FAQs
Q: What is probate?
Probate refers to the court proceeding that oversees the distribution of assets according to a person’s will. Before the assets are distributed, all the person’s property must be identified and accounted for, and any remaining debts must be paid off. However, probate is often little more than a formality. When no one contests the decisions made in a will, there is no need for a lengthy legal process.
Probate is slow and expensive. It takes an average of 9-12 months before the inheritors finally receive what they were left, and lawyers, appraisers and accountants must be paid for all their work during the year-long process. There are some states that have a shortened—and therefore less expensive—probate process, but California is unfortunately not one of them. The good news is that there are ways to avoid, or at the at least minimize, these extensive delays and costs.
Q: How much does probate cost?
The probate process costs families a great deal of money. In California, probate fees—which include executors’ fees and lawyers’ fees—are about 5% of the gross estate (before mortgages and other debts are paid off). This means, for example, that on an estate with a gross value of $150,000, the probate cost would be approximately $8,000. On a gross estate of $1,000,000, the family would be looking at a total fee of around $50,000. Remember that probate fees are based on the gross value of a person's assets. Five percent of a gross estate is often equivalent to a significantly larger portion of the estate once all taxes, fees and debts are paid off. However, these fees can be avoided with a properly drafted Trust.
Q: Aren’t trusts only for the super rich?
Absolutely not. We’ve all hear of “trust-fund babies” whose parent’s sizable inheritance meant they never had to worry about money. So, we naturally associate Trusts with the super rich and therefore assume that only high net-worth individuals need them. This is one of the most common misconceptions in estate planning. There’s an old legal saying: “Where there’s a will, there’s probate!” This means is that if you have a will, which is the most basic means of estate panning, then the money that you leave for your loved ones will be subject to the significant fees that probate requires. The probate process is also slow. It can take up to a year or more before your loved ones receive their inheritance. But there’s a way to avoid this long and expensive process. The assets that are placed in a Trust do not go through probate. Trusts may not be for everyone, but assuming that they’re only for the super rich can be costly mistake. If you want to prevent your loved ones from incurring the costs and suffering the delays of probate, you should consider consulting with a Personal Family Attorney.
Q: I want to keep my estate planning private. How do I do that?
The decisions we make about who we leave our wealth to after we die are deeply personal ones. If you’d like to keep these decisions private, you'll need to put your assets into a Trust. Probate proceedings are public record, which means that anything you put in a will can be viewed by anyone who’s interested. If you would like to keep private your decisions about what you leave to your loved ones, you’ll need to consult with a Personal Family attorney and set up a Trust.
Q: What is a Living Trust?
A Living Trust is an effective way to transfer your assets while avoiding probate. The greatest advantages of a Living Trust are freedom and control. A Living Trust gets its name from the fact that you retain complete control over the assets while you are alive. You are both the “trustee” and the “beneficiary.” You are free to manage and spend the Trust property as you see fit, and you are free change the terms of the Trust at any point. As your assets change, as your circumstances change, or as the law changes, you can and should alter the Trust to reflect these factors. No one else but you has any powers over the Trust.
When you create a Living Trust, you will name the beneficiaries who will receive the Trust property upon your death. You will also name a “successor trustee” who will be in change of turning the property over the beneficiaries. If you suspect that a Living Trust might be right for you, you should consult with a Personal Family Attorney.
Q: Will a Living Trust complicate my life?
Absolutely not. During your lifetime, a Trust will not really change the way you do anything. No new tax returns are needed. The bottom line is that no control is lost. A Trust is also private. Unlike a will, which is open to the public once it's in probate, a Trust is a private document and its contents and provisions are fully confidential.
Q: Are there disadvantages to a Living Trust?
A properly drafted and funded Living Trust can avoid probate entirely. However, there are arguably advantages of probate. Probate protects against wrongful actions by the person you select to oversee the distribution of your assets. Without probate, there is no one to ensure that this person is managing and transferring your property as you intended. However, probate is very expensive insurance. Remember that probate fees are projected to cost 5% of the gross estate.
One disadvantage to a Living Trust is its cost. However, this disadvantage is far outweighed by the money that your family saves—not to mention the heartache and delays that they avoid—by bypassing probate. Nor does it take into account the peace of mind that comes with the complete control and freedom that a Living Trust provides.
Q: Who should I name as my child’s personal guardian if I suddenly passed away?
This is often the most difficult and emotional decision that parents make in the process of writing their wills. Some experts in estate planning recommend that you begin by making a list of the qualities and values that you and your spouse want the person to possess. You might then rank these qualities in order of importance, and end by comparing your candidates to the list. This kind of exercise can help facilitate a difficult conversation, and can certainly help you and your spouse talk about what you feel is most important in your children’s upbringing. However, no amount of math or list-making can make the decision for you. In the end, how you feel when you imagine a particular person raising your children is often the best guide.
There are a number of general things to keep in mind, however. The first is that any person you name as your children’s guardian must be willing and able to do the job. Second, it is usually not a good idea to name a couple as joint guardians. Should they disagree about a decision regarding you children, resolving this disagreement can become a tricky legal issue. And no matter how stable a couple may seem, their break-up or divorce would raise the difficult question of who would become the primary guardian. Third, it is important to remember that the person you choose to be the children’s guardian need not be the same person who manages their money. You can select a separate person to manage the money that you leave them. This means that you need not worry about selecting a guardian who has the financial know-how to manage your children's inheritance while they are still minors.
Q: Can I be sure that the person I name as my child’s personal guardian will be allowed to take care of them?
Unfortunately, there is no way to be absolutely certain. The person you name in your Will does not become your child’s personal guardian until the court gives its approval following your death. The court is charged with the task of determining if the person you chose is up to the task. If it is decided that the person is unfit for the job, the judge can name someone else. This is very unlikely, however, and it usually only happens when someone comes forward and contests your choice. Unless there are significant risk factors in the person's life (such as substance abuse problems or a serious criminal record), the person you choose will in all likelihood become your child’s guardian, especially if no one contests your Will.
Q: How do I choose a property manager for my child?
The best rule of thumb is this: choose the same person you named as the personal guardian unless there is a clear reason not to do so. Though it’s often wise to name the same person—if only to simplify matters—there are certain scenarios in which a separate person would be the better choice. For example, if you were concerned that the guardian you nominated lacks sufficient financial know-how, you may want to name someone more financially adept, someone who you think would manage and invest the property soundly.
Q: If I die, will my spouse (or ex-spouse) become my child’s guardian?
In most cases, the answer is yes. The court generally assumes that your spouse has the strongest bond with your child, has the most experience in raising them, and is therefore the most suitable person to be your child’s guardian.
Q: I don’t want my ex-spouse to become my child’s guardian. Is there anything I can do?
There is something you can do, but the rule the court follows makes it unlikely that anyone but the other parent will become the guardian. The rule is this: one parent cannot name someone other than the second parent to be the child’s guardian, unless it can be proved that the second parent is clearly unfit, or has legally abandoned the child—and this is usually a difficult thing to prove. Your low opinion of the other parent, however justified, is not enough to make the case. However, if you do decide to name another person, it is a good idea to attach a letter to you Will describing the reasons for you choice—both the positive qualities of your nominee and the reasons why your ex-spouse should not be your child’s guardian.
Q: I’m worried that my children wouldn’t be mature enough by the time they’re 18 to manage their inheritance responsibly. What should I do?
This is a common concern. For many parents, the notion of their children becoming rich on their eighteenth birthdays is a worrisome prospect. Some parents can’t even conceive of their 28-year-old inheriting a large sum of money outright. If you share this concern, and would like more control over how and when your children receive their inheritance, the solution, in most cases, is what’s called a Child’s Trust. With a Child’s trust, you have complete freedom to decide when your children receive their inheritance. If you create a Child’s Trust, you would specify the age at which you want your children to inherit the Trust Property—let’s say at 30 or 35—and you would name a trustee to manage their inheritance and provide for their financial needs before they reach that age. Many parents include a Child’s Trust as part of their Living Trust. If you think a Child’s trust might be the right thing for your family, don’t hesitate to consult with a qualified attorney.