Unfortunately, it is not uncommon to be involved in an auto accident where the other driver has either no insurance coverage or insurance coverage that is so low that you will not be properly compensated.  The State of California only requires that drivers have $15,000 in policy limits for bodily injuries and property damage.  The policy limits determine how much money the insurance company has to pay you. 

So what do people do if they are involved in a serious accident and the other driver has either no coverage at all or only has the bare minimum $15,000 in coverage?  Well, you can purchase uninsured and underinsurance motorist coverage.

What Is Uninsured Coverage?

Uninsured motorist coverage provides you with insurance coverage where you are in an accident with a driver who does not have any insurance to cover your accident and the other drive is at fault for the accident.  If you purchased uninsured motorist coverage, your insurance company may pay for your injuries as well as any person in your car where the other drive is at fault. 

Hypothetical 1

For example, let’s assume that the other drive is negligent and hits your vehicle.  Your $30,000 vehicle is totaled and you need shoulder surgery, which is going to cost you $40,000.  The other driver has no insurance and is at fault for the accident.  Under your auto insurance plan, you have uninsured motorist coverage of $100,000 for property damage and $100,000 for bodily injuries.  Since you are paying for that added coverage, you will have sufficient coverage to replace or fix your $30,000 vehicle and to pay for you $40,000 surgery.  

Hypothetical 2

Now let’s assume that the other drive is negligent and hits your vehicle.  Your $30,000 vehicle is totaled and you need shoulder surgery, which is going to cost you $40,000.  The other driver has no insurance and is at fault for the accident.  This time, you have no uninsured motorist coverage for either property damage or bodily injuries.  Your insurance company might possibly pay to replace or fix your vehicle but they will certainly not be contributing any money toward your $40,000 shoulder surgery.  Now you are left burdened with a $40,000 hospital bill because the other driver was driving illegally without any insurance coverage. Unless the other driver has other assets, you will be left with the bill. This situation can create a real nightmare for people who have serious injuries and find out that they are the one who have to pay for it when they were the innocent victim in the first place.  Life can be very unfair at times.    

What Is Underinsurance Coverage?

Underinsurance coverage provides you with insurance coverage where you are in an accident with a driver who has some insurance but not enough to cover your injuries.  The other driver must also be at fault for the accident.  For most insurance companies, if you pay for uninsured motorist coverage, you automatically get underinsurance coverage too. 

Hypothetical 1

Let’s assume that the other drive is negligent and hits your vehicle.  Your $30,000 vehicle is totaled and you need shoulder surgery, which is going to cost you $40,000.  The other driver has $15,000 in coverage for property damage and $15,000 for bodily injuries.  Under your auto insurance plan, your underinsurance motorist coverage of $100,000 for property damage and $100,000 for bodily injuries.  Since you are paying for that added coverage, you will have sufficient coverage to replace or fix your $30,000 vehicle and to pay for you $40,000 surgery.  

The way the underinsurance coverage works is you have to first obtain the policy limits from the other drive first before you can tap into your own insurance.  In the scenario above, you will need to have the other driver’s insurance company pay you $15,000 toward your property damage and another $15,000 toward your bodily injuries.  Once you max out the policy limits, your insurance carrier will get a credit on the amounts paid from the other driver. 

For example, your insurance company will get a $15,000 credit toward your $30,000 vehicle ($15,000 paid from the other driver’s insurance).  That means that your insurance company will then have to pay the rest of the bill and pay for the other $15,000 in property damage.  Since you paid for $100,000 in property damage coverage, you have plenty of coverage for your vehicle.

As for the bodily injury, your insurance company will get a $15,000 credit toward your $40,000 shoulder surgery.  Your insurance company could then pay the rest of the claim ($40,000 – $15,000 = $25,000).  Since you paid for $100,000 in bodily injury coverage, you have plenty of coverage for your shoulder treatment. 

Now you will need to have a skilled personal injury attorney negotiating on your behalf to maximize the policy limits whether you are dealing with the other driver’s insurance carrier or your own insurance carrier.  The Law Offices of Michael C. Murphy will aggressively fight the insurance companies to pay up their policy limits to provide you with the compensation that you deserve. 

Third-Party Liability Insurance?

What if your shoulder surgery costs $150,000?  Under the same scenario above, the underinsurance coverage is maxed at $100,000.  The law says that your insurance company only has to pay up to the policy limits and is entitled to a credit on the amount the other driver’s insurance pays to you.  As a result, $15,000 would be contributed from the other driver’s insurance and your insurance would contribute $85,000 for a total of $100,000. 

Who has to pay the difference to make up for the remaining $50,000 in medical bills?  You would have to check with the Law Offices of Michael C. Murphy to see if anyone else might be responsible for paying the remainder of your medical bills.  If the other driver was working on the clock at his or her job, then you might have a claim against the employer to contribute some money. 

Sadly, if there is no other insurance coverage and no one else to blame, you will be left paying the rest of the bill.  This is exactly why it is so important to pay for enough bodily injury coverage.  You do not want to take the gamble on the road not knowing whether other drivers have any insurance or only the bare minimum amount of insurance.

Call the Law Offices of Michael C. Murphy

If you need a car accident lawyer or a motorcycle accident lawyer, we can help you.  Our personal injury attorneys here at the Law Offices of Michael C. Murphy will know how to navigate through your case and work tirelessly to obtain the best possible recovery for you.  Please contact the Law Offices of Michael C. Murphy today at 818-558-3718 or email us at info@murphlaw.net. 

If you own real estate in California, you need to have an attorney prepare a will and trust for you.   The following are answers to some basic questions we often receive from our clients.

What is a Will and Trust

A will and trust are legal documents that provide a written declaration as to how you want your assets distributed after you pass away.  We always prepare trusts for our clients as they can provide tax advantages and can be utilized as a tool to avoid death taxes and inheritance taxes later.  When you prepare a trust, you appoint a trustee.  While you are alive, you appoint yourself the trustee and put all of your assets into the trust.  You can then use your assets however you wish.  You would also appoint a successor trustee, which is someone who will be responsible for carrying out your wishes after you die.  If you want title in your house being transferred into your spouse, son, or daughter’s name after you die, the trustee would be responsible for making sure that title is properly transferred. 

If you have a trust, why do you also need a will?  Our office prepares what we call a pour-over will.  When a person goes to prepare their trust, sometimes they won’t think of all the assets they own or will forget something or possibly they suddenly inherit an asset after their trust has been prepared.  The classic example is winning the lottery and then suddenly dying.  A pour-over will makes sure that any assets that are unaccounted for are transferred into the trust.  This is basically a safety net for your assets and to make sure your beneficiaries receive all of your assets through the trust without having to go to court for them.   

The Power of Attorney

When my grandfather suffered a fatal injury to his spine, he was sent to the hospital where the doctors told our family that they could keep him alive but he would continue to suffer and had no hopes of ever recovering.  He would be stuck to a hospital bed with never-ending medication for the rest of his life.  It was in that moment my family had to make a decision about what was in my grandfather’s best interests.  To save my grandfather from permanent agony and suffering, we each said our good byes, joined in prayer with religious leaders, and allowed the doctors to take him off life-support.  It was a beautiful end to a beautiful life as many of us never get to say good-bye to our loved ones. 

This story is a perfect example of why you need a power of attorney for health and finance.  If your loved one suffers from a serious accident like my grandfather, nobody wants to watch their loved ones suffer.  A power of attorney gives a person the authority to end the suffering through instructions we draft for you to give to a professional physician.  Without a power of attorney, your family cannot make these final decisions on your behalf.  You can custom draft your power of attorney based on your religious ideals and other parameters to your wishes, such as being a donor, whether to be cremated and where to drop your ashes, whether to be buried and have a formal funeral, etc.  All of your wishes can be drafted into your estate plan. 

A power of attorney for finance is also a necessary tool that gives your loved ones the authority to make financial decisions on your behalf.  Say you get into a serious accident that is not life threatening but causes you to become paralyzed from the neck down.  With a power of attorney, your loved ones can spend money on your behalf buying whatever medical equipment, medication, and food that you need to live out the rest of your life.  Without a power of attorney, your loved ones would have to go into court to obtain permission from the judge to be appointed to make financial decisions on your behalf, which can become an expensive process. 

Avoid a Costly Probate Proceeding

If you have an estate that is valued at $166,250 or less, you do not need a will or trust to transfer your property to your beneficiaries and can avoid probate court altogether.  (Prob. Code, § 13151.)  However, if your estate is valued above $166,250.00, you will absolutely need a trust prepared.    

If you pass away, own a house, and do not have a trust, your family members will have to hire a probate attorney to go into court to inherit your assets.  Probate attorneys will either want to be paid hourly or if you do not have enough money to pay for the attorney, they will ask the judge to award them a percentage of your total assets, which varies depending on your net worth. 

However, if you have a trust, your family members and loved ones won’t have to hire a probate attorney or go into court.  The trust will appoint a trustee (a person or institution) to make all of the distributions out of the estate to your beneficiaries without getting attorneys or the court involved.       

Plan for Family Disagreements

Another reason why you want to have a trust prepared is to avoid family disagreements later.  After a person passes away, all sorts of family members, loved ones, and friends often come along to say that you promised them that watch, that piece of jewelry, that car, that expensive set of golf clubs, etc.  With a trust, there are no questions about who gets what in your house or as to your other assets.  Your attorney can draft specific instructions as to who gets what and when they get it.  Maybe you don’t want your son inheriting your Rolex collection until he’s at least 25 years old and will be responsible caring for it.  Your attorney can address these concerns through custom drafting.

Some of the biggest areas of litigation that our office handles is trust lawsuits.  Family members will get into these huge litigation battles over family-run businesses, family assets, will accuse each other of exerting undue influence, of taking advantage of grandma, and all kinds of terrible things.  A will and trust that is carefully drafted can help avoid many headaches and problems later.  One great way to avoid costly litigation with family members later is to record a person’s last wishes.  Videotaping is a great way to ensure that your beneficiaries are protected from costly lawsuits. 

What also happens in many situations is that children will inherit property from their parents and they will have equal ownership interests to that property.  Say one sibling really needs money and wants to sell the property while the other sibling prefers to rent out the house to save money on taxes.  One sibling could buy out the other’s interest or they could come to some other solution.  If the siblings cannot agree, then they will have to go to court where a judge will likely order the property sold and divide the assets equally (after paying realtor fees, appraiser fees, court fees, etc.).  After paying for lawyers and incurring all these other fees, there may not be much left from the sale of the house.  Careful drafting can help avoid these disputes.

What if your daughter is disabled but you also want your son inheriting your house?  What you can do through estate planning is give your daughter a life estate in the house so that she can use the house for the rest of her life without having to pay her sibling a penny towards rent and then after your daughter passes away, your son inherits the house outright. 

As stated, estate planning can help avoid many disputes after you are long gone through careful consideration and planning with your attorney.  The relatively small expense of a will and trust greatly outweighs the headache, emotional exhaustion, and legal fees that could be incurred later.  The last thing you want is your entire estate dwindled away in legal battles.

Prevent Creditors from Consuming Your Children’s Inheritance

A spendthrift trust provision prevents creditors from consuming your beneficiary’s inheritance.  Say that your daughter is involved in a big lawsuit and loses in court.  Your daughter owes $500,000.00 to her old business partner (who in your mind is a crook and a liar).  When you pass away, you want your daughter to inherit $700,000 but you don’t want all of your hard-earned money just going to her old business partner.  To avoid this issue, you can set up a spendthrift trust, which prevents creditors (your daughter’s old business partner) from going after your daughter’s inheritance.  A spendthrift gives a trustee the authority to give your daughter periodic payments toward reasonable living expenses without having to pay money to her creditor.  The money could be used to pay for your daughter’s rent, living expenses, food, healthcare, etc. 

Without One, a Judge Could Be Deciding What Your Children Inherit

The final reason why you want a will and trust prepared by a professional is that you do not want a judge to be the one deciding what each of your family members inherit from your estate.  California has default rules that determine an order of priority for how family members inherit from each other.  Maybe you don’t want your spouse, son, daughter, or grandkids inheriting a penny from you.  Maybe you want your grandchild to inherit everything and your own children to receive nothing.  Maybe you wanted your local church or temple to inherit all of your assets.  If you do not prepare a will and trust, these default rules will kick in and you will have no say as to who gets what.  Could you imagine passing away and your children are fighting over every little item in your garage?  Avoid the nightmare and be smart by hiring a legal professional today to prepare your will and trust.    

If you have any questions, please contact the Law Offices of Michael C. Murphy today at 818-558-3718 or email us at info@murphlaw.net.