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Sacramento Estate Planning Attorney

Sacramento Estate Planning Blog

Is avoiding probate possible in California? When?

For those in California who understand how complicated and contentious probate can be, the chance to avoid it should be considered. When estate planning, the person should also be aware of the options in avoiding probate. An example of when it is possible to avoid probate is if the property falls below a certain amount. If the person who died left $150,000 or less to the heirs, then it might not be necessary to go through the probate process.

A person who is legally entitled to inherit property such as a bank account or stocks could avoid probate if the value falls at or below $150,000. With the circumstances in place, the simplified process can be used to transfer that property into the person's name. The property value will be determined based on what it was worth on the date that the person died and not what it is worth at the moment. There are certain factors that must be remembered. If it is declared real property such as a house, this cannot be done. There is a form that must be filled out if the amount left was $150,000 or less. It is the Petition to Determine Succession to Real Property (Estates $150,000 or Less). With that there will need to be another form of Inventory and Appraisal filled out and notice given of a hearing.

Important considerations with estate planning

Estate planning in California should be thought of as a method of organizing one's life for the future when he or she is no longer there. It is a positive step for the heirs whether there is a substantial estate or one of more modest means and making sure that it is complete and in place is a wise decision for anyone. Those who are reluctant to create a coherent estate plan should remember certain steps to take and realize that it is essential for their own peace of mind and their family's future.

Decisions must be made as to who will receive what when the person dies. To do this, there must be a list of assets, what wishes the person wants in place to distribute the assets, and who will carry them out. This should be known before moving forward with the legal documents. Having legal advice goes without saying. Even a smaller estate will have different issues that are of legal consequence and must be navigated according to the law.

Key points that are often ignored with wills

All California residents need to think about a future in which they are no longer here but their loved ones are. It is a difficult matter to reconcile one's mortality, but it is something that must be done. With that, a wills a necessary document for estate protection, to avoid inheritance issues and probate issues. There are several pieces of advice that people are well-advised to adhere to when striving to make certain that everything is organized for the future.

There is certain terminology that needs to be understood. The estate includes the assets that are owned and things that are financially based and that which is property like a home. Estate planning is making arrangements prior to death to make certain the wishes are carried out. Wills are documents to list where all the property should go after death. With an estate plan, taxes are always a consideration. A person does not want to leave loved ones with a hefty bill after death. There are methods that can be used to mitigate this.

A basic need for any estate plan is preserving the documents

While Californians are advised to take the necessary steps to have a coherent and well-organized estate plan, the basics are sometimes lost on them. The most foundational matter after moving forward with the document itself and having all the "I's" dotted and the "T's" crossed is to know where it is and be prepared for the time when heirs will need to find these documents. It might sound like a silly dispute, but litigation can result if the estate plan documents are nowhere to be found. With this in mind, there are certain steps to take.

People should keep the original documents in a safe location. The court might be reluctant to take copies or digital files to replace the originals. This is particularly true if the estate is being contested. This can degenerate into an unwinnable argument. It might also be necessary to have original copies of health care proxies and a power of attorney. These documents should be maintained in a sealed envelope with a notation as to what it is. Keeping them at home in a fireproof location is a good way to preserve them. A safe deposit box might seem like a good idea, but there could be problems accessing it after the person has died.

Pluses and minuses of a living trust (inter vivos trust)

For Californians, estate planning might be perceived as a dual-edged sword. On one hand, it is a strategy to make sure that loved ones are cared for and assets are allocated as the owner wants. On the other hand, it is acknowledging one's mortality and preparing for the inevitable. However, there are certain methods that are beneficial and should be considered even if it is difficult to contemplate. One is a trust. Specifically, a living trust (inter vivos trust) is a tactic that is useful. Knowing its benefits and potential drawbacks is key before deciding.

A living trust can make certain that the assets will be managed according to the person's desires. When the living trust is formulated, the person who is taking it out can be the trustee at the start or someone else can be chosen to do it. The trustee can be named to take over if the person is no longer able or willing to do so. When the person dies, the trustee will accrue the assets and pay whatever outstanding debts remain. The assets left over will be distributed as the person wanted. The difference between a will and a trust is that the trust assets can be distributed based on the trustee's decisions and there is no supervision or approval from the court.

A lawyer can help with trust administration in Sacramento

While many Sacramento residents might be aware of the need for trust planning, but do not know how to go about it in the necessary and smartest ways for avoiding probate, thinking about health care and organizing it appropriately. There are numerous issues that are integral for estate planning and trusts. Probate and inheritance taxes are problematic if they are not accounted for and legal help is essential toward that end. Health issues can throw a wrench in the works and cause worry that is often unnecessary. Knowing the important issues to consider is imperative.

Examples of what is necessary with a trust include changing the titles to assets, maintaining an amount to have an exclusion of federal estate tax, and making certain there is legal compliance with the trust. With significant assets such as real estate and businesses, these must be accurately valued and shielded. Responsibilities for the trustee include filing income taxes for the state and the federal government. There are certain types of trusts that are irrevocable and additional tax returns must be filed for verification that the exemption is legal.

How are assets put into a living trust?

When we discuss living trusts and other estate planning documents, we often focus on how they can help and how to set them up. But we often overlook details about what happens once the plan is in place.

In the case of living trusts, what happens after a document is finalized and signed? Specifically, what is the process for funding, or transferring assets into, the newly-established trust?

Debt management and your estate plan

Preparing an estate plan that takes care of your loved ones extends beyond your property and your wealth. It also includes debt management. A recent study by Experian found an average consumer debt of almost $62,000 per individual. That’s a lot of money and, after removing mortgages from the figure, it still comes to roughly $13,000 per person.

While the monetary figures are noteworthy, more significant is that 73 percent of those in the study had debt at death. That means three of every four people are leaving the management of that debt to their heirs. 

Estate plans and small businesses

Many people in California view an estate plan as little more than a directive about how to divide and distribute their assets after they die. While this sentiment is correct, it does not account for important matters such as minimizing estate and gift taxes or avoiding or minimizing capital gains taxes. Also, small business owners in Sacramento often overlook the connection between a proper estate plan and passing their business to the next generation.

For most small business owners and professionals, the business is the principal source of the family's wealth and income after the owner's death. Without an estate plan that specifies who will own the business and how it will be managed after the owner's death, a business can be destroyed as heirs fight over questions of ownership, income distribution and management. A competent estate plan can avoid these unwelcome results.

For many people, estate planning should include tax planning

Most people in California don't have to be concerned about estate taxes when they prepare an estate plan. The federal estate tax only applies to estates that are worth more than $5,490,000. Married couples can effectively combine their estate tax exemptions, meaning that up to almost $11 million of their combined estates can be shielded from estate taxes. At the state level, California has eliminated its estate and inheritance taxes.

For those whose estates are above, or approaching, the federal exemption amount, tax planning is a critical part of the estate planning process. Fortunately, there are a number of strategies to reduce one's potential estate tax liability.

My Sacramento law practice, Michael A. Sawamura, Attorney at Law, focuses on wills, trusts and estate planning law in addition to business law and corporate defense services. My clients include professionals, government employees, small businesses, blue-collar workers and national corporations.

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