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Estate Planning

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Wills, Trusts, & More

People Without Wills or Trusts

Approximately 55 percent of American adults do not have a will or other estate plan in place. This number has stayed relatively steady during the 2000’s.

Probate Time Frame

Probating a Will can take quite a bit of time. A complicated estate may take over two years to probate, but even a simple one may take at least six months. Probate takes time because California has minimum periods of time that creditors are allowed to respond, during which the probate estate cannot be distributed.

Probate Costs:

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

An Advance Health Care Directive is not a Will that distributes your property when you die. Instead, it is a document that explains what medical care you wish to receive if you are incapacitated and gives another person power to make your healthcare decisions for you if you become incapacitated. Although the number of American adults with medical directives increased between 2004 and 2007, only 38 percent of adults have a medical directive.

Estate Taxes

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%.


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?

You do – whether your estate is large or small. Either way, you should designate someone to manage your assets and make health care and personal care decisions for you if you ever become unable to do so for yourself. If you fail to plan ahead, a judge will simply appoint someone to handle your assets and personal care. During your lifetime, this may mean the court placing you under a conservatorship whereby the court determines where you will live and you will manage your finances. After death, your assets will be distributed to your heirs according to a set of rules known as intestate succession. Contrary to popular myth, everything does not automatically go to the state if you die without a will. Your relatives, no matter how remote, and, in some cases, the relatives of your spouse will have priority in inheritance ahead of the state. Still, they may not be your choice of heirs; an estate plan gives you much greater control over who will inherit your assets after your death.

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?

A revocable living trust (also known as a revocable inter vivos trust or grantor trust) is a legal document whereby your assets are put into the trust, administered for your benefit during your lifetime and transferred to your beneficiaries when you die-thus avoiding the need to probate your estate. Most people name themselves as the trustee in charge of managing their living trust’s assets. By naming yourself as trustee, you can remain in control of the assets during your lifetime. In addition, you can revoke or change any terms of the trust at any time as long as you are still competent. In your trust agreement, you will also name a successor trustee who will take over as the trustee and manage the trust’s assets if you should ever become unable to do so. Your successor trustee would also take over the management and distribution of your assets when you die.

E. What is probate?

Probate is a court-supervised process for transferring a deceased person’s assets to the beneficiaries listed in his or her Will. Typically, the executor named in your will would start the process after your death by filing a petition in court and seeking appointment. Your executor would then take charge of your assets, pay your debts and, after receiving court approval, distribute the rest of your estate to your beneficiaries. If you were to die intestate (that is, without a will), a relative or other interested person could start the process. In such an instance, the court would appoint an administrator to handle your estate. Personal representative is another term used to describe the administrator or executor appointed to handle an estate. Probate proceedings are lengthy and costly. Probates are also public record. Your estate plan and the value of your assets will become a public record. Also, because lawyer’s fees and executor’s commissions are based on a statutory fee schedule, a probate may cost more than the management and distribution of a comparable estate under a living trust. Time can be a factor as well. A probate proceeding generally takes longer than the administration of a living trust.

F. How should I provide for my minor children?

First of all, in your will, you should nominate a guardian to supervise and care for your child (and to manage the child’s assets) until he or she is 18 years old. Under California law, a minor child (a child under age 18) would not be legally qualified to care for himself or herself if both parents were to die. Nor is a minor legally qualified to manage his or her own property. Establishing a living Trust for the benefit of your children will avoid the need for a guardianship of the estate which involves court supervision .Guardianships are costly as accountings in most cases must be submitted to the court for court approval. You also might consider transferring assets to a custodian account under the California Uniform Transfers to Minors Act to be held for the child until he or she reaches age 18, 21 or 25. You can also set up a 529 investment plan to provide for your children’s education.

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.

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