Estate Planning & Probate Topics
What Is A "Living Trust?"
A revocable living trust is a device for holding property and simplifying the transfer of property at death. Property is transferred into the trust and is held and managed by the trustee. The trust can be revoked or amended at any time by the person who established it.
Persons who establish a trust are called the "trustors" or "settlors." Generally, with a revocable living trust, the trustors will name themselves as trustees and name successor trustees who will manage the trust assets when the trustors are no longer able to do so themselves or transfer the assets to the intended beneficiaries upon the death of the trustors.
The trustee is required by law to manage and administer the trust only for the benefit of the beneficiary. Until the death of the trustor, the trustor and trustees are commonly the same person. At the death of the trustor, or the surviving spouse if the trustors are a married couple, the successor trustee may continue to administer the trust for minors, young adult children, or disabled children of the trustor or other designated persons or entities.
A revocable trust acts in place of a will by providing for the disposition of the property held in the trust when the trustors have died. The most popular advantage of a revocable living trust is that the property held in the trust avoids formal probate.
What Is "Probate?"
Probate is a legal process of the probate court for receiving claims, ordering the payment of said claims and transferring the decedent's property, either to his or her heirs at law or the persons named in his or her will. If the decedent had a valid will, the will determines which property is to be received by which persons or entities. If there is no valid will, the decedent's property passes to heirs ascertained by the laws of intestate succession.
In California, intestate succession is determined by the California legislature and is set forth in the California Probate Code. It is used to determine which relatives shall receive the decedent's property if the decedent does not have a valid will. The decedent has no control over who will inherit and no one, other than the persons listed in the Probate Code, can inherit.
Avoiding Probate Fees
One of the main motivations for avoiding the probate process is to avoid probate fees. Probate involves many duties, including the following: taking control of the estate of a person who is deceased; determining what property exists and which debts to pay; deciding what assets should be sold or retained; determining the existence and validity of the decedent's last will; and identifying and locating heirs.
California has a statutory fee schedule set forth in the Probate Code for the attorneys and executors representing the estate. The schedule reflects the difficulty of tasks involved in the probate process. The fees are based on "ordinary" estate administration activities and are calculated using the gross amount of the estate, e.g., the full market value of the assets of the estate. Loans or encumbrances are not considered in calculating these fees.
Consider, for example, ab estate consisting primarily of the decedent's home. If the house is worth $100,000 the statutory probate fees would be $4,000 for the attorney and $4,000 for the executor, regardless of the amount of the mortgage. If the house is worth $200,000 the statutory fees would be $7,000 each for the attorney and the executor.
Top 10 Reasons to Review Your Existing Estate Planning Documents
If you do not already have estate planning documents, you should. Even an 18 year old needs a health care directive. Review this list to determine if you should update your estate planning documents.
- Your circumstancesmay have changed
- The law may have changed and your documents are now out of date
- Your documents are unnecessarily complicated or are too basic for your situation
- Your beneficiaries cannot handle money
- You cannot find your documents
- Your assets are not titled in the name of the trust
- You are married and your spouse just died
- Your fiduciaries are no longer appropriate or able to serve
- Your durable power of attorney was executed more than six years ago
- You need an advanced health care directive and / or a HIPAA Release
What Estate Planning Documents Do I Need?
The types of estate planning documents you need depends on your assets, how you want to distribute your assets, your living situation, and your family situation. The typical estate plan includes the following documents:
- A Revocable Living Trust
- Will or Pourover Will
- Durable Power of Attorney
- Advanced Healthcare Directive
- HIPAA Release
If you have special circumstances, our attorneys might recommend one or more of the following documents:
- An Irrevocable Trust
- A Special Needs Trust