What is Probate?

Probate is the first step in administering the estate of a loved one who died either with a will (testate) or without a will (intestate). If your loved one left a will, the court will determine if the will is valid and appoint the person named in the will as the executor of the estate. If your loved one did not leave a will, the court will appoint an administrator of the estate and determine who are the heirs of the estate.

If you are the executor or appointed as administrator of a loved one’s estate you have many responsibilities and duties. First, you have the fiduciary duty to preserve the assets of the estate. The creditors of the decedent must be notified. Heirs notified and given a chance to object. The assets of the decedent must be located and brought together.  The taxes and bills must be paid including funeral and other final expenses. Assets need to be retitled.

Only after all the steps are completed then the court must be notified, and a petition can be filed to close and distribute the estate.

What is Intestacy?

Intestacy is where someone dies without a will or trust. In this case, the court will decide how your assets are distributed. This is covered under California Probate code 6400. Generally, it works like this; if married then the spouse gets ½ the community property share. The other ½ is distributed 100% to the spouse if there are no children or parents. If there are children or parents, then they will be entitled to part of the decedent’s estate. The surviving spouse could end up with as little as 1/3 of the other half. The surviving spouse could end up having her in-laws own part of the family home.

If there is no spouse then the estate will go down to the children, if there are no children, then it goes up to the parents. If the parents are passed away then to the brothers and sisters. If no immediate family it can be distributed to cousins and even more distant relatives. If there are no relatives found it will escheat to the state. It stays with the state indefinitely until claimed. California, unlike other states, does not have a deadline in claiming.

What is a will?

A will is a legal document that states your final wishes to be carried out after your death. In California, there are several types of wills.

First is the holographic will. This will have the testamentary provisions of the will handwritten and signed by the testator (the person who makes the will). Often called a handwritten will. It does not need to be witnessed.

Second it the Statutory Will. The California Bar offers a statutory will that you can fill in the blanks. This Will needs to be signed by the testator and two disinterested witnesses.

Lastly is the attorney prepared Will. This will can include important provisions such as who will be the guardian of your children if something should happen to you as well as distributing your life savings.

There are considerations to look at when you decide to do a will. First, a Will needs to be probated. Probate can be expensive. In California, the fee for probate is written in the probate code. It is 4% for the first $100,000, 3% for the next $100,000, 2% for the next $800,000 and 1% of the next $9,000,000.

As an example, if you had a home worth $350,000, some bank accounts with another $200,000 and a couple of cars and furniture your estate could be worth $600,000. Probate fees do not take in consideration if you owe any money on these items. The probate fee for a $600,000 estate would be $15,000 for attorney fees and another $15,000 for Executor fees for a total of $30,000 in costs. Further, if the home needs to be sold or there are other complications in administrating the estate the attorney can ask for additional “extraordinary fees” above the statutory probate fees.

Secondly, they are public. A will must be lodged with the court making it a public record. Anyone can go and look at and read the will.

A will is also very basic and does not allow you to provide properly for minors, assist special needs family members. It does not provide protection for blended families.

What is a Trust

A Trust is an instrument that can be used to pass on assets without having to probate the assets. It can also provide a more structured way to pass on assets to children.  A Trust can be distributed the money at a certain age or just given portions of the money in installments.

A trust can also protect family members that may be receiving medical or other government benefits by setting up a special needs trust that will give them money to help with non-covered care but still leave them eligible for their benefits.

It can also provide for the Trustor (the person making the trust) in case of their disability or incapacity.

A Trust can be structured to protect blended families. It can be used to protect assets from creditors and decrease tax burdens for the wealthy. They are very flexible and if properly written be the key part of an estate plan.

What else is part of a comprehensive estate plan?

Power of Attorney – springing power

Health Care Directive – how do you want to be taken care of if you are in the hospital.

Health Insurance Portability and Accountability Act (HIPAA) – Allows your medical information to be shared with a loved one.

Final Disposition Instructions – lets your loved ones know your wishes when you die.

For domestic partners or unmarried couples living together – Health Care Facility Visitation Authorization – allows the partner to visit you in the hospital

Who should have an estate plan?

If you have children.

If you have over $125,000 in assets.

If you are in a long-term unmarried relationship.

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