Q: What is Estate Planning?

A: Basically, Estate Planning is the ongoing process of accumulation, enjoyment, and protection of your assets during your lifetime, followed by the orderly, efficient, and cost-effective distribution of those assets to your loved ones after your death.

 

Proper Estate Planning involves aspects of Financial Planning, Tax Planning, Retirement Planning, and other disciplines.

 

 

Q: What is a Will?

A: Wills are the traditional documents used to name individuals or charities to receive your assets upon your death, and to name the Executor of your estate.  The Executor works under the supervision and control of the Probate Court to manage your estate, pay all debts, taxes, and expenses, and then ultimately distributes the remaining assets to the beneficiaries.

 

 

Q: Do I really need Estate Planning?

A: Regardless of the size of your estate, you should designate the person who, in the event of your incapacity, will have the responsibility of managing your assets and your care.  For larger estates, Estate Planning can help preserve your assets for your designated beneficiaries and reduce or postpone the amount of income and death taxes that might otherwise be due upon your death.

 

 

Q: What is "Probate"?

A: Probate is the court-supervised administration of an estate of a person who has left a Will.  Actually, even the estates of people who did not leave a Will go through Probate.

 

During Probate Court administration, an Executor will be appointed to manage the estate.  The Executor usually must post a bond as security, and then may go about the process of identifying and inventorying the estate assets, valuing them, and safeguarding them.  The Executor must also give notice to all the relatives and creditors of the deceased person (by publishing a notice in the newspaper and by direct mail) that they may submit a claim against the estate.  Finally, after all legal requirements are met, the Executor will receive permission by the court to pay all debts, taxes, and expenses, and distribute whatever is left to the beneficiaries of the Will.

 

 

 

Q: Does everyone's estate have to go through Probate?

A: No.  For estates of less than $100,000 in titled assets such as bank accounts, stock, mutual funds, credit unions, or if the only real property is valued at less than $20,000, then a Will does not have to be "probated".  Note that IRA accounts, other qualified retirement plans, and pensions, annuities, and life insurance are not subject to probate.

 

Also, there are will substitutes such as Trusts that avoid Probate altogether.

 

 

Q: Why do we hear so much about "the horrors of Probate"?

A: There are several important disadvantages of Probate.  First, since Probate is a court proceeding, everything is out in public and there is no privacy for the family.  Virtually anyone that's interested can go to the courthouse and see the court file and read the Will.  Other personal information may be found out also.

 

Second, Probate can take a long time.  Because of the many court filings, petitions, notices, appraisals, reviews, and claims, the average Probate in California is estimated at 18 months!  It's not at all uncommon to see Probates take many years to complete, if there are any complicating factors such as business interests or contesting beneficiaries.  Marilyn Monroe's estate, for example, was in Probate court for over 20 years.

 

Lastly, the legal fees for Probate attorneys and Executors is set by law, and is based upon the gross value of the Probate assets.  Typical attorney fees for an estate of $1 million dollars could be as high as $50,000.  The Executor of the estate is entitled to collect $50,000 also. 

 

 

Q: Are there any advantages to Probate?

A: Yes, two.  The main purpose of Probate is to make sure that the deceased person's assets are not stolen or misappropriated.  So in some situations it's preferable to have the estate ultimately supervised by the court. 

 

The second advantage is that after Probate is started, the estate's creditors only have 4 months to submit their claims.  If they wait longer than that, they are barred by a statute of limitations from collecting. 

 

 

Q: What is a Trust?

A: A Trust is an agreement that creates a special relationship whereby one person, called the Trustee, holds the legal title to an asset for the benefit of another person, called the beneficiary.  The person that sets up the Trust is called either the Settlor, Trustor, Creator, or Grantor.

 

Trusts can be used for many purposes such as avoiding Probate, minimizing Taxes, and providing Asset Protection.

 

 

Q: What is a Certified Specialist in Estate Planning, Trust, and Probate Law?

A: The State Bar, through the California Board of Legal Specialization, allows attorneys who have demonstrated superior proficiency to become certified as specialists in Estate Planning, Trust, and Probate law.

 

Only about 850 attorneys throughout the state are Certified Specialists in this field.  The basic requirements are:  45 hours of specialized continuing education (every 3 years); Relevant, demonstrated, experience in the field of estate planning over at least 5 years; Obtaining a passing grade on a one-day long Bar-type written examination that is administered once every 2 years; Peer review by attorneys and judges, and a background check.