The Next Generation

Occasionally clients ask, "What will a living trust do for me?" The answer is not a whole lot. But it will help your children and other beneficiaries by keeping your estate out of probate. For larger estates, a trust can also avoid the federal estate tax (I'm assuming that it is coming back some day.)

A trust, or a simpler estate plan, can make a huge difference for your children. For one thing, it can prevent your children from inheriting your estate at age 18. That's the age of adulthood in California, and if there is no estate plan, that's when young people will receive their inheritances. A living trust, or a testamentary trust included in a will, can specify that the children won't receive the bulk of their inheritances until an older age, such as 25. The trust can also make funds available for the child's education, medical expenses, and support.

Your estate plan can also nominate guardians for your children if they lose both parents before age 18. It is important that you nominate guardians to ensure that the child's adoptive parents are someone who you believe can do a good job. The person who is nominated will need to petition the court to become the guardian, and your nomination will provide helpful guidance to the court.

Is Probate Really Necessary?

I got a call a few days ago about an estate that included several joint tenancy bank accounts and one account that was in the decedent's name only. The good news was that the joint tenancy accounts avoided probate. The bad news was that account that was in the decedent's name only had a balance of $102,000. The caller knew from my web page about probate that if the probate assets in an estate total less than $100,000, no probate is required due to the small estates exception. But if the assets total more than $100,000, probate is required.

Surely, the caller pleaded, there must be some way to bring this account under the small estates law and avoid probate. The difference, after all, was only $2,000. And that $2,000 was going to cost the caller a legal fee of at least $4,000, and court costs of somewhere between $600 and $800.

The answer, however, is that if the assets in the probate estate amount to more than $100,000, a probate is required. Who enforces this? The bank, believe it or not, because it won't hand over the account to anyone else without seeing a probate court order first.

There are many ways to avoid probate in this situation, such as a joint tenancy account, or a pay on death (POD) account. Even a simple trust would work in this situation. But if you don't take advantage of any of these procedures, your heirs will have to start a probate.

Was There a Will?

"Mom died suddenly and I need to know if she had a will or trust because I think I'm mentioned in it."

This is a request that I hear frequently because the caller has seen my website and is looking for some quick and inexpensive way of seeing the will or trust. Often the caller was estranged from the person who died, or they would found some easier way of getting the information, such as asking them while that person was still alive.

Here are the basic details on how to find out if your relative left you anything:

1. After a person dies in California, state law requires that their will be filed with the Superior Court clerk's office in the county where the decedent lived. Go to the Superior Court and ask if the will has been filed.

2. If a probate has been started, you can look at the will, if there was one, in the file. Go to the Superior Court and ask to see the file. The name of the case will be Estate of (fill in name). If there was no will, you may be entitled to part of the estate through intestate succession.

3. Also, if there is a probate and you are one of the heirs, you should have been notified as part of the probate process. If you were not notified, and you are also entitled to part of the estate, you should retain a lawyer and make an issue out of this.

4. You can learn if the decedent had a trust by looking in the county recorder's records for any county in which the decedent owned real property. If the decedent had a trust, he or she probably had transferred the deed to the trust. The current deed will show the owner as trustee of his or her trust.

5. If a trust was involved and you were an heir of the decedent, you are entitled to a notice when the trust becomes irrevocable, in other words, when the trustor of the trust dies. This applies regardless of whether you will receive anything from the trust.

6. You can also write a letter to the trustee of the trust, or the personal representative of the probate, demanding a copy of the will or trust. If that doesn't work, hire a lawyer to demand the copy of the will or trust.

Too Much Trouble To Get A Will?

The couple had a modest house in one of California's rural counties, and the value of the house was $165,000 at the time the husband died. It was a second marriage for the couple, and they were living in husband's house from his first marriage, which ended when his first wife died. The deed was in his name only, and the couple had no community property agreement. Husband had two children from his first marriage. Husband had no will.

Question: Who gets the house when Husband dies?

Answer: Everybody gets the house, but they won't get it until the probate is completed.

Why? Because California intestacy law provides that when a decedent's estate includes separate property, the separate property is split between the spouse and the children. In this case, the spouse gets one-third of the house, and the children get two-thirds. Because the children's share is greater than $100,000, a probate will be needed. It could take upwards of a year and $7,000, including court costs, to complete the probate.

How could this have been avoided? Assuming that the decedent wanted his spouse to have the entire house after he died, he could have accomplished this with a simple will that gave everything to his wife. She would have used a spousal property petition, instead of a full probate, to take title to the house. No probate, no need to share the house with the children.

But, assuming that the decedent wanted the children to take part of his estate and still avoid probate, he could have created a living trust and put the house in it. There would be some trust administration fees, but no probate.

The decedent had a choice: Do nothing and cause a problem down the road, or do something now and avoid future problems. The difference can be summarized as being remembered as "Dear Old Dad", or "that blankity-blank idiot."