PROBATE
Frequently Asked Questions
Table of Contents
General Probate Questions
- What is Probate?
- Why are so
many people setting up Living Trusts to Avoid Probate?
-
What if I own real estate in another state?
- Does
a Living Trust avoid Probate?
- Can't I just avoid
Probate with Joint Tenancy?
- Why does Joint Tenancy
cause Income Tax Problems for a Couple?
-
Why should I want to avoid Conservatorship?
General Probate Questions
Probate is a court-supervised transfer of your property to
your heirs. Many people mistakenly think that having a Will avoids probate. The
opposite is generally true. Having only a will almost guarantees that your
assets will have to be probated.
Why are so many people setting up Living Trusts to Avoid Probate?
1. Probate Is Expensive. In general, attorneys love
probates because we are entitled to charge large fees on a probate. However,
what is good for attorneys is not what is best for your heirs. In California,
statutory probate fees range from 4-8% of the gross value of your estate. Court
costs and appraisal fees are added to that.
A properly created and maintained living trust avoids probate. When you are
gone, your successor trustee simply pays your last bills, reads your trust to
see who gets your property, and then distributes the property. This all occurs
without reporting to the probate court.
2. Probate Means Delay. A probate takes a minimum of
six months (usually over a year) to get your assets to your heirs. We feel this
delay is actually worse than the expense of a probate because of the potential
hardship and emotional drain. On the other hand, the bulk of the property in a
living trust is generally distributed in a few short weeks.
3. Probate Invades Your Privacy. A probate is open to
the public. In a probate, anyone can go to the court clerk's office and find out
a surprising amount of information about the deceased and his or her family. A
living trust, on the other hand, avoids such an invasion of privacy. No probate
is needed if the living trust is set up and maintained properly. With a living
trust, only your heirs and your attorney will know the details of your affairs.
What if I own real estate in another state?
If you do not have a living trust, your heirs will likely have
to go through two probates, one in California and another in the other state
where you own real estate. A living trust will allow you to avoid probates in
both states.
Does a Living Trust avoid Probate?
A living trust enables you to avoid probate if you set it up
correctly and make sure pretty much all your assets are in the trust.
Can't I just avoid Probate with Joint Tenancy?
For a married couple, holding their assets as joint tenants
together does avoid probate upon the death of the first of them. However, as is
explained below, joint tenancy may very well have a high income tax cost to the
surviving spouse. Furthermore, a major problem will arise when the second spouse
dies, or if both spouses die together - a probate will be required at that
point.
In addition, many problems are caused by owning property in
joint tenancy with a child. For example, your child's creditors might try to
seize your property. Furthermore, at your death, your property could end up
going to only one of your children at the expense of your other children or
grandchildren. A living trust can avoid all these problems.
Why does Joint Tenancy cause Income Tax Problems for a Couple?
In short, if a couple holds appreciated property, such as real
estate, as joint tenants and one of them passes away, the surviving spouse will
have income taxes to pay if the property is sold. This occurs because only half
of capital gains are eliminated at death under joint tenancy. The cost may be
tens of thousands of dollars or even more. On the other hand, if the same couple
were to set up a living trust and transfer the appreciated asset to the trust as
community property, on the death of the first spouse the survivor could sell the
asset and have no income tax to pay.
Why should I want to avoid Conservatorship?
Medical science is making great strides, but an unfortunate
consequence of longer life spans is many older people cannot manage their own
affairs. If you become incapacitated by a stroke or another cause and do not
have a trust and durable powers of attorney, your family may have to petition
the court to have a conservator appointed for you. As with a probate, the
purpose of a conservatorship is actually quite simple - enabling someone to make
decisions for you and manage your financial affairs. The problem is that as with
a probate, a conservatorship is an expensive and complicated procedure. Having a
living trust and durable powers of attorney almost always avoids the need for a
conservatorship. If you become incapacitated, whomever you have named in the
trust and durable powers takes over for you without having to go to court. In
particular, the "Power of Attorney for Health Care," one of our basic estate
planning documents, will give your family the legal authority to make health
care decisions for you, including the authority to make end-of-life decisions
such as the decision to "pull the plug."
Probate is a court-supervised transfer of a decedent’s
property to the heirs. It becomes necessary when the decedent did not have a
living trust, regardless of whether or not there was a will.
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