering an estate. Good business judgment is important when selling assets and dealing with insurance and other financial matters. Because of this, do not choose your trustee solely on the basis of friendship. Make sure he or she is able to make practical decisions relating to your care if you’re incapacitated and to your estate after you die.

Not all of us have the luxury of choosing an ideal trustee from among family and friends. If you find yourself at a loss, consider an independent trustee. Often, certified public accountants, enrolled agents, professional trustees or estate advisors are good candidates.

While these professionals may charge more, their ability to work efficiently and fairly often makes it well worth the cost – both in saving time and in helping curb the drama that sometimes grips families during these proceedings.

Some people who lack an ideal trustee try to solve the problem by naming two or more less-than-ideal family members to serve as co-trustees. Parents may name two children as co-trustees, even though the two don’t get along. They think that forcing them to make decisions together will keep them from fighting.

Unfortunately, that is not usually the result. Instead, the co-trustees fight bitterly and nothing gets done until one is forcibly removed by the court. Instead, simply choose one of the children to serve as sole trustee, or name an independent trustee.

Hopefully, by now you have created a basic estate plan by doing the following:

Signing Durable Powers of Attorney to make sure that someone you trust will be able to handle your finances, and/or make medical decisions if you are unable to.

Establishing a will or trust so your estate can be efficiently settled and distributed when you die.

Discussing these documents with your family members, or other agents, to make sure they are aware of your wishes and comfortable with their assigned roles.

Tamara Polley is a partner at Gianelli & Polley, a Sonora law firm.

Most of us do not think about our pets as part of our estate planning. We assume that if something happens to us, friends or family members will step in and adopt our pets, or find happy homes for them.

But the reality is that when a pet owner dies or is no longer able to stay in his or her home, it is often very difficult to find caretakers for pets. According to an article I read recently, the Humane Society estimates that about one million pets are euthanized in the U.S. each year as a result of owners not adequately planning ahead.

The issue of “what happens to my pet” can be especially stressful for a person who is hospitalized or placed in long term care. So take a moment to make a plan.

The planning necessary depends on what pets you own – planning for exotic pets or large animals is likely to be more involved than for a cat or small dog. Also, consider the number of pets you have – planning for five dogs will require more thought than planning for one.

It may also be a matter of finances. California has a specific code section on “pet trusts,” providing that money may be set aside for the care and maintenance of pets.

Five steps to consider:

Plan for emergencies by identifying someone who can temporarily care for your pet if you are hospitalized or have an emergency that leaves the pet unexpectedly home alone. Keep that person’s contact information in a place that is easily accessible and can be found quickly.

Consider a long-term plan. First, think about what type of permanent home would be best for your pet. For example, can it tolerate small children or other pets in the home? Does it need a big yard?

Identify in writing a friend or relative who has agreed to adopt your pet if you can no longer care for it. If you can’t find anyone to do so, then designate someone to determine your pet’s placement when it becomes necessary. Also, make this designation in writing.

Talk with the person you have designated, so that he or she understands your wishes with respect to your pet.

Make sure that whoever will take care of your pet can afford it. Consider setting money aside in a pet trust, especially if you have multiple pets or large animals.

One of the most important reasons for estate planning is your own peace of mind. You cannot control the future, but you can have a say in what becomes of your beloved pet. So take time to make a plan.

You can request a property tax reassessment if you think the assessed value of your property is too high. Real property is typically reassessed when there is a transfer of ownership, with the new assessed value based on the purchase price. Therefore, if you purchased your property at the height of the market, its current value may now be significantly lower and your assessed value higher than it should be. You can request a reassessment.

Tamara Polley is an attorney with Gianelli & Polley, a Sonora law firm.

California law allows for a temporary reduction in assessed value when a real property’s market value falls below its assessed value. The assessor’s offices in Tuolumne and Calaveras counties have performed automatic reviews of the assessed values for some properties, and made temporary reductions without requests from property owners. If you have not received a reduction, you can file a Request for Property Review form with documentation supporting your request. I recommend calling the assessor’s office in your county to find out what its procedures were for the automatic reviews, and what it requires in support of a request for reassessment.

§    In Tuolumne County, 2 South Green St., Sonora, 533-5535, co.tuolumne.ca.us.

§    In Calaveras County, 891 Mountain Ranch Road, San Andreas, 754-6356, co.calaveras.ca.us.

There is no deadline for filing the form, but if it is filed too late in the year, the reassessment may not affect the current year. Filing also will not affect valuation for any prior years, and it does not extend the deadline for filing assessment appeals or excuse the property owner from paying property taxes due.

If your assessed value has been temporarily reduced, be aware that your property will be reassessed again annually – and future increases will not be limited to 2 percent per year until the assessed value reaches that existing at the time of the temporary reduction.

For example: Fred bought a home in 2005 for $350,000. Now it is only worth $200,000, so he files the form and gets its assessed value reduced to $200,000. Fred’s property can then be reassessed each year and, if the market continues upward, can be increased to its current market value, regardless of the normal 2 percent limit. After it reaches the $350,000 threshold, any later increases will be capped at 2 percent per year unless there is a transfer of ownership.

Certain transfers of real property will not trigger a reassessment. For those who have owned their property for a long time, the assessed value is probably much lower than its current market value, even in this depressed economy. If you transfer your property to your children or grandchildren, either during your lifetime or by inheritance, the transfer may be exempt from reassessment.

California law provides that transfers of real property between parents and children are exempt from reassessment. Transfers between grandparents and grandchildren are exempt if the grandchildren’s parents died before the date of transfer. These exemptions apply to transfers of a primary residence of any value, and transfers of the first $1 million of real property other than the primary residence.

There are no exemptions for transfers between siblings. So if your children inherit your home and then one child buys the others out, there will be a reassessment. Although this is sometimes unavoidable, property tax implications of all likely transfers should be considered in drafting your estate plan.

The California Board of Equalization has a helpful website, www.boe.ca.gov,

with answers to frequently asked questions about these and other property tax issues.

Tirzah Woodward is an estate planning attorney with Gianelli & Polley

Estate planning is more than just transferring assets to your loved ones upon your death. Perhaps more importantly, good estate planning includes choosing the right people to manage your financial affairs in the event you cannot do so.

Most estate plans include both a “living trust” and a “power of attorney.” While each document plays virtually the same role – allowing the person of your choice to manage your affairs while you are incapacitated – having both is essential.

Your living trust is your main estate planning document. It handles management of your assets if you are unable to, and distribution of your assets upon death. Because a trust only controls what it owns, it’s important to re-title your assets to the living trust. If this is done properly, your trustee (the person designated to manage your financial affairs) will have the authority to oversee all of the assets. This will enable your trustee to pay bills or keep funds in proper accounts. However, your trustee does not have authority over assets not titled to your living trust.

What if you forget to put some of your assets into your trust? Or what about the assets that are intentionally left out of your trust, such as retirement accounts, life insurance policies, annuities and Social Security? Since they are not in the trust, the trustee does not have the authority to manage them if you become incapacitated.

These are the situations where a separate power of attorney is needed. This document gives your “attorney in fact” authority to manage non-trust assets. It allows that person to deposit your Social Security, for example, or to better invest your retirement account. Furthermore, with this document, that person will have authority to deal with vital aspects of life such as accessing your mail, dealing with the IRS, and entering into contracts on your behalf.

Both a living trust and a power of attorney work together in forming a comprehensive estate plan, with the goal of preventing any asset from falling through the cracks upon death or incapacity. For proper planning, it’s important to know how both of these documents work together, and under what circumstances each may be needed.

Attorney Jim Gianelli is a founding partner in Gianelli & Polley law firm.

Probate is a court process set up to assure that upon one’s death, assets get distributed to the people in one’s will (or in absence of a will, to one’s legal heirs), creditors get paid, and disputes are settled.

Probate requires the estate to pay set statutory attorney and executor fees based upon the estate’s gross value. It takes at least six months and, more likely, a year or more, and involves court costs, inventories, appraisals, and court-approved accountings.

For those who don’t plan ahead, probate is required, and the laws of the State of California – rather than you – will determine where your assets go and who is in charge of your estate. However, it is possible to avoid the inherent delays, costs and difficulties of probate.

Here’s the process: By submitting an estate to probate, one is asking the court to appoint someone to act as executor and issue “letters of administration” allowing banks, title companies, and stock advisors to deal with the executor.

The executor must take inventory and appraise all assets in the estate, protect the estate’s assets, notify creditors of the death, publish a death notice in a newspaper (to give unknown creditors a chance to step forward), address creditor claims, pay taxes, and keep beneficiaries informed.

After all this is completed, the executor files a “petition for final distribution” which reports on all of the executor’s activities, and finally, transfers the assets to the beneficiaries.

Why is probate often a bad thing? In a community like ours, most estates are small to medium in size. Most are under $1 million, and most are fairly simple, comprised of a house, money in the bank, and an investment account.

Probate is usually not necessary upon the death of a person with a simple estate, no surviving spouse, and no major family disputes – provided they’ve planned properly. By contrast, the estate of a person who leaves a will only (or did no estate planning) and has assets in excess of $100,000 must go through probate. However, a person who enters into a carefully crafted revocable living trust can easily avoid probate and allow for an informal (albeit attorney-guided) distribution of assets.

For a simple estate, in cases where it’s easy to reach agreement on structure and attorney participation and fees, this can mean big savings to your loved ones in terms of time and money.

When you fill out an application for long-term care Medi-Cal benefits, you will be asked whether you have given any assets away in the last 30 months. If so, there may be a penalty resulting from the gift, depending on answers to the questions below:

What was given away? There is no penalty for giving away your home or car. So if you give your only car to your son because you no longer drive, and he uses it to take you to the doctor, that gift will not result in any penalty. But if you have a car that you still use, and deed that car to your son, a penalty may result.

What was the value of the gift? Medi-Cal will only impose a penalty if the value of the gift exceeds $5,698. This number is adjusted every year for inflation, and is considered the “average private pay rate” for long-term care. If the car you gave is a broken-down clunker, it probably has little value and will not result in a penalty. But if the vehicle has value, then a penalty will be imposed.

What is the penalty? A period of ineligibility results from the transfer: one month for every $5,698 transferred. So if the vehicle is worth $30,000, the transfer will mean five months of ineligibility for Medi-Cal long-term care benefits.

When was the transfer made? The ineligibility period runs from the asset transfer date. So if you gave the car to your son more than five months ago, you will need to wait until the five-month period expires before applying – unless you can prove the transfer was made for a purpose other than qualifying for Medi-Cal.

Incremental Transfers

As stated earlier, gifts valued at less than $5,698 do not result in a Medi-Cal penalty, and because gifts are not cumulative, you can make consecutive transfers of $5,698 on different days and those gifts will not be added together – even if made to the same person. So if you have $30,000 in a bank account, and transfer $5,000 a day on six consecutive days, there will be no ineligibility period. Making a single transfer, however, would result in five months of ineligibility.

Beware: Change is in the air

The option of incrementally giving away assets to qualify for Medi-Cal is only available for a limited time. The Deficit Reduction Act of 2005 made significant changes in Medi-Cal rules. These changes will not be enforced until the California Department of Health Care Services enacts regulations implementing the changes, expected in late 2010. The changes include:

• The “look back” period for transfers will increase from 30 months to 60 months
• Incremental gifts will be cumulative (so consecutive small gifts will be added together)
• The period of ineligibility resulting from a gift will run from the date that the application for Medi-Cal is made, rather than from the date of the gift, unless the applicant can establish that the gift was made for a purpose other than qualifying for Medi-Cal
• Partial months will be included in calculating the period of ineligibility

The bottom line? These new rules will make it more difficult to transfer assets and still qualify for long-term Medi-Cal benefits. So if you or your spouse need 24-hour skilled nursing care, or soon will, and you anticipate needing long-term care Medi-Cal benefits, consider taking steps to qualify for Medi-Cal now rather than delaying.

Keep documents up to date. If it has been more than five years since you drafted your estate planning documents, make an appointment with an estate planning attorney to review your plan. Your personal circumstances or changes in the law may have occurred. Both should be reflected in your estate plan.

Get your children involved. Introduce the next generation, or your successor trustee, to your estate planning attorney. An appointment to review and update your documents is a perfect opportunity. Bring them to the meeting so they can get familiar with your documents and the attorney they will be working with when you pass away. Some attorneys offer video and teleconferencing, convenient for families who live far apart.

Prevent fights over possessions. When you pass away, statistics and attorneys’ experiences show that family members will fight most about who gets the personal property. These items not only carry the most sentimental value, but cannot be easily divided (i.e., the china set, paintings, jewelry, etc.) Be specific about who gets what. Prepare a list of personal belongings and spell out the intended recipient. It saves your successor trustee from the near-impossible task of sorting things out, and may prevent hard feelings.

Make your estate documents accessible. Make sure your successor trustee knows the location of all important paperwork, and how to access it. This includes estate planning documents, real estate and banking records, life insurance policies, and any outstanding liabilities. Keep original documents in a safety deposit box, with the successor trustee named as a joint owner.  Place all other information in one master file. Be sure to include your personal information: Full name, date of birth, address, telephone number, Social Security number, and any veteran’s information.

Communicate end-of-life decisions now. Creating a health-care directive conveys your end-of-life decisions if and when you are no longer able to. Let loved ones know your wishes now, so that when the time comes, everyone is on the same page.

In short, stress communication and cooperation while you are still here and able to be heard.

Attorney Jim Gianelli is a founding partner in Gianelli & Polley law firm.

When it comes to planning your estate, it’s best to start the process with an estate planning attorney, preferably a state-certified specialist. But other advisors may play a vital role: your accountant, banker, insurance agent, financial advisor or broker. You may also wish to involve your family, your doctor and, if applicable, your spiritual advisor.

Here is how each of these individuals can help.

Accountant

Your accountant can share valuable information with the attorney, such as an asset’s purchase date and price (this establishes the cost basis, vital for capital gains purposes), or how a business is structured (i.e., whether it is an S or C Corporation, which has huge implications as to how trusts for children are structured).

Your accountant will also need to know – particularly if you do any advanced estate, gift tax or asset protection planning – the tax status of any trusts you’ve created and the tax consequences of gifts you’ve made. Charitable remainder trusts, irrevocable life insurance trusts or other irrevocable trusts necessary to save federal estate taxes require the accountant to file a Form 1041 income tax return yearly.

Any large gifts made to children (more than $13,000 each per year) require filing of a Form 709 gift tax return. And any estate in excess of the federal estate tax exclusion will require a form 706 death tax return. On a related note: Individuals could pass up to $3.5 million tax-free to heirs in 2009 and 2010, but that amount will drop to $1 million in 2011 if Congress does not act quickly. The inaction and ineptitude of Congress, if it fails to prevent this absurdity, will be the subject of a future article.

Accountants are also vital to the trust termination, probate or conservatorship process if the trustee, executor or conservator is required to do a complex accounting.

Banker, insurance agent and financial advisor

Your banker, insurance agent or financial advisor can provide important information to your estate planning attorney, such as account titles, cash values and beneficiaries of your life insurance policies, and values and beneficiaries of your retirement accounts and annuities.

These advisors should make sure your accounts are properly funded into your revocable living trust, and that beneficiary designations are updated to comply with your new or updated estate plan. They are also essential in funding sub-trusts in more advanced estate plans. And an insurance agent familiar with irrevocable life insurance trusts is invaluable in cutting estate tax costs.

Family members

Involving your family in your estate plan can promote harmony and avoid confusion and distrust later. If you keep everything a secret, then your estate plan will be more prone to challenges after you die, since only your professional advisors will know your true intent.

Involving your family in these complex transactions from the beginning may give them peace of mind after you’re gone, since they’ll already understand what was done and why. And if a family member is your main trustee, executor or health care agent, it is essential that he or she understands the duties and obligations involved.

Physician

It is often necessary to involve the family physician in the estate planning process, particularly if the time comes when your mental capacity is in doubt. Almost all of my estate planning forms require a physician’s certification of the client’s incapacity before a trustee, attorney-in-fact or health care agent can act.

Also, physicians are directly involved in decision making, along with the health care agent named in the advanced health care directive. A good physician will identify who is in charge of health-care decisions while trying to involve the whole family in the process. And, when it is advisable or timely, he or she will discuss DNRs (“Do Not Resuscitate” forms), which spell out when a person may be removed from life support.

Spiritual advisor

Spiritual advisors may be important to include in estate planning, particularly if your religion has specific canons about what should happen to your property after you die, or mandates certain decision-making with respect to health care decisions (such as Christian Scientists or Jehovah Witnesses).

So you can see that, when it comes to successful estate planning, it often takes a “village” of professional advisors, family members, physicians and spiritual advisors.

Attorney Jim Gianelli is a founding partner in Gianelli & Polley law firm.

Your spouse has died, and whether or not the death was sudden and unexpected or gradual and expected, you are in shock. Your mind is just not working quite right. The realization of what has happened – and the grief – comes in waves, most of the time when you least expect it.

You still need to take care of the details of the living, those pesky matters that require you to act, when you just feel like stopping the world and taking a time-out from all responsibilities. Here’s a practical guide on what to expect.

Fortunately, you have things in order, things like your revocable living trust, your will, your health care directive, and other estate planning documents. You have a continuing relationship with an estate attorney, so your documents are up-to-date. You wait a few days (even a couple of weeks is OK), then call the attorney and ask: “What do I do now?”

Schedule an appointment. If possible, bring with you the next person (usually a child) in the family line who would take over your health care and financial decision-making if you should become incapacitated or die. It is important to establish a relationship between this person and your estate attorney, and a face-to-face meeting is the best way to do this.

Your next question: “What should I bring to the appointment?” Note that if the attorney you are seeing is your current estate attorney, he or she will already have your living trust and will on file. It’s helpful to bring these additional documents:

• Certified Death Certificates (the number needed depends on your assets and investments)
• Your latest income tax return and current statements for all assets and investments, including retirement accounts, insurance policies, bank accounts, real estate, and other investments
• A list and statements of all your bills and debts

At your appointment, unlike in the movies, there is no formal “reading of the will.” Instead, you will be guided through a checklist of do’s and don’ts – steps that need to be taken to transfer title of assets and investments, pay or not pay creditors (some debts may belong to your spouse and not to you) and tie up loose ends, such as contacting Social Security or other agencies.

There may be important tax decisions to make. For instance, whether to roll over an IRA into a spousal IRA, and whether to divide a revocable trust into two trusts for estate tax planning purposes. You may need to obtain real estate values by getting appraisals, or to determine the investment values as of your spouse’s date of death in order to determine the income tax basis for the surviving spouse (especially important if you intend to sell an investment asset or depreciate rental real estate). If real estate is involved, there may be a need to record an “affidavit death of co-trustee” form and an “exemption from real property tax” form to prevent property tax reassessment.

You are still in a fog but glad that your son or daughter is there to help you gather information and take notes on what you need to do next. This is a good time to review your current estate plan to make sure that everything is up-to-date. Addressing issues ahead of time, as always, makes things much easier when a crisis occurs.

A caveat: Be alert for con games that people try to play on grieving widows and widowers. You are especially prone to these scams if you relied on your spouse to take care of the finances and must now do it yourself for the first time.  If something does not feel right, run it by your accountant, financial advisor or attorney. And tell the person who is trying to sell you something that you will need to do this prior to acting.

Finally, be gentle with yourself.  Your world is now different and it will take time to develop a new “identity” without your life partner. The amount of time varies from person to person, but most inform me that it takes about two years to really begin to regain your balance. And remember, you are never alone – many have been there and felt what you are feeling, and grief support services are offered locally. If you need help, rest assured that it is available.

Attorney Jim Gianelli is a founding partner in Gianelli & Polley law firm.

Did you know you can lose your home to the state as a result of the state paying your long-term care costs? Unfortunately, this is a common occurrence. Let’s discuss the problem and ways to avoid it.

Consider this real case (the names have been changed). Mr. Jones, 87, is in the mid-to-late stages of dementia. His wife, 86, has cared for him for the past five years but can no longer manage without help. The couple has a modest estate: a home that’s paid for, a modest pension, and a bank account of nearly $100,000.

They cannot afford the 24-hour live-in care that Mr. Jones now needs because of his deteriorating medical condition. His wife has heard that she may receive state aid in the form of Medi-Cal, which will cover the costs of a skilled nursing facility.

Q: Is Mr. Jones eligible For Medi-Cal?

Yes. Medi-Cal requires that an applicant (and his/her spouse) have limited resources. He can have a home (considered to be exempt under most circumstances), and certain other assets. For married couples, this is known as the “CSRA amount” of $109,560 (as of 1-1-09). For a home to be considered exempt, Mr. Jones must intend to return home – an intent that can be declared by his representative, Mrs. Jones in this case.

Q: How much of the skilled nursing facility costs will Medi-Cal pay?

Generally speaking, if Mr. and Mrs. Jones’ income from all sources (including pension, social security, interest, etc.) does not exceed $2,739 per month (the “effective maintenance needs allowance,” effective 1-1-09), then Medi-Cal will pay all of Mr. Jones’ skilled nursing home costs! This is remarkable. Costs of a skilled nursing facility in Tuolumne County vary widely, but the average is $7,500 per month. Through Medi-Cal, the State pays it all!

Q: What’s the catch?

It is this: After Mr. Jones dies, the state may make a claim against the home, unless Mrs. Jones is still alive (but they will lien the estate after her death), or unless the home passes to a minor child, or a blind or disabled child of any age.

Laws passed in 1993 expanded the definition of “estate” from which the state can seek recovery. California now may seek recovery from any real or personal property, or any other legal assets held at time of death, including but not limited to the home of Mr. and Mrs. Jones. The “estate” is composed of what is in the Jones’ estate at the time the second of them dies.

An estate includes living trusts, joint tenancies, tenancies in common, life estates that are considered “revocable,” and assets received by a surviving spouse by distribution or survival, e.g., assets left by a will or community property. Many people place their property into living trusts, thinking it will protect it from an estate claim. However, property placed in a living trust can be subject to recovery; unless the property has been transferred out of the beneficiary’s name during life, there will likely be an estate recovery claim.

Q:  How do the Jones’ avoid an estate claim and save their home for their children?

The Jones should have nothing in their estate at the time of death of the second of them. The state can only claim for the amount of Medi-Cal benefits paid or the value of the estate, whichever is less. The Jones’ home is their main asset, as is often the case. To protect the home from recovery, the couple must transfer the home title out of their name. However, there are a number of ways to transfer property and still retain some control over it. Any such transfer should be discussed with a qualified estate planning attorney, to avoid complications (both tax-wise and liability-wise) created by doing these transfers without legal help. Contrary to popular myth, there is no 30-month “waiting period” for transferring a home which is an exempt asset.

I recommended that the Jones transfer the home to their children as tenants in common, and retain an “irrevocable life estate interest” in the home. This provided tax benefits and liability protection. In the end, the home was saved for the children and not subject to state Medi-Cal recovery lien.