Estate Planning

Wills

There comes a time when we all should consider what to do with the personal and real property we leave upon our passing. Although we try to avoid thinking about it, the though of taking care of your loved ones can be very comforting. Take time to make your preparations to ensure that your estate provides for the ones you love.

Remember though that even though you may have a will that your estate will not avoid probate. Should you want to avoid the probate of your estate, you should consider creating a living trust.

Trusts

An instrument that can be used with or without a will. There are many benefits to creating a trust and they can be an integral part of estate planning. Review the procedures for probate, the statutory fees and other requirements and then decide if you want your estate distributed by a court or through a trust.

Probate Requirements

Estates with a market value over $100,000 may be subject to probate. The transfer of real property into a revocable trust or a transfer of real property out of a revocable trust is not subject to reevaluation under Proposition 13.

Probate does not occur if the majority of the deceased person’s estate is held in a trust. Real property held in trust will require a filing with the county recorder’s office to remove the deceased person’s name from the title.

Revocable Trust

A trust can either be revocable or irrevocable. A revocable trust contains a clause which gives it’s creator the right to dissolve the trust – this is called a “revocable living trust” or a “living trust.” An irrevocable trust does not have a clause permitting it’s creator to revoke and dissolve the trust.

Trust Purpose

The revocable living trust is typically used as a will substitute. Your estate will be probated if you created a will or die without one. Your estate will not be probated if it is held in a living trust which will includes instructions for the management and distribution of your estate upon your death. The assets placed in the living trust are not subject to the probate or estate administration. By creating a living trust, you avoid the probate of your estate, fees and administrative costs associated with probate, and you preserve your privacy. The assets or instructions included in your estate are not filed with a court and are not documents which can be obtained by the general public.

Creation & Effect

A living trust is a legal instrument that is created during your lifetime by the transfer of your assets into a trust that names you and others as beneficiaries. The trust includes instructions for the management of your estate during your lifetime and how your estate will be managed should you become unable to manage it yourself. A living trust allows you to maintain control of your assets during your lifetime and to determine how your assets are managed upon your death or incapacity.

Transfer of Assets

A living trust will require you to transfer some or all of assets into the trust. These assets can include real estate, stocks, and bank accounts, just to name a few. You do not loose control of your assets upon a transfer and you do not subject yourself to federal gift, estate, or income tax consequences. You are still considered the owner for tax purposes even though your assets are held in the name of a living trust.

Creator’s Death

When you die your co-trustee or successor trustee will carry out the instructions that were set forth in your trust and will distribute the assets held in trust to the named beneficiaries. Beneficiaries can be people and/or organizations. Upon distribution, the assets held in your living trust, will be subject to federal and state taxation. However, there are provisions which can be added to your living trust to help reduce and possibly eliminate taxes, depending on the size of your estate.

Probate

A deceased person’s estate is handled by a Probate Court unless the person created a trust, regardless if the deceased person executed a will. Probate can be either testate, the deceased person created a valid will, or intestate, the deceased person passed without leaving a will. The process begins with the filing of a probate petition with the probate court.

• • The Executor or Executrix – the person who manages the estate when the deceased person left a will.

  • Administrator – the person who manages the estate when there is not will or when a will does not name an executor.

  • Personal Representative – the person who is also known as the executor or the administrator and who must file with the court an inventory of all the assets and liabilities of the estate that are covered by the probate. Creditors are paid after a final accounting and the remainder or the estate is distributed to the beneficiaries.

  • Bond – must be posted by the personal representative unless this requirement is waived in a will that designated the personal representative or by a writing by all interested parties.

  • Probate referee – appraises the assets of the estate and settles disputes related to the estate.

Intestacy

The deceased person did not leave a will or a trust for the managing of their estate or the distribution of their assets. The laws of intestate succession are used to determine who will inherit the estate and distribution under these laws is determined by which family members survived the decedent’s death:

• • If the decedent leaves only a surviving spouse, then the surviving spouse receives all community property and all of the decedent’s separate property.

  • If the decedent leaves a child or issue of a deceased child, the surviving spouse receives only one-half of decedent’s separate property.

  • If the decedent leaves a parent or issue of a deceased parent, the surviving spouse receives only one-half of decedent’s separate property.

  • If the decedent leaves two or more children, two or more issues of deceased children, or any combination thereof, the surviving spouse receives only one-third of the decedent’s separate property.

Real Property

A surviving spouse who gains an entire interest in real property may file a spousal petition to cause a transfer of the title to that property into their name alone. The petition must assert how the surviving spouse gained the entire ownership which can be by a title which describes the property as being held in joint tenancy with the right of survivorship or as community property with a right of survivorship.

Probate Statutory Fees

The attorney fees are based on the gross value of the estate.

4% on the first $100,000.

3% on the next $100,000.

2% percent on the next $800,000.

1% on the next $9,000,000.

½ of 1% on the next$15,000,000.

A reasonable amount determined by a court for all amounts above $25,000,000.

Additional fees for extraordinary services.

An executor of a will is entitled to the same amount of statutory fees unless the will does prohibits the executor from taking a fee.

The probate referee is compensated by a commission of 1/10 of 1% of the total value of the appraised assets and will receive a minimum fee of $75 and a maximum fee of $10,000. The referee may all petition for higher fees if the reasonable value of their services is more.

Notice to Specific Creditors

The personal representative must give notice directly to reasonably ascertainable creditors before the later of four months after the date of issuance of the “letters” appointing the representative or 30 days after the personal representative first becomes aware of the creditor. Proof of the notice to each creditor must be filed with the Court.

Time Limits for Creditors to File Claims

Each creditor must file a claim no later than four months after issuance of the “letters” appointing the personal representative or 60 days after the date that specific notice is given to that creditor. Creditors must file their claims with the Court and serve a copy on the personal representative.

Creditor lawsuits must be commenced within one year after the date of death. This deadline can be extended if the creditor files a timely claim.

Allowance and Rejection of Claims

The personal representative must file and serve any allowance or rejection of a claim. If a claim is rejected, the creditor must bring a lawsuit in the proper court within three months of the date of service of the notice of rejection (or within three months after the claim becomes due, if that is later) or the claim is barred. If suit is brought, the plaintiff must notify the personal representative.

If the personal representative does not reject a claim within 30 days after the claim is filed, the claimant may deem the claim rejected and file a lawsuit. The estate cannot be closed while there are unresolved filed claims and creditors can wait for an eventual approval by the personal representative.