People Without Wills or Trusts
Probate Time Frame
California statutory law sets the amount of probate Attorney’s fees and Executor’s commissions based on the gross value of the assets passing through probate. Assets which typically do not pass through probate would include: joint tenancy, life insurance, TOD (transfer on death) accounts, 401k’s, pension plans, 529 plans (college educational investment accounts). The statutory formula per Probate Code section 10800 for setting the amount of attorney’s fees and executor commissions is:
- The first $100,000 @4% $4,000
- The next $100,000 @3% $3,000
- The next $800,000 @2% $16,000
- The next $9,000,000 @1% $90,000
A typical probate estate consisting a residential home, 2 automobiles, an investment account and miscellaneous furniture and furnishings worth a gross value of $800,000 would result in attorney’s fees in the sum of $19,000; executor’s commissions in the sum of $19,000; and court and other miscellaneous costs of approximately $2,000 for an estimated minimum cost to the estate of $40,000.
Advance Health Care Directive
The federal estate tax exemption for 2019 is $11.4 Million Dollars per individual which means that a federal estate tax is imposed on assets exceeding $11.4 Million Dollars at the rate of 40%.
YOU CAN AVOID AVOID PROBATE, ESTATE TAXES,GUARDIANSHIPS & CONSERVATORSHIPS THROUGH PROPER ESTATE PLANNING:
A. Estate planning is a process.
Many people mistakenly think that estate planning only involves the writing of a Will. Estate planning, however, can also involve financial, tax, medical and business planning. A Will is only a small part of the planning process. You will need other documents as well to fully address your estate planning needs. A proper estate plan involves a Living Trust, an Advance Health Care Directive, a Durable Power of Attorney, a Pour-Over Will, and a HIPAA release, as well as other financial planning for you and your family. Through estate planning, you can determine:
1. How and by whom your assets will be managed for your benefit during your lifetime if you ever become unable to manage them yourself thereby avoiding the need for a conservatorship of your estate.
2. How, to whom, and when your assets will be distributed after your death.
3. How and by whom your personal care will be managed and how health care decisions will be made during your lifetime if you become unable to care for yourself thereby avoiding the need for a conservatorship of the person.
4. How, by whom, and when your assets will be distributed for the benefit of your minor children, thereby potentially avoiding the need for a guardianship of the estate of a minor.
There are many issues to consider in creating an estate plan. First of all, ask yourself the following questions:
1. What are my assets and what is their approximate value?
2. Whom do I want to receive those assets-and when?
3. Who should manage those assets if I cannot-either during my lifetime or after my death?
4. Who should be responsible for taking care of my minor children if I become unable to care for them myself?
5. Who should make decisions on my behalf concerning my care and welfare if I become unable to care for myself?
6. What do I want done with my remains after I die and where would I want them buried, scattered or otherwise laid to rest?
B. Who needs estate planning?
C. What is a Will?
A Will is a legal document which:
A. Names individuals (or charitable organizations) who will receive your assets after your death.
B. Nominates an executor who will be appointed and supervised by the probate court to manage your estate; pay your debts, expenses and taxes; and distribute your estate according to the instructions in your will.
C. Nominates guardians for your minor children.
D. What is a revocable living trust?
E. What is probate?
F. How should I provide for my minor children?
G. Will my beneficiaries' inheritance be taxed?
It depends on the circumstances. Assets left to your spouse (if he or she is a U.S. citizen) or any charitable organization will not be subject to estate tax. Assets left to anyone else-even your children-will be taxed if that portion of the estate totals more than $11.4 million. For estates that approach or exceed these amounts, significant estate taxes can be saved by proper estate planning before your death or, for couples, before one of you dies. In addition, while you are living, you can give away as much as $15,000 a year to each of your children or to anyone else without incurring gift tax. You could also pay your grandchild’s college tuition or medical insurance premiums (or anyone’s tuition or medical bills, for that matter) free of gift tax-but only if the payments are made directly to the educational institution or medical provider.
H. Are there other ways of leaving property?
Yes. Certain kinds of assets are transferred directly to the named beneficiaries. Such assets include:
Life insurance proceeds.
Qualified or non-qualified retirement plans, including 401(k) plans and IRAs.
Certain “trustee” bank accounts.
Transfer on death (or TOD) securities accounts.
Pay on death (or POD) assets, a common title on U.S. savings bonds.
529 college savings accounts
I. What happens if I become unable to care for myself?
If you set up a living trust, it is the trustee who will provide the necessary management of the assets held in trust. Additionally, by setting up a durable power of attorney for property management your agent will have the power to deal with assets and manage your financial affairs. The power of attorney can be set up so that it only becomes effective upon your incapacity, otherwise known as a Springing Durable Power of Attorney.With an Advance Health Care Directive, you can also designate someone to make health care decisions for you in the event that you become unable to do so for yourself. In addition, this legal document can contain your wishes concerning such matters as life-sustaining treatment and other health care issues and instructions concerning organ donation, disposition of remains and your funeral. If you become unable to make sound decisions or care for yourself and you have not made any such arrangements in advance, a court could appoint a court-supervised conservator to manage your affairs and be responsible for your care. Conservatorships can also be more cumbersome, expensive and time consuming than the appointment of attorneys-in-fact under powers of attorney.
For a review of your estate planning, please contact Susan Borquez for your free consultation at (805) 482-3738.