You may have heard that it is a good idea to create an estate plan, but unless you have personally gone through the process of administering someone’s estate or trust after they have passed away you may not know exactly why it is such an important process. Today, I want to go through what to expect if you pass away in these three different scenarios. First, I will go over what it is like to pass away without any plan at all. Then, I will go over what it is like to pass away with a will. Finally, I will go over the process that you can expect when you pass away with a trust.
Passing without a plan (aka intestate): Passing away intestate, without a plan, means that your loved ones will have to go through the court process known as probate. Most families in California do not want to go through probate for a few main reasons:
Lack of Privacy: If you go through the probate process everyone can easily find out everything that you own. This may make your loved one’s more susceptible to predators who take advantage of the public nature of the proceedings.
Expense: The attorney that helps you through probate will get a percentage of the estate after you pass as a fee. Also, a professional executor may be required who will also get a percentage of the fee. Also, a court appointed representative known as a probate referee gets a percentage as a fee. Finally, there are court fees that you pay for the case to be heard. This is on top of the normal fees that are present when a case is administered, such as realtor fees and the fees that an estate salesperson charges.
Lack of Control: This is the most important reason to create a plan. If you do nothing, the State of California legislature has come up with an approximation of what it thinks you would want done with your assets after you pass. However, the legislature is also looking out for the courts and does not want to overburden the system. This means that if you have minors, the court will find someone to administer over their money for them. If they cannot find a suitable person in the family, this may fall to a stranger that court deems fit. When that minor child does reach the age of maturity, eighteen, they will get all their inheritance (if there is any left after the fees) outright to do with what the child sees fit.
Most families want to decide for themselves what will happen with their assets after they pass. Further, in this article we don’t even go over all the problems that present themselves when you become incapacitated. This is also administered by the court system.
Passing with a will: Most people think that creating a will avoids the probate court process. It does not. The court will most likely abide by your wishes as far as who gets what when, but executing your wishes are not private and are costlier than what might be achieved if you avoided the probate process completely. This means that A and B above, lack of privacy and expense, respectively, still are problems in a will-based estate plan. Lack of control still exists to some extent as a drawback of a will because the court still has the final say as to what happens.
Passing with a trust-based estate plan: A trust does not have any of the pitfalls presented above. It is private because it is not a document that has to be filed with the court. It is less-costly in the long run because you do not have to pay an attorney to jump through all the hoops set up by the California court. There isn’t no expense to administering a trust after someone has passed but it is a fraction of the cost in a probate. Finally, the trust is a contract and you have complete control over who gets what when. There are also possible asset protection features that you can add to the trusts to protect the assets from mistakes that beneficiaries often make. Further, you can protect the assets from changes in situation.
For, instance, if you are married, you can add terms to your trust that require the surviving spouse create a prenup. The trust can be tailored to fit your personal situation. No two well-crafted trusts are the same and can be as different as each different family or individual.
Don’t let yourself get bogged down in the minutia of which type of plan is best and procrastinate until it is too late. We have spent decades wading through that for you. Call our office at (951)304-3431.