February 19

I Have a Will, Why Do I Need a Trust?

I Have a Will, Why Do I Need a Trust?
You have a last will and testament. Your will directs that, at your passing, your spouse will inherit everything you own. It further directs that if your spouse dies before you, your children will inherit everything. Why do you need a Trust?
The most apparent reasons are time and money. The first reason why you need a trust is that a will does not avoid court; a will gives instructions to the court. A California probate estate administration is a lengthy process. It is very unusual to complete the process in less than a year. Your beneficiaries must wait for a court order before distributions may be made to them. In addition, attorney and executor fees are set by statute in California. An estate valued at $1,000,000, would incur attorney and executor fees totaling at least $46,000. If you are house-rich and cash-poor, how will your beneficiaries meet these obligations? If you have a trust, the attorney’s fees and trustee’s fees may be substantially lower and distributions may be made to your beneficiaries more quickly and without court supervision.
The second reason you want a trust is that the last will and testament only comes into play after your death. If you become incapacitated, a trust allows the Trustee that you have chosen to quickly and easily step in and manage your trust assets for your benefit. This may help you avoid a costly and very public conservatorship proceeding. A conservatorship is put into place when a person can no longer manage their own affairs and no mechanism is currently in place, i.e. a trust and/or durable power of attorney, to allow someone else to step in and help you. Conservatorships are heavily supervised by the court and thus the attorney’s fees may be quite high. It is expensive to establish the conservatorship and annual reporting requirements incur additional fees every year until your death.
Both a will and a trust will direct distribution of your assets after your death. However, a well-drafted trust will also enable someone to manage your assets during your lifetime if you become incapacitated. Finally, a trust may save substantial time and money in the administration of your estate after you are gone.
Call an estate planning attorney today and make your life and death easier.

January 15

Aretha Should Have Had a Plan

On Thursday, August 16, 2018 the “Queen of Soul,” Aretha Franklin died in her Detroit home. She was seventy-six years old. Aretha battled pancreatic cancer nearly eight years before succumbing. She owned an estate worth an estimated eighty million dollars. And yet, Aretha didn’t have a will or trust.

What is more surprising is that Aretha is just one of many famous musicians to die without planning. Jimi Hendrix, Bob Marley, Kurt Cobain, Tupac Shakur, Sonny Bono, Barry White, Amy Winehouse, Nate Dogg, Prince and Michael Jackson all died without planning. As a result, all their estates faced complications they otherwise would not have.

For example, if Aretha passed in California, Aretha’s estate would take a hit of at least eight hundred thousand dollars; four hundred thousand dollars in attorney fees – and another four hundred thousand dollars to an executor approved by the court. (And that doesn’t include the taxes her heirs will no doubt pay on her multiple properties).

However, Aretha could have protected her estate with an estate plan. The plan would have cost her a lot less! More importantly perhaps, it would have allowed Aretha (not the state) to determine how and to whom her estate is distributed. It would also protect her children from possible family squabbles – freeing them to properly grieve.

Of course, the average person doesn’t have an estate as large as Aretha’s. Yet, with proper planning the average person can protect whatever estate they have for a fraction of the costs their estate will pay in taxes and legal fees if they opt out of planning. The real benefit of planning for any person is making the process easy and efficient for his or her loved ones.

For more information about wills, trust or other estate planning documents, please contact a qualified estate planning attorney.

December 13

Who Gets What?

Who Gets What?
Who inherits when someone dies without a will in California? Many people are under the impression that the State is first in line to receive our assets but actually state law sets forth a long list of people who will inherit before the State gets their sticky hands in our pie.
For most people, their primary asset is their home. When someone dies without a will, there are different rules that govern the distribution of real property versus other types of property such as cash or brokerage accounts. For illustrative purposes, we will restrict our discussion to distribution of real property.
We will assume your spouse died less than 15 years before you, neither of you had any children, both your parents and your spouse’s parents are deceased, neither you nor your spouse had any siblings, all of the uncles and aunts on both sides are deceased as are the first cousins on both sides – voila! – you and your spouse’s first cousins once removed would inherit your real property. Do you even know the names of your first cousins once removed, let alone your spouse’s? Do you want someone you don’t know to inherit your most valuable asset?
This scenario may be avoided by making your wishes known in a will or a trust. If you don’t have any family or friends that you would like to name as your beneficiaries, you may choose to name a charitable institution to receive your assets. Most of us have a cause that is near and dear to our hearts, whether it is children, animals, libraries, churches, hospitals, the arts, nature, or any of a number of other possibilities. Your bequest may continue to make a positive impact in people’s lives long after you are gone.
Call an estate planning attorney today and make your wishes known!

November 12

How You Hold Title Matters

How You Hold Title Matters

There was a deed somewhere in that mountain of paperwork you signed when you purchased your home. You may not have paid much attention to how you hold title on the deed, other than to verify your name is spelled correctly, but the designation that follows your name is very important. It determines how the property is transferred upon your death and it may also have significant income tax consequences for your survivors.

Some options in California are:

Sole name. In order to transfer the property at your death, a probate administration must be initiated with the Superior Court and a Personal Representative is appointed. The Court supervises the entire process. Distribution is made to the beneficiaries, if there was a will, or to the Decedent’s heirs if there wasn’t a will, by means of an order from the Court. Probate is a costly and time-consuming process.

Joint Tenancy. You may hold property with your spouse or another person as joint tenants. Joint tenancy assumes each party owns an equal interest in the property. At the death of a joint tenant, the surviving tenant merely files an Affidavit with the County Recorder and the property passes to the surviving tenant. Probate is avoided but a major drawback of joint tenancy is the loss of a step-up in basis. Holding property in joint tenancy may result in a higher capital gains tax upon the death of the surviving joint tenant than other forms of ownership.

Tenants-in-Common. Two or more people may hold title to equal or unequal interests in property. Upon the death of a tenant, his or her share will pass according to the provisions of a will or trust, or according to the laws of intestacy if the decedent died without a will or trust. If no trust was in place, a court probate proceeding is necessary. However, the step up in basis may be preserved.

Community Property. At the death of the first spouse, the survivor files a spousal property petition with the Superior Court. An order is issued by the Court and title passes to the surviving spouse. This process is not usually as involved or as costly as a probate administration; however, it is still time-consuming and may incur significant attorney’s fees. The step-up in basis may be preserved.

Community Property with Right of Survivorship. This is a relatively new way for married couples, or registered domestic partners, to take title in California. Upon the death of the first spouse or partner, the survivor files an Affidavit with the County Recorder and title passes to the surviving spouse. No court proceeding is necessary and the step-up in basis may be preserved.

Trustee(s) of a Trust. If you and/or your spouse established a Trust during your lifetime, and your real property was transferred into that Trust, the Successor Trustee files an Affidavit with the County Recorder upon the death of the original Trustee. The property is distributed to the beneficiaries named in the Trust Agreement. No court proceeding is necessary and the step-up in basis may be preserved.

So, pull that deed out of your file cabinet and take a look at it. Then call your estate planning attorney to determine if any change needs to be made to accomplish your goals.

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