Archive for the ‘Estate Planning’ Category

California Probate: Value of Assets

Tuesday, October 9th, 2012

What is the value of your estate?  Most people consider an estate, millions of dollars or the large home only celebrities can afford.  In reality, people with fairly modest homes and money in the bank have an “estate’ large enough to cause their assets to be susceptible to the rules of Probate Court.   In California a new law was passed in 2012 providing a new minimum value of assets to warrant formal Probate.  The law changed the minimum value of $100,000 to $150,000.   This means that if the total value of your assets is less than $150,000 your estate does not need to go through formal Probate involving the Court.  Instead, assets can be transferred informally by creating an Affidavit.  However, if your assets are valued at $150,000 or greater, a formal Probate may be required to transfer assets upon death.

Let’s say Mom and Dad, own their home with a mortgage amount of $250,000 but if the home was sold, it would be valued at $350,000.  Some may think that the total asset is valued at $100,000.  For purposes of Probate, we use the fair market value or $350,000 in our example.   Assuming Mom and Dad were to die in an accident without an estate plan, the home valued at $350,000 would cause a formal Probate since it exceeds the $150,000 rule.  The ordinary fees allowed to the attorney and personal representative handling the Probate for a single home valued at $350,000 would be $10,000.  Extraordinary fees and other costs may apply in order to finalize the Probate.

Let’s assume that Mom and Dad also had the following additional assets:  $5,000 in a checking account, $50,000 in savings, $100,000 held in a Certificate of Deposit and 2 cars valued at $30,000.  With these additional assets the total estate would be valued at $535,000.  The ordinary fees to the attorney and personal representative handling the Probate are now $13,700.  Extraordinary fees and other costs may apply in order to finalize the Probate.

Whether your estate is valued at $150,000 to $10 million dollars, a  properly drafted estate plan can avoid formal Probate allowing peace of mind knowing a plan is in place should a tragedy occur.

Do-it-yourself Estate Planning

Tuesday, January 25th, 2011

Several clients have had do-it-yourself estate plans which included trusts that were intended to avoid probate.  Inevitably, each one has failed to accomplish this goal and has landed the family in the middle of probate court.  The problem with the do-it-yourself estate plan is that the formalities of creating the plan are not followed.  Most people are lured by the inexpensive software or package deal that is sold to hundreds of people with the false sense of security that the mere document is all that is needed.  Unfortunately, these people have wasted their money on a product that doesn’t accomplish their goals and end up having to pay for attorney fees and costs in probate.

Although executing an estate plan provides you with an orderly disposition of your estate, you will not avoid probate (assuming assets over $100,000) unless and until the trust obtains legal title to your property. This procedure is called “funding” the trust and requires transferring title to you as trustee. Title to assets you acquire in the future should also be put in the trust’s name.  If you take title to property in your own name at any time without subjecting it to the trust, the trust will not affect that property and may still be subject to probate even if you have a living trust.  During the initial creation of your estate plan, we will help you “fund” your living trust at no additional cost.

By having a well-drafted estate plan in place, you can feel confident that your estate will be distributed the way that you intended, minimizing estate taxes and saving your family the headache and heartache of going through a lengthy probate process.