A basic Estate Plan consists of a Will, a Durable Power of Attorney and an Advance Health Care Directive. For clients who own real property, a basic Estate Plan generally also includes a Trust. The Estate Planning process aims to move assets out of your Probate estate, e.g., by utilizing beneficiary designations and by transferring ownership of real property and other assets into your trust. This allows for distribution of assets directly to your named beneficiaries without the need for Probate.
No matter your stage of life, a well-drafted Estate Plan provides important benefits:
CREATES A SET OF INSTRUCTIONS: Your Estate Plan is a formal declaration of your wishes. What do you want to happen should you be unable to manage your own affairs? Who will receive your assets after your death? Who do you want to serve as guardian for your minor children? Estate Plans also address more complex situations such as second marriages, charitable giving and protecting the financial well-being of minor children and children with special needs. For example, Contingent Trusts can be used to pay for a beneficiary’s health, education, maintenance and support while delaying outright distribution of assets until the age you select, e.g., 25/30/35.
AVOIDS PROBATE: Probate is a court process required when a person dies with a “probatable estate”. Probate is required: 1) when a person dies without a Will (intestate); 2) when a person dies with a Will, but without a Trust; and, 3) when a person dies with a Will and a Trust but still owns assets subject to Probate (e.g., real property that was never transferred to the Trust). Probate adds time, complexity and cost to Estate Administration. The personal representative (often the Executor named in the Will) must file paperwork with the Court, attend court hearings (or hire an attorney to do so) and obtain court orders before taking action to manage your affairs. Probate can also be quite costly; fees are mandated by law. Under current (2017) law, an estate valued at $1,000,000 would generate statutory legal fees of $15,000; legal fees would increase to $25,000 for an estate valued at $2,000,000. The legal representative (Executor) is entitled to the same fees, potentially doubling the cost.
AVOIDS ESTATE TAXES: Historically, Trusts were used not only to avoid Probate but also to reduce estate tax liability. Changes in the law such as the unlimited marital deduction and “portability” have greatly reduced the need for special trust provisions solely to avoid estate taxes. Given the current exemption rate ($5.498 million per person in 2017), married couples are able to protect almost $11 million in assets from estate tax. As a result, under current law, less than one-percent (1%) of Americans pay Estate Tax. But for those with high net worth, a proper estate plan addressing potential estate tax liability remains crucial.
KDK Legal offers reasonably priced Estate Planning packages and preparation of individual Estate Planning documents, together with advice on how to best address issues of ownership and distribution of all types of assets.
ESTATE ADMINISTRATION: Estate Administration is the process of collecting and managing one’s estate. When a person dies, all of his or her possessions – real estate, money, stocks, personal belongings, etc. become part of his or her Estate. Estate Administration involves gathering the assets of the estate, paying the decedent’s debts and distributing the remaining assets pursuant to the decedent’s Estate Plan, or where no plan exists, pursuant to California state law. The Probate Process is overseen by the Probate Division of the State Court system and governed by the California Probate Code.
PROBATE PROCEEDINGS: (see other tab) describes the Estate Administration process for individuals who do not have a Will, or who have a Will but no Trust in place or where there are “Probatable Assets” that were not transferred into the Trust.
TRUST ADMINISTRATION: For those who do have a properly funded Trust and have taken other necessary steps to avoid Probate, it is possible to administer an Estate without involving the Court. In such cases, after the death of one or both of the Trustors (the people who created the Trust), the Succesor Trustee lodges the Will with the Court, provides proper notification to Trust beneficiaries, identfies and gathers the Trust assets, inventories and appraises the assets, pays valid debts, satisfies tax liabilities, prepares an accounting and, finally, distributes the assets per the terms of the Trust.
The Trust Administration process can be complicated and confusing and may seem overwhelming for the person tasked with serving as Successor Trustee. KDK Legal guides Successor Trustees through the Trust Administration process, assists clients in meeting all legal requirements and works hard to avoid and/or minimize conflict among beneficiaries.
PROBATE: A legal proceeding required to settle a deceased person’s estate when a person dies without a Will (intestate), with a Will but no Trust, or with a Will and a Trust but also with “Probatable Assets”. Under certain circumstances, e.g., when a person’s spouse dies, or when the total “Probatable Assets” are under the Exclusion Amount ($150,000 in 2017), a simplified Probate Proceeding may be available. In other cases, a full Probate Proceeding is generally required. Usually, the Executor lodges the Will with the Court and files a Petition for Probate. However, other interested parties may also initiate the Probate Proceeding. Absent a contest, the Will is admitted to Probate and, often, the Executor is named as the “Personal Representative”. The process is similar to Trust Administration in that it involves proper notification to beneficiaries, identfication and marshalling of assets, an inventory and appraisal, payment of valid debts, satisfaction of tax liabilities, preparation of an accounting and, finally, distribution of assets. The primary difference is that all of these activities take place under Court supervision in a public forum. All court filings are public documents. Probate Proceedings are also subject to statutory fees for both the Personal Representative and his or her attorney.
Probate Proceedings require strict adherence to the law, can be complicated and can take up to a year or more to bring to a close. KDK Legal guides the Personal Representative through the Probate process by assisting clients with legal requirements, handling Court filings and appearing in Court on behalf of clients. KDK Legal also works hard to avoid and/or minimize conflict among potential beneficiaries.