Category Archives: Personal Finance

Estate Planning for “Normal” People

By Kimberley Spears

How many times have you heard someone say they don’t have an estate that’s big enough to plan for? Maybe you’ve said this yourself! Many people believe that estate planning is only for the very wealthy. But in California, one of the most important goals of estate planning is staying out of probate, and that affects most of us, not just the super-rich.

If a person dies and leaves non-retirement assets to someone other than their spouse (like their children, for instance), and if those assets are worth more in fair market value than $150,000, then that estate is required to go through the slow and expensive court process call probate.

The fees you pay to probate an estate are also based on the fair market value of the assets. These can add up very quickly, especially if you own real estate in the Bay Area. As an example, if your home is worth $1 million (even if the bank owns most of it), the minimum probate fees will be $23,000—and that number can be doubled to pay the Executor. You can look at the Probate Fee Schedule to estimate how much it would cost to take your estate through probate. Most people would much rather give this money to the people or causes they love—not to the Probate Court or probate lawyers.

Avoiding probate is simple. Just create a living trust and put your assets in it. Most people work with a lawyer to create their trust, and the best lawyers also help their clients put their assets safely into the trust as part of the estate planning process. The fees to create a trust are a small fraction of what the estate would pay in probate fees, and many lawyers offer estate plans for flat fees.

And, if you have young children, there are additional benefits to estate planning, like nominating guardians for your kids, and making sure money is managed well for them until they are truly old enough to handle it on their own.

Estate planning is really for everyone—especially in California. Often just getting motivated to schedule the first appointment is the most difficult part of the estate planning process, but once you take that step, you’ll find you’re well on your way to having an estate plan that will serve your family well.

For more information on estate planning, see the Family Wise Estate Planning Probate Fee Schedule.

Kimberley Spears has been practicing trusts and estates law exclusively for 10 years. She graduated from Boalt Hall School of Law at the University of California, Berkeley. At Boalt, she won the Moot Court Writing Award, the Prosser Award, and she served as Articles Editor for the Berkeley Technology Law Journal. She has a B.A. in English from the University of California, Irvine, where she graduated cum laude, Junior Phi Beta Kappa. Kimberly can be reached at 415-606-1384, and through her website.

Image via Creative Commons

New Year’s Resolutions for Those in Debt

My partner Jeena Cho and I have been discussing plans and strategies for 2014. Along with this comes the annual resolution pitch we all seem to give ourselves: eat better, go the gym, blah blah. There is something a little cheesy about this, but there is also something to be said for reflection and the vow to take action to better your life in the new year.

I will never stop harping on my number one problem I see with people in too much debt: waiting too long to take action. I know it is hard. Whether it is embarrassment, fear of the unknown or procrastination, waiting to act is one of the worst things you can do.

If you have too much debt, the interest and penalties that increase this out-of-control debt actually feed off of your very failure to act. You know the drill: the credit cards reach their limits and you can’t make the required payments.

Clients describe this sinking feeling in their stomachs when they realize they are over their heads. And when they can’t juggle things and make even all the minimum payments, the phone calls and collection letters are particularly intimidating.

One of my favorite parts of bankruptcy practice is seeing people rise again. The first sense of relief is our first meeting where the client realizes there is a viable strategy for getting themselves out of this mess. The second big step is completing the 341 meeting of creditors, and breathing a sigh of relief that it is over and not what they expected. The third step is getting a discharge. Getting out from underneath the debt and getting a fresh start brings about a much needed sense of hope.

So, back to the resolution. If you are suffering from too much debt, make the resolution to do something about it, and act. Do not just reflect, but take affirmative steps. Call a financial advisor, tax specialist or whatever professional you need. It’s so easy today that you can often just schedule appointments online. Regardless of how you go about it, talk to different professionals and make an informed opinion on how to proceed.

I’ve never had a consultation with someone that regretted getting good information.

Image Credit: EEPaul

Will I Ever be Debt Free?

By Jeena Cho

Money, especially in the context of debt has a lot of emotions surrounding it. If you’ve been avoiding your debt because you’re feeling guilty, shame, embarrassment, fear, anger or some other emotion, this post is for you.

Being in Debt is Painful!

Frequently, when I meet with clients, I can feel the increased tension in the room. You see, we have all sorts of associations with money. Money represents success, power, ability to purchase things for yourself and your loved ones. Clients will frequently express the emotional pain of being deeply in debt. Common emotions are: shame, fear, denial, frustration and anger.

How Did You Get Into Debt?

Most people don’t end up with unbearable debt overnight. For most people, it’s very gradual. Maybe you don’t have enough money to buy holiday gifts for your children, so you charge it on your credit card. Then when you get your next paycheck, you need more money for unexpected house repairs. So, you charge that too. Then the car breaks down. Or you’re faced with an unexpected hospital visit. Sometimes, it’s simply wanting what you know you can’t afford. You don’t want to feel left out when you see your friend carrying the latest designer purse so you charge it. This feeling of wanting to belong, wanting to keep up with the Joneses is powerful.

Who is to Blame for the Debt?

There’s a tendency to play the blame game. You blame your spouse, your significant other, your parents, your children. The hardest part of the blame game is blaming yourself. Berating oneself for the financial mess and constantly beating yourself up for debt - that’s very common.

You’re Not Alone

Another thing I hear frequently is “I feel so alone.” Debt doesn’t exactly make polite dinner conversation. People in debt go to great lengths to hide their problem. It can feel as though everyone else around you is earning more, spending more, yet doesn’t have the financial woes you’re facing.

If you feel like you’re the only one in debt, read the headlines in any newspaper. Debt is everywhere. We’ve gone through a mortgage crisis and now a student loan crisis. Chances are many of your friends, family, and co-workers are suffering with debt too. It’s just we’ve all gotten very good at masking the problem.

What’s Stopping You from Being Debt Free?

Despite the pain of being deeply in debt, most people resist change. It’s like resisting healthy living. Most of us know we need to drink more water, consume less fat, eat more fruits/veggies, exercise more, yet, we all struggle.

Basic math requires that in order to pay off debt, you must (1) increase income or (2) decrease spending or do combination of both (1) and (2). Some clients resist this idea. They will buy lotto tickets, gamble or try various other ways of coping with their debt, including simply ignoring it. You can guess how well this works.

Kick the Debt Habit

Oftentimes, I’ll meet with clients that struggled with debt for years and they want me to make it better instantly. Frequently, clients want to avoid bankruptcy. I can certainly understand. However, non-bankruptcy options are often more costly than bankruptcy. This includes repaying the debt in full or paying in part, such as debt settlement.

Bankruptcy can only fix existing debt. It can’t help fix your broken budget. If you’ve always been borrowing from the future and subsidizing your lifestyle by using your credit cards, it will mean you have to cut expenses to remain debt free. It means taking a hard look at your budget. It may mean you have to drastically curb your shopping habits. It may also mean you have to give up certain expenses. Like the saying goes, you can’t have it all.

Make it a Priority

I firmly believe that in order to get out of debt, you must make it your number one priority. Look at your budget as though you were a CFO reviewing your company’s P&L. Grab that red pen and start figuring out what expenses go.

Start Big

When reducing your expenses, start with the large line items like rent, and car payments. The reason is that it’s much easier to save if you can reduce your rent by $500 per month than trying to reduce your food budget by $500. Is it possible to get a roommate to offset your rent? How about renting your apartment on Airbnb temporarily? Can you drive your car on Lyft or loan your car on getaround or relayrides?

Go Small

After you’ve figured out ways to reduce your spending on the big items, look at all the tiny ways you’re wasting money. This can be anything from your daily cup of joe to buying lunch everyday.

Yes! You Can Be Debt Free!

The journey to a debt free life isn’t easy. It’s full of challenges. There may be disappointments. You may have to make difficult choices like deciding to file for bankruptcy. In addition, you may need to make some serious adjustments in your spending habits.

Similar to starting a new diet, there will be days where you won’t meet your goals. The important thing is to not give up. Don’t beat yourself up for not sticking to your budget. If you go over budget one day, tomorrow’s another opportunity. Responsibly managing personal finances is a lifelong goal. Don’t let one defeat stop you.

Image Credit: morguefile

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Austerity Measures in Bankruptcy | San Francisco Bankruptcy Attorney

By: Jeena Cho, San Francisco Bankruptcy Attorney

If you’ve been watching the news, you probably saw stories about Greece and its austerity measures. Austerity describes government policies to reduce budget deficits. Oftentimes, austerity measures are necessary in personal bankruptcy as well. We are creatures of habits, so most changes are painful. Budget cuts are a particularly painful type of change.

When I meet with a potential bankruptcy client, a common question I get is “do I have to give up _________.” This can be anything from bad habits like smoking to non-essential spendings like vacations. The answer to whether you can keep any single line item on your budget depends on several factors.

Can You Afford It?

The first obvious rule is that any budget item you want to keep should be affordable. This applies to homes, cars, utilities such as phone, cable and internet, food, transportation, etc. Frequently, people subsidize their income with credit. Without credit, you may find yourself coming up short each month. If this is the case, it’s time to take a hard look at your budget and ask yourself “can I afford this?”

Another helpful analysis may be to ask yourself “is this something I need or something I want?”

Reasonable and Necessary

The basic rule in bankruptcy is that all of your expenses must be “reasonable and necessary.” This is a case-by-case analysis, taking into consideration the client’s individual circumstances.

For example, a $600 per month payment for a BMW may be “reasonable and necessary” for a real estate agent where it’s important to portray a certain image to his or her clients. However, if you’re earning $40,000 or there’s no justification for why you need a BMW, this would not be considered “reasonable and necessary.”

Similarly, if you’re a busy working professional with young children, it may be necessary to pay for full-time child care. Not so much if you’re not working and can care for the kids yourself.

Is it fair?

Bankruptcy is premised on an idea that honest but unfortunate debtors should be afforded an opportunity to get a “fresh start.” Tied to this idea is that you should be required to pay back your fair share of the debt if you can afford it. This doesn’t mean that you’ll be required to eat ramen noodle for five years to repay your creditors. It does mean you probably won’t be able to dine out at every meal.

The information contained in this post is informational only and not substitute for legal advice. Please consult a San Francisco Bankruptcy Attorney about your circumstances.

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Six Building Blocks to Creating a Healthy, Financial Future Part 5 - Podcast #18

Today, we continue our series on building a healthy, financial future. Every step along the way strives to solve a problem that may be keeping you from moving forward and giving you the solution you need to move forward.

This really is Jeena’s favorite topic to talk about: Building Your Wealth! It’s the steps to get that pot filled with funds so you can choose what you want to do and how you do it.

But with so many ways to do it, where do you start? We talk about that in this edition of the podcast.

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