Pre-Death Planning determines the cost, length, and efficiency of Post-Death Administration. A common misconception is that having only a Will is sufficient estate planning. Although a Will does name someone in charge of the estate and provides directions on post-death division of assets, it does not always escape probate.
The Executor is merely “named” in the Will, and has to be formally appointed to do the job by the Probate Judge. As such, unless the gross value of assets is below $150,000 or assets are held jointly, the Will must be administered by the Probate Court – and so begins the dreaded, expensive, seemingly endless court process that accomplishes the exact same goal as a Trust administration does: it passes assets from point A to point B. Only, at a very high price.
Probate is not only expensive (the fees are set by the California legislature and are a percentage of the gross value of the estate, as valued by the Court), but also makes the process a public record, hands the estate assets to its creditors, and is riddled with countless costs and expenses, in addition to the statutory attorneys’ fees. By contrast, trust administrations are private, they cost a very small fraction of the probate costs, and conclude in a much more expeditious manner.
For those with no prior estate planning, I prepare the Essential Estate Plan, which consists of the Living Trust, General Grant, and Assignment, Pour Over Will, Durable Financial Power of Attorney, Power of Attorney for Healthcare with a HIPAA Release, Trustee’s Certificate, and conveyance documents transferring their real estate in the Trust. Most notably – we address how the trust affects everything you own: financial assets and personal items of value.
For those looking to tie the knot, a Prenuptial Agreement can be an important part of Estate Planning, not foregoing “Exemption Portability”- where the less wealthy spouse’s unused estate tax exemption is fairly valued for purposes of a second to die administration, since the wealthier spouse could be the beneficiary of such unused exemption.
For those with estate plans set up years and years ago (think yearly 1990s) when the Estate Tax Exemptions were very low and most trusts were generally drafted as mandatory A-B trusts, a Trust Amendment or a complete Restatement may be critical. Where the family assets fall far below the applicable estate tax exemption combined with the portability rules, it makes splitting an A-B trust into sub-trusts nothing short of an exercise in futility and leads to unnecessary and unjustified expenses of administration. However, after one spouse dies, an A-B trust cannot be fully restated by the survivor, so the best time to review the trust and see if its provisions conform with current law and remain cost-effective is while both spouses are still alive.