HOW TO AVOID PROBATE AND SAVE THOUSANDS OF DOLLARS IN FEES AND COSTS

A $1,000,000 estate costs approximately $50,000 to probate and takes about 1 to 2 years. Creating and funding a living trust avoids probate.

1. Estate Distribution Plans:

A. Intestate (no will or estate plan)
B. Will
C. Living Trust
D. Others 
      1. Joint tenancy 
      2. Totten trust (savings account, i.e., Mary Jones in trust for Susan Jones)
      3. Small estates (under $100,000)
      4. Community property

2. Probate: Court supervised administration of an estate if a person dies intestate or with a will.

Statutory Probate Fees:

Also, most estates must pay additional fees for extraordinary services. Examples of extraordinary services are sales of real and personal property, any litigation, preparation of tax returns, carrying on a business, and others.

In addition, there are court costs, filing fees, publication fees, appraisal fees, and other fees.

3. Intestate Succession:

A. Estate distributed by default pursuant to rules in Probate Code
B. Estate representative (administrator) selected by default pursuant to rule in Probate Code
C. Requires probate, substantial costs and time delays
D. A $1,000,000 estate costs approximately $50,000 to probate
E. Probate usually takes 1 to 2 years and more often 2 years.

4. Will:

A. Low establishment costs
B. Simplicity during lifetime
C. Can include a trust (testamentary trust)
D. Guaranteed results
E. Requires probate, substantial costs and time delays
F. A $1,000,000 estate costs approximately $50,000 to probate
G. Probate usually takes 1 to 2 years and more often 2 years.

5. Living Trust:

A. Establishment of trust is a two step process

1. Creation of trust
2. Transfer of assets to trust and funding process

B. Titles of persons involved in process

1. Grantor or Trustor: person who creates trust
2. Trustee: person who manages trust, can be same person as grantor
3. Beneficiary: person entitled to benefits of trust, can be same person as Grantor and Trustee

C. Advantages

1. No court proceeding
2. Substantial cost savings; probate is avoided
3. Eliminates time delays
4. Proceeding is private; whereas probate is public

D. Disadvantages

1. Establishment costs more expensive than will, but in most cases cost is all or partially tax deductible
2. Requires attention during lifetime
3. Possible mismanagement by Trustee

6. Federal and state wealth transfer tax system:

A. Transfers not subject to death taxes:

1. All transfers to surviving spouse
2. All other transfers under $3,500,000
3. Annual gifts of $13,000 per donee

7. Further elements of Comprehensive Estate Plan:

A. Pour-over will if living trust is adopted
B. Durable power(s) of attorney for assets
C. Advanced health care directive(s) to physicians
D. Durable power(s) of attorney for health care
E. Nomination(s) of conservator
F. Transfers of real and personal property into trust
G. Letter of instructions
H. Burial instructions
I. Location of estate plan documents
J. Declaration of status of property; community vs. separate
K. Personalized estate plan data recorder and booklet
L. Free consultations explaining estate plan and documents
M. Review of assets and advice regarding estate plan, life insurance and retirement plans

INITIAL FAMILY TRUST

• All assets transferred to Family Trust
• Spouses are co-trustees
• All assets available for support and maintenance of spouses
• Trust may be amended or revoked in whole or in part at any time

One spouse dies
Two Trusts created
No death taxes payable

1. By-Pass Trust

• Funded with up to $3,500,000
• Income and principal available for support of surviving spouse
• May not be amended or revoked

2. Survivor's Trust

• Funded with balance of assets
• Income and principal available for support of surviving spouse
• May be amended or revoked

Surviving spouse dies

1. By-Pass Trust: No death taxes payable.

2. Survivor's Trust: $3,500,000 exempt from estate tax*, balance is taxed.

Assets pass to beneficiaries and can remain in trust or be distributed outright.

*Exemption is reduced by gifts made in excess of $13,000 per donee per year beginning 2009.

*The exempt amount increases as follows:

2006 thru 2008	$2,000,000
2009	$3,500,000
2010	No tax under current law

Most observers believe that Congress will extend or perhaps liberalize the estate tax provisions that will be in effect in 2009. In essence that the no estate tax scheduled for 2010 will not take effect.

Please call (818) 991-6664 or e-mail us now to get answers to your questions.

Copyright © 2007 Law Offices of John D. Williams. All rights reserved.

We are centrally located to represent clients throughout California, in Los Angeles County and Ventura County, including Camarillo, Moorpark, Newbury Park, Oak Park, Ojai, Oxnard, Simi Valley, Thousand Oaks, Ventura, Westlake Village, Agoura Hills, Calabasas, Canoga Park, Chatsworth, Encino, Granada Hills, Malibu, Northridge, Reseda, San Fernando Valley, Sepulveda, Sherman Oaks, Tarzana, Van Nuys, West Hills, Woodland Hills.