CALIFORNIA WILLS AND LIVING TRUSTS

In California, when you pass on, your property is distributed according to your will. If you don’t have a will, it is distributed according to California law. There are exceptions to this such as the proceeds of your life insurance policies; the assets in your retirement plan; your bank accounts or other accounts that state “transfer on death” or “pay on death”; which are paid directly to the beneficiaries named by you. But if you don’t name a beneficiary or the beneficiary has passed away or you make the above payable to your estate, California law will decide who will get it. Generally, you can control the distribution of your property by creating a will or living trust. A will is a legal document that must meet certain requirements to be effective. Although you can create a will yourself under certain circumstances, my strong advice is to contact an attorney. In your will, you state to whom and how you want your property distributed and you nominate your executor. Your executor is the person who is basically the CEO of your estate. He or she will get all your assets together; pay your debts; pay any taxes that are due (income and estate); and distribute your property as well as perform other legal functions. The process by which your executor does this is called probate and it is court supervised. The probate process begins with the executor filing a form called the Petition for Probate with the court. If there are no problems, the court confirms your nominated executor as executor. During the probate process, which can generally take six months or longer, your executor must file certain forms and perform certain functions within specified time periods. The process can get complex and many executors hire attorneys to handle it. The attorney is generally paid a statutory fee which currently ranges from $7000 for a $200,000 estate to over $20,000 for a $1,000,000 estate. If you don’t name an executor or your executor does not qualify for some reason or if you don’t have a will, the court will appoint an administrator who will perform the same functions as your executor. Every form that your executor files and your will become part of the public record so that anyone can look at them. There are several exceptions to the probate process such as estates valued below a certain amount and community property belonging to the surviving spouse. This property is distributed by following certain streamlined procedures. You can revoke your will at any time during your lifetime as well as make changes to its provisions through the use of a document known as a codicil. My strong advice is to contact an attorney. The advantages of a will are that the attorney fee for preparing one is generally not high; you don’t have to change the title to any of your assets; and the probate process ensures court supervision. The disadvantages are the time and expense of the probate process and the fact that your will and other probate documents become part of the public record. Another way to distribute your property is by creating a living or revocable trust. A living trust is a separate entity that is created by you in a trust document. The trust document will contain many provisions which will state how the trust is to be operated and how your property is to be eventually distributed. If you desire to establish a trust, my strong advice is to contact an attorney. You can amend or change the provisions of your living trust as long as you follow the instructions in your living trust which state how to do so. The CEO of the living trust is the trustee. Generally, you will be the initial trustee of your living trust and you will name successor trustees who will take over after you. Once you create the trust document, you will transfer your assets to yourself as the initial trustee of the trust. However, your life will not change, you will still control your assets, and you do not need to file a separate tax return for your living trust. Any assets that you transfer to the trust can be taken out at any time during your lifetime by following the provisions of your trust. Since the assets are owned by the trust and not by you, the assets can be transferred to your beneficiaries without the need for the probate process. Since there is no probate, there is no public record. The distribution of your property can be handled by your attorney in his or her office. The advantages of a living trust are that there is no probate and your property can be distributed much sooner; the attorney fees for distributing your assets is generally much lower than the attorney fees for probate; and there is no public record. The disadvantages of a living trust are the greater initial cost of creating and setting up your living trust; and your need to make sure that all your assets are transferred into the living trust. This has been a very basic discussion of wills and living trusts. As you can see, with a will there’s a way to make sure that you make the decision as to how your property is distributed, but, by avoiding probate, a living trust may be the better way. The information is this article is for informational purposes only and does not constitute nor is it intended to constitute legal advice.