Frequently Asked Questions
Estate Planning
When should I create or revise my estate plan?
Typically, significant life events trigger a need for creating or revising your estate plan, such as:
Marriage or the dissolution of a marriage.
Birth, adoption, or guardianship of children.
Purchasing a house or other real property.
Receiving an inheritance or other large gift of money or property.
Establishing a new business, buying into an existing business, or selling a business.
Adding a companion animal with a long life-span to your household.
Preparing for retirement.
Downsizing or moving to an assisted living facility.
Receiving a life-changing medical diagnosis.
Death of a spouse.
What does estate planning consist of?
A comprehensive estate plan consists of the following documents, at a minimum:
Will.
Trust, if appropriate (and instructions about transferring assets to the trust).
Power of Attorney for non-trust assets.
Advance Health Care Directive.
HIPAA Authorization.
Deed(s) transferring real property to the trust, where appropriate.
Assignments of stock, partnership interests, or property to the trust, where appropriate.
How do I know if I need a trust?
Trusts are useful for a number of reasons:
Trusts can be effective both while you are alive and after your death (wills are only effective after death).
Trusts are private; they do not have to be filed with the court or overseen by the court (wills must be overseen by the court in the probate process, with the proceedings becoming a matter of public record).
Trusts can prevent the need for a conservatorship, if you become incapacitated.
Trusts can prevent the need for probate, which may save significant time and money administering the estate after death.
Trusts can provide a mechanism for postponing and/or reducing the payment of estate taxes if your estate is large enough (for estates worth $11.7 million for an individual/$23.4 million for a married couple when death occurs in 2021)
Trusts can also provide the flexibility to determine, at the time of a spouse’s death and based on the value of the estate, whether a separate sub-trust should be established to postpone the payment of estate taxes.
Trusts can provide a means of protecting assets for children of a previous marriage if the parent is remarried.
Special Needs Trusts can be a vehicle for holding assets for individuals with specific disabilities, without jeopardizing government assistance.
I have a trust, so I don’t need a will, right?
Even with a trust, you still need a will. It is a special type of will, called a “pour-over will,” which serves as an important backup to your trust.
What if I don’t need a trust?
You should still have a will, a financial power of attorney, and an advance health care directive, as well as deeds for real property titled appropriately.
Why do I need a will?
You can name anyone you choose to be your executor, co-executor, and backup executors, rather than relying on the law to determine who they will be if you haven’t named any yourself.
You can name specific beneficiaries in equal or non-equal proportions.
You can designate which items of your property will go to specific beneficiaries.
You can designate how much money, if any, will go to specific beneficiaries.
If you have a trust, you need a “pour-over” will as an important backup to confirm that all assets you intend to be held in the trust are, in fact, legally considered trust assets after your death.
Why do I need a financial power of attorney?
You can name a person or persons to be your agent, while you are alive, to perform financial transactions for you when necessary.
You can specify whether one or more of your agents need to act together or can act separately.
If you have a trust, you can enable your agent under the power of attorney to make administrative changes to your trust, without changing the beneficiaries.
You can include information regarding your preferences about who to name as a conservator, if a conservatorship becomes necessary.
Why do I need an Advance Health Care Directive?
You can specify who should be consulted and who will be allowed to make decisions about your medical care if you are cannot decide for yourself, which is particularly important if you would like to name someone who is not next-of-kin.
You can specify how much care you would like to receive in certain situations, such as when brain death has occurred or a terminal illness makes recovery impossible.
You can designate your preferences about organ donation, including specifics about where organs should or should not be donated.
The agent named in your health care directive will also be the person who can take possession of, or designate the disposition of, your body after death.
Trust Administration
What is trust administration?
Trust administration is the process of maintaining one or more ongoing trusts for specific beneficiaries, or closing out and fully distributing a trust after the settlor’s death. Some trust administration is usually required when the first spouse in a married couple dies, although it may be minimal.
What does trust administration consist of?
Trust administration may consist of some or all of the following:
Sending required notices to heirs and beneficiaries.
Valuing all assets as of the date-of-death.
Determining whether estate taxes will be due.
Determining whether a federal Estate Tax Return should be filed, even if no taxes are due, to preserve available tax exemptions for a spouse’s estate.
Obtaining a tax identification number.
Recording Affidavits of Death of Trustee for real property.
Notifying County Assessor(s) of Change(s) in Ownership or exemption from Change(s) in Ownership within the required time period, as well as submitting Claim for Reassessment Exclusion(s) where applicable.
Filing federal and state fiduciary income tax returns.
Funding subtrusts, where appropriate.
Providing trust accountings to beneficiaries.
Distributing assets to beneficiaries as directed by the trust.
How much does trust administration cost?
Like probate, trust administration has both attorney’s fees and trustee’s fees, in addition to miscellaneous fees. However, the attorney and executor fees are not specified by law in trust administration, as they are in probate.
The trust document itself usually governs the trustee’s fees, and they are usually less than the executor’s fees, particularly for the first $1 million in assets. The attorney’s trust administration fees are set by the attorney, and the attorney will usually base them on the complexity of the trust administration.
So, rather than being a “one-size-fits-all” fee as required in probate, the fee will likely vary between estates. In addition, like probate, there are miscellaneous fees such as appraiser, realtor, and accountant fees, but there are usually not court fees associated with the trust.
Probate
What is probate?
Probate is the court-supervised process that occurs when a person dies with assets controlled by a will, or if someone dies without a will.
What does probate consist of?
Probate is a complex and highly regulated process of filing documents with the court; scheduling hearings; providing notices to creditors, heirs, beneficiaries, and government agencies; paying debts; and distributing the remaining assets according to the decedent’s instructions and with the court’s approval.
Important deadlines occur at various times, and missing deadlines can have serious negative consequences.
Probate usually takes a year or more to complete, and in some California counties, 18 to 24 months is standard.
Many documents, such as those filed with the court, must be in a specific format, and even simple mistakes may result in the court rejecting the forms and prolonging the process.
What happens if the decedent doesn’t have a will?
The court will appoint an executor (also known as a personal representative), which means you have lost control of the choice.
The court will distribute your assets as the law specifies, rather than as you intend. Without a full understanding of the applicable (intestate) law, you may be depriving certain members of your family of an inheritance, or limiting the amount they inherit.
One common misconception is that your entire estate goes to your spouse if you are married. This may or may not be true, depending on your circumstances.
How much does probate cost?
These fees are the same for both the executor and the attorney, and are specified by law as follows:
4% of the first $100,000
3% of the second $100,000
2% of the next $800,000
1% of the next $9 million
0.5% of the next 15 million
So, in a situation where the only probate asset is a house worth $1 million, the executor’s fee would be $23,000 and the attorney’s fee would be $23,000, for a total of $46,000 in fees. For comparison, the trustee’s fee is usually 1% of the value of the assets for trust administration, which would be $10,000 in this case.
In a situation where the probate estate is worth $200,000, the executor’s fee would be $7,000 and the attorney’s fee would be $7,000, for a total of $14,000, plus the additional fees. For trust administration, the trustee’s fee could be around $2,000.
In addition, there are court filing fees, notice publication fees, and other miscellaneous fees, such as appraiser, realtor, and accountant fees. For comparison, trust administration has similar miscellaneous fees, such as appraiser, realtor, and accountant fees.
Is it always a good idea to avoid probate?
Not necessarily. It depends on your particular situation. If you believe it would be a good idea for the court to oversee the distribution of your assets, then you may not want to avoid probate. In this case, simple wills may be the best option for you, and a trust may not be useful, or your will could set up a trust that comes into existence at your death (a testamentary trust). If you have assets that will be liquidated at your death but do not have the current resources available to have an attorney prepare an estate plan that includes a trust, simple wills may be the best option for you, as they may be significantly less expensive than having a trust prepared.