California Probate: Value of Assets

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

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.

Estate Taxes: 2011 and beyond

December 23rd, 2010

For most of 2010, several of my clients were worried that the estate tax exemption would be set at $1 million dollars with any amount in excess of $1 million being taxed at 55 percent.  Those individuals with even a $2 million dollar estate were faced with the possibility of paying a large tax bill upon their death to the federal government.  During the last few weeks in Congress, some fears have been removed concerning estate taxes while others still remain concerning the health of our economy.   Here is a summary of the actions Congress has taken concerning estate taxes for 2011 and 2012:

Estate and gift taxes. For 2011 and 2012, the top estate-tax rate falls to 35% and the exemption rises to $5 million an individual.

The bill also allows executors of 2010 estates to elect whether to use 2010 rules or 2011 rules. The choice will help heirs who would pay more as a result of the lapse of the estate tax in 2010 and a corresponding rise in capital-gains taxes.

Also for the first time, estate, gift and generation-skipping taxes will be “unified” so that one $5 million exemption per individual applies to all three.

While most of you may think that your estate will never reach $5 million and now may tune out when you hear the phrase estate planning, there are additional concerns for drafting an estate plan even for estates that do not reach the $5 million mark.   Look for my next post in 2011 for practical legal solutions for estates less than $5 million.

I wish everyone good health and prosperity in the new year!

Secrets to Estate Planning

June 17th, 2010

While many people focus on documents such as a living trust, Will, power of attorney or Advance Health Care Directive when considering an estate plan, I believe you should focus on a few more details in addition to the estate planning documents.

First, most people need a plan for their estate in addition to the estate planning documents.  Most attorneys will draft an estate plan, but the plan does not accomplish the intended goals.  A true estate plan includes writing instructions to family members on distribution of funds, ensuring that all assets are properly controlled by the living trust document and communicating financial or medical desires to family members so that true intentions are followed.  Simply drafting a Living Trust, Will, Power of Attorney or Advance Health Care Directive is typically not enough unless they are customized to your goals.

Second, your assets are not protected from probate court unless re-titled in the name of your living trust.  Again, simply drafting a living trust does not protect your assets from probate.  Unfortunately, many attorney’s do not offer the service of “funding” a living trust which means re-titling assets or changing beneficiaries to the name of your trust.  Without properly giving the living trust control over your assets, your family members may not avoid probate.

Third, some assets should not be re-titled to the name of your trust such as an IRA or 401K.  However, these assets can still be protected through a living trust but should be carefully examined and reviewed by an estate planning attorney.

Drafting an estate plan is more than just cookie cutter documents.  An estate plan, if drafted correctly, can preserve the value of your assets, avoid probate, reduce unnecessary estate taxes, ensure that your loved ones will receive what you intend them to receive, manage your estate for yourself in the event that you become disabled and can protect your privacy.   Make sure your estate plan accomplishes your goals.

Welcome to the Roseville Estate Planning Blog

June 17th, 2010

Welcome!  I hope you will find the information posted in this blog to be informative concerning estate planning and issues related to estate planning such as probate, conservatorships, durable power of attorney and Advance Health Care Directives.   Please keep in mind that the information in this blog is not legal advice, and your use of it does not create an attorney-client relationship.  Any liability that might arise from your use or reliance on this blog or any links from this blog is expressly disclaimed. This blog is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice.  My practice is limited to the State of California and my office is located in Roseville, California.

With the legal disclaimers out of the way, I hope this information is useful for you.  You can find additional information at my website