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Trust Administration: How a Trustee Can Collect Reasonable Fees

January 24, 2017/in Estate Planning /by Michael Lonich

Although trusts do avoid the complication and expense of probate proceedings, a trustee—the person given power to hold legal title to and to manage trust assets—is not necessarily spared the administrative burdens that can accompany estate management. Trustee responsibilities can include clearing title to property held in the decedent’s name, the preparation and filing of estate and income tax returns, and the collection of insurance proceeds—essentially any task necessary to administer the trust as the trust instrument instructs. Typically, the creator of the trust—the settlor—will appoint a trustee in the trust instrument and provide compensation from his or her estate for the trustee’s services. However, if the trust instrument does not specify any compensation, California Probate Code § 15681 allows a trustee to receive “reasonable compensation under the circumstances.”

In re McLaughlin’s Estate defines “reasonable.” First, the trial court has wide discretion when making a fee determination, but it should consider the following factors:

1) The gross income of the trust estate

2) The success or failure of the trustee’s estate administration

3) Any unusual skill or experience which the trustee may have brought to his/her work

4) The fidelity or disloyalty displayed by the trustee

5) The amount of risk and responsibility assumed by the trustee

6) The time spent by the trustee in carrying out the trust

7) Community customs as to fees allowed by settlors/courts or as to fees charged by trust companies and banks

8) The character of the administration work done

9) Whether the work was routine or involving skill and judgment

10) Any estimate which trustee has given of his/her own services.

In McLaughlin, the appeal court concluded, after considering the above factors, that the trial court justly allocated reasonable fees—the trustees had profitably and with special skill managed the trust property, had accurately summarized receipts and transactions, and had committed a large amount of time to the trust’s administration.

Estate of Nazro provides another example of the above factors in action: Here, although the trustee received dividend checks, made bank deposits, wrote checks, prepared quarterly accountings, and reviewed trust assets, the work did not consume much of the trustee’s time. Further, the court noted that corporate trustees in the area customarily charged management fees based on a schedule of percentages of the value of the various trust assets. Therefore, the court held that $2,500 was an appropriate amount of compensation for the trustee’s services.

Ultimately, managing a trust estate is not always a walk in the park—if not otherwise provided, trustees should not be afraid to ask for compensation for their services. However, keep in mind that compensation must reasonable and proportional to the work done on behalf of the trust.

If you have recently been named or appointed as a trustee or you are interested in creating a trust, please contact the experienced attorneys at Lonich Patton Erlich Policastri. We can help you understand what being a trustee entails, and if you want to create a trust, how you can properly compensate your chosen trustee.

Lastly, please remember that each individual situation is unique, and results discussed in this post are not a guarantee of future results. While this post may detail general legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

Sources:

California Probate Code § 15681

In re McLaughlin’s Estate (1954) 43 Cal.2d 462

Estate of Nazro (1971) 15 Cal.App.2d. 218

Estate Planning for Millennials

September 28, 2016/in Estate Planning /by Gina Policastri

While estate planning may sound like an activity reserved for the baby boomer generation, even Millennials can get in on the fun! Further, estate planning is not only for people with ample assets—planning for your future can extend to healthcare decisions and even your Facebook account. Of course, thinking about death—especially one’s own—is hard, but there are many benefits to be reaped from laying out a few guidelines for your loved ones.

To begin, estate planning at a young age may not involve complex financial considerations, but there are two key areas to focus on: healthcare and personal property.

First, once you turn 18 years old, family members no longer have the legal right to access your medical records, and should you become incapacitated, your family would not be able to speak to your doctors or make medical decisions on your behalf. Estate planning ensures that in the event of your incapacitation, your health is taken care of according to your wishes and by people you trust—

1) Advanced Healthcare Directive: A legal document in which you detail what medical actions should be taken if you are incapacitated or unable to make decisions on your own. This document can be used to record your preference (or not) for a “do not resuscitate” order.

2) Durable Power of Attorney: A legal document which, should you become incapacitated, gives power to a person of your choosing to make medical or financial decisions on your behalf. A durable power of attorney works in conjunction with an advanced healthcare directive to ensure that your health preferences are understood and heeded.

3) HIPPA Release Form: This form allows people listed on your advanced healthcare directive to access your medical records. Access to your records makes it easier for your designated caregivers to make informed decisions regarding your health.

Second, you may not have a lot of assets, but most likely, you do have some treasured possessions. To prevent your assets from being waylaid by intestacy (in which state laws determine how your property is distributed), consider making a will or trust—

4) Wills and Trusts: A will and/or trust details to where and to whom your assets will go after your death. While you may be content to let intestacy laws distribute your estate, creating a will or trust can streamline the process and assure your relatives that they are honoring your true wishes. Importantly, besides money, you should consider other cherished aspects of your estate. First, your pet—who will take care of your beloved fur friend? Second, consider family heirlooms passed down to you through grandma and grandpa—a will or trust ensures that those items fall into the right hands. Third, do you want to allocate any assets to a significant other? If you and your partner are not married, he or she is not entitled to any of your assets and will likely receive nothing through intestacy either. Whether you want to leave money or possessions—valuable or sentimental—a will or trust ensures your significant other receives a piece of your estate.

5) Digital Assets: Social media accounts and digital files need postmortem management, especially if you would like your family to shut down your various online accounts. Federal law does not require that websites permanently delete the account of a deceased user. Therefore, designating a digital “executor” and creating an inventory (with updated usernames and passwords) of your online accounts that details what you would like done with them can ensure your online presence is handled according to your wishes.

Death is a difficult subject, but estate planning ensures that your family is not left without direction for how your final wishes should be carried out. Therefore, if you are interested in learning more about estate planning, please contact the experienced attorneys at Lonich Patton Erlich Policastri. We can help determine what documents would best safeguard your assets and/or your medical wishes.

Lastly, please remember that each individual situation is unique, and results discussed in this post are not a guarantee of future results. While this post may detail general legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

Three Things to Know About Creating a Living Trust

July 27, 2016/in Estate Planning, Probate /by Virginia Lively

First, one of the biggest advantages of creating a living trust is avoiding probate court. Administering a will or trust through probate court takes time and money. A living trust is a great estate planning vehicle because it can keep the entire administration process court-free. When the settlor of the trust passes away, the terms of the trust dictate how the estate should be administered. In turn, probate court is avoided.

Second, make sure that the successor trustee is someone who is capable of administering the trust. Often times, the oldest child is chosen to be the successor trustee. However, the oldest child is not always the right choice. A successful administration requires a trustee who is organized, diligent, and capable of administering the trust. It is also beneficial to have someone with an understanding of accounting. If your oldest child does not have any of these characteristics, consider appointing another child, relative, or friend. If no one you know is capable of administering the estate, you may have to hire a third party. There are a number of trust companies and banks that administer trusts. The biggest concern about hiring a third party is the administration fees, which can be substantial. If your estate can handle the fees, a third party may be the right choice for you. Lastly, a trust will never fail for lack of a trustee. If the elected trustee refuses, another one will be appointed.

Finally, creating a trust avoids California’s intestacy laws. A state’s intestacy laws provide the default estate plan for those who die without a will. In California, the beneficiary of a decedent’s estate depends on whether the property was community property or separate property. Assuming that decedent was married and had community property, the surviving spouse’s intestate share is the decedent’s one-half share of the community property. On the other hand, if the decedent’s property was separate property, the intestate share of the surviving spouse depends on how many children the decedent had, if any. While it is important to know a state’s intestacy laws, they should be avoided at all cost. Thus, creating a trust is a way to avoid intestate succession and have your estate administered the way you want it.

If you are interested in creating a living trust or have any questions regarding your current estate plan, please contact the experienced estate planning attorneys at Lonich Patton Erlich Policastri for further information. The attorneys at Lonich Patton Erlich Policastri have decades of experience handling complex estate planning matters, and we are happy to offer you a free consultation. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may detail general legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

Sources:

California Probate Codes § 6400-6414.

Going to California, The Quasi-Community Property State

June 27, 2016/in Estate Planning, Family Law /by Michael Lonich

A move to the Golden State has the potential to change the character of your property. Upon arrival in California, meeting with an experienced California estate planning attorney is a must!

Generally, there are two kinds of property systems: community property and separate property. California is one of nine community property regimes in the United States.* Presumptively, community property is all property acquired by a couple during marriage. The community property system gives each spouse a fifty percent (50%) interest in the property, among other characteristics. In California, separate property is all property owned by a person before marriage and all property acquired by gift, bequest, or devise during marriage.

California’s community property system is unique because it also recognizes “quasi-community property.” Quasi-community property includes all property, wherever situated, that would have been treated as community property had the acquiring spouse been domiciled in California at the time of acquisition. For example, if husband bought a car with funds earned during marriage, while living in Minnesota, a separate property state, the property would be the husband’s separate property. However, if husband and wife moved to California and then filed for divorce, the car would be considered quasi-community property. The reason being is that if the husband was domiciled in California at the time he had purchased the car, it would have been characterized as community property. Pursuant to California law, all property acquired during marriage, including a spouse’s earnings, is community property. Therefore, in accordance with the quasi-community property statute, each spouse would have a fifty percent (50%) interest in the car.

The example above is just one of many that may give rise to quasi-community property. Nonetheless, it illustrates the potential effect a move to California can have upon one’s property. Moreover, each state has the authority to make its own property laws. Therefore, it is imperative that when you move to a new state, especially from a separate property state to a community property state, you visit an experienced estate planning attorney.

For more information about quasi-community property or estate planning in general, please contact the experienced estate planning attorneys at Lonich Patton Erlich Policastri for further information. The attorneys at Lonich Patton Erlich Policastri have decades of experience handling complex estate planning matters, including quasi-community property issues, and we are happy to offer you a free consultation. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may detail general legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

*https://www.irs.gov/irm/part25/irm_25-018-001.html

HOW AN ESTATE PLAN COULD HAVE CARRIED ON PRINCE’S CHARITABLE LEGACY

May 27, 2016/in Estate Planning /by Riley Pennington

In the wake of rock & roll legend Prince’s untimely death, a number of issues have arisen regarding his estate plan – or lack thereof. One of the biggest issues is that none of the charities that Prince donated to throughout his life will inherit from his approximately 150 million dollar estate.

CNN Political Commentator, friend, and philanthropic partner of Prince, Van Jones, described Prince as “The Silent Angel.”* During Prince’s lifetime, he anonymously donated millions of dollars to dozens of charities. Unfortunately, since Prince died without a will, the charities that used to receive substantial donations from Prince will inherit nothing. Instead, his estate will be distributed pursuant to Minnesota’s intestacy laws. For those who die without a will, intestacy laws are a state’s default estate plan. The estate is usually distributed among the decedent’s heirs. Prince dying intestate is strange because of the the size of his estate, and his propensity to give to charity.

It is uncommon for someone with an estate as big as Prince’s to not do any kind of estate planning. In fact, those with big estates often do what is referred to as “advanced estate planning.” One advanced estate planning practice is to create a charitable trust. A charitable trust is an estate planning vehicle that can fulfill your philanthropic endeavors, all the while, having your estate receive beneficial tax treatment. There are generally two kinds of people that set up charitable trusts: those who are charitably inclined and those who take advantage of the tax benefits.

For those who are charitably inclined, a charitable trust can and should be tailored to accomplishing your philanthropic undertakings. A charitable trust allows an individual to make charitable donations during life and after death. Setting up a charitable trust is a way to ensure that a charity will continue to receive donations after the settlor has passed away. Other benefits of creating a charitable trust, and an estate plan, include, but are not limited to, avoiding probate, minimizing conflict during trust administration, and fulfilling the settlor’s intent.

For those who are primarily tax-driven, there are various tax benefits of which one can take advantage. In short, there are different kinds of charitable trusts. Each receives different kinds of tax treatment, has different formation requirements, and other distinguishing characteristics. If creating a charitable trust is something that you want to do, or are at least considering, meeting with an experienced estate planning attorney is imperative, because estate planning requires expertise and precision when determining which avenues should be taken. Had Prince set up a charitable trust during his life, not only would the charities that relied upon his generous donations be taken care of, but his estate would be taking advantage of the tax benefits.

Unless a will is found, we will never know how Prince would have wanted his estate to be distributed. It is likely that he would have had wanted a portion of it to go to charity. If you possess a philanthropic disposition, creating a charitable trust is something that should definitely be considered. A few of the benefits of creating a charitable trust are accomplishing your charitable goals, helping those who need it, and receiving tax benefits.

If you are interested in creating a charitable trust or have any questions regarding your current estate plan, please contact the experienced estate planning attorneys at Lonich Patton Erlich Policastri for further information. The attorneys at Lonich Patton Erlich Policastri have decades of experience handling complex estate planning matters, including charitable trusts, and we are happy to offer you a free consultation. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may detail general legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

* http://www.cnn.com/2016/04/22/opinions/prince-eight-things-to-know-jones/

The Strangest Wills of All Time

March 9, 2016/in Estate Planning /by Michael Lonich

The Huffington Post recently compiled a list of 7 of the weirdest, but very real, wills of all time. Although some are foreign wills, the article serves to remind us that wills are a powerful tool. Creating a will allows us to control the disposition of our property, and fulfill some last wishes.

1. The Original “P.S. I love you”

Comedian Jack Benny left a provision in his will instructing a local florist to deliver a red rose to his wife every day for the rest of her life.

2. A Dog’s Life

Businesswoman, Leona Helmsley, left her dog “Trouble” 12 million to inherit. (Although a judge later reportedly reduced the inheritance to 2 million)

3. The Talking dead

Magician, Harry Houdini’s, last wishes included a request for his wife to hold a mini séance every year on the anniversary of his death. Houdini had promised to contact his wife after death and they even agreed upon a phrase that he would say as confirmation that it was him really speaking. His wife, however, quit the séances a decade after his death.

4. The unhappy husband

German poet, Heinrich Heine’s wife was set to inherit all his assets upon the fulfillment of one condition, she had to remarry. His will reportedly read, “because, then there will be at least one man to regret my death.”

5. The Stork Derby

Toronto businessman, Charles Miller’s, left his fortune to the married woman in Toronto who could birth the most children in the decade following his death. The stork derby, as the race for the fortune later became labeled, eventually led to a 4 woman tie, each producing 9 children.

6. The unfitting funeral

Writer, F. Scott Fitzgerald, initially wrote in his will that his funeral should be “suitable” and “in keeping with my station in life.” However, by the time he died, Fitzgerald had changed his will to say it should be the “cheapest” funeral because Fitzgerald had gone into debt.

7. Controlling from the grave

Real estate millionaire, Maurice Laboz, who died in 2015 left his nearly $40 million estate to his 2 daughters. His daughters are set to receive the inheritance at 35, but can receive bonuses before, if they adhere to certain rules. For example:

1) Daughter, Marlena, will receive 500,000 upon marrying, but only if her husband signs a sworn statement promising to not touch the money

2) Marlena will receive another 750,000 if she graduates from an accredit university and writes an essay “100 words or less describing what she intends to with the funds”

Source: http://www.huffingtonpost.com/entry/7-of-the-most-unusual-wills-of-all-time_us_55fb0059e4b0fde8b0cd5bc5?utm_hp_

If you would like to learn more about wills or avoiding probate in general, call Lonich Patton Erlich Policastri to schedule a free half-hour consultation. Our attorneys are passionate about estate planning and have decades of experience handling complex estate planning matters, including wills and living trusts. If you are interested in developing an estate plan or reviewing your current estate plan, contact the experienced estate planning attorneys at Lonich Patton Erlich Policastri for further information.

How to protect your assets, even if you didn’t win the billion dollar powerball

January 25, 2016/in Estate Planning, Probate /by Michael Lonich

After the historical $1.5 billion jackpot was finally won, it is time for many of us to consider how to protect our assets during our lifetime and after. Although winning the lottery may not be something we will experience, many of us do have valuable assets that we would like to protect when we are gone. Therefore, this year it might be time to give your estate plan a review.

An important tool in estate planning to consider is the living trust (also called a revocable living trust). In its simplest form, a living trust is a written agreement which sets forth what happens to your assets in the event of your death. One of the greatest advantages of a living trust is that it protects your estate from the probate process, which can be time consuming and expensive. And while a living trust is primarily used as a convenient and efficient way to distribute your assets upon death, you still maintain control over all your assets during your lifetime. Therefore you can alter, add or revoke the living trust at any time for any reason.

In many situations, a trust is the best way to achieve your goals. With a trust you can:

Avoid probate
Provide for your care should you no longer be able to handle your own affairs
Provide for children from a previous marriage
Hold money for minors and ensure they cannot spend it all the minute they come of age
Protect assets from creditors and former spouses
Benefit family and charity through one mean

Probate, on the other hand, is the process the court utilizes to manage the affairs of a decedent’s estate. In contrast to a living trust, the probate process, in most metropolitan areas in California, can take about 6- 18 months. This delay creates additional expenses that can consume 3% to 6% or more of the gross value of the probate estate.

At Lonich Patton Erlich Policastri, our estate planning attorneys don’t believe in offering services that are “one size fits all.” We understand that each family has particular needs and concerns, and we can customize our estate planning services to meet these specific needs and ensure that your long term wishes are carried out. If you are interested in nonprobate transfers or have any questions regarding your current estate plan, please contact the experienced estate planning attorneys at Lonich Patton Erlich Policastri for further information. The attorneys at Lonich Patton Erlich Policastri have decades of experience handling complex estate planning matters, including nonprobate transfers, and we are happy to offer you a free consultation. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may detail general legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

Source:

http://www.forbes.com/sites/deborahljacobs/2012/01/04/make-a-new-years-resolution-to-give-your-estate-plan-a-checkup-2/#2715e4857a0b7be8584f7cf0

Important Estate Tax Figure for 2016

January 21, 2016/in Estate Planning /by Michael Lonich

For 2016, the federal estate tax exemption has increased to $5.45 million per individual, up from $5.43 million in 2015.

The estate tax is a tax on the value of your estate which exceeds the estate tax exemption. Your estate consists of the fair market value of everything you own or have interest in at the time of your death. The total of all of these items is your “Gross estate.” Once your Gross estate is accounted for, certain deductions are allowed and thus your “taxable estate” is determined.

After the net amount is computed, the value of lifetime taxable gifts (beginning with gifts made in 1977) is added to this number and the tax is computed. The tax is then reduced by the available unified credit.

Many relatively simple estates do not require the filing of an estate tax return, however you should consult with an estate attorney. A filing is required for estates with combined gross assets and prior taxable gifts exceeding $5.45 for 2016.

Estate Tax	2016	2015
Federal estate tax exemption	$5.45 million	$5.43 million
Maximum estate tax rate	40%	40%
Annual Gift Exclusion	2016	2015
Amount you can give each recipient	$14,000	$14,000

Estate planning is a highly complex area of law. If you are interested in creating a trust for your family business or have any questions regarding your current estate plan, please contact the experienced estate planning attorneys at Lonich Patton Erlich Policastri for further information. The attorneys at Lonich Patton Erlich Policastri have decades of experience handling complex estate planning matters, including family business trusts, and we are happy to offer you a free consultation. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may detail general legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

Sources:

IRS 2016 tax: https://www.irs.gov/pub/irs-drop/rp-15-53.pdf

https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Whats-New-Estate-and-Gift-Tax

https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estate-Tax

Have You Heard of Digital Estate Planning?

November 3, 2015/in Estate Planning /by Michael Lonich

In today’s increasingly technological world, leaving your digital accounts out of your estate plan can prove to be a big mistake. As of 2014, 84 percent of American adults own a personal computer and 64 percent own a smartphone.[1] As of June 2015, there were approximately 1.49 billion Facebook users, 300 million Instagram users, hundreds of thousands of videos uploaded on YouTube each day, and over 6 billion photos on Flickr.[2] Given the user increase, more and more people are challenged with administering a loved one’s digital assets.

Digital assets can include files stored on digital devices, email accounts, digital music, digital photographs, digital videos, social network accounts, file sharing accounts, online stores, and software licenses.[3] The entirety of these digital assets forms an individual’s digital estate. Due to the role technology has in today’s world, the deposition of digital assets has become a major issue in estate planning.

One of the biggest concerns necessitating digital estate planning is the emotional value of social network accounts. For example, in 2005 a dispute arose in which a mother, Karen Williams, turned to her twenty-two year old son’s Facebook account after his sudden death in hopes of learning more about him.[4] Ms. Williams found her son’s password and emailed the Facebook administrators, asking them to maintain her son’s account so she could look through his posts. However, within two hours, her son’s password was changed, essentially locking her out of the account. It was not until she filed a lawsuit that Facebook granted her ten months of access to her son’s account and after this period, his profile was removed.

With careful digital estate planning, situations like Ms. Williams’ are less likely to occur. Digital estate planning can also serve a variety of purposes aside from the emotional value. It can make things easier on executors and family members, it can prevent identity theft, it can prevent financial losses to the estate, and it can prevent unwanted secrets from being discovered.[5] However, the current state of the law is uncertain and changing in regards to digital estate planning. Currently, federal law addresses privacy concerns and regulates the unauthorized access of digital assets under the Stored Communications Act and the Computer Fraud and Abuse Act, which can create limitations for those attempting to plan for their digital assets. But recently, the Uniform Fiduciary Access to Digital Assets Act (UFADAA) was created and nearly half of U.S. states have introduced legislation this year to enact the Act.[6] The UFADAA is an inclusive law that would remove obstacles that prevent fiduciary access to digital assets and would also give access to a wide range of digital assets. In California, a bill has been introduced known as Assembly Bill 691 or the Privacy Expectation Afterlife and Choices Act (PEAC). PEAC would deny relatives access to electronic information of their loved one, unless the court finds that the person had previously agreed to pass them onto a fiduciary. This bill was unanimously passed by the House of Representatives and as of September 10, 2015, it was sent to the Senate floor with the instruction that it not be voted on until January 2016 in order for further negotiation among parties and amendment.[7]

Our daily lives have changed from sending letters and keeping photo albums to emailing and using social networking accounts. While the state of the law is uncertain, technological use increases each day, emphasizing the importance of digital estate planning to carry out an individual’s wishes.

Estate planning is a highly complex area of law. If you are interested in digital estate planning or have any questions regarding your current estate plan, please contact the experienced estate planning attorneys at Lonich Patton Erlich Policastri for further information. The attorneys at Lonich Patton Erlich Policastri have decades of experience handling complex estate planning matters, including nonprobate transfers, and we are happy to offer you a free consultation. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may detail general legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

[1] Michael Rosen-Prinz, The Uncertain Future of Estate Planning for Digital Assets in California, 21 Cal. Trusts and Estates Quarterly 37 (2015).

[2] Number of Monthly Active Facebook Users Worldwide as of 2^nd Quarter 2015, STATISTA, http://www.statista.com/statistics/264810/number-of-monthly-active-facebook-users-worldwide/.

[3] Evan Carroll, Sample Will and Power of Attorney Language for Digital Assets, THE DIGITAL BEYOND, http://www.thedigitalbeyond.com/sample-language/.

[4] Karen Williams’ Facebook Saga Raises Question of Whether Users’ Profiles Are Part of ‘Digital Estates’, HUFF POST TECH (Mar. 15, 2012, 5:57 PM), http://www.huffingtonpost.com/2012/03/15/karen-williams-facebook_n_1349128.html.

[5] Gerry W. Beyer, Web Meets The Will: Estate Planning for Digital Assets, 42 Est. Pln. 28 (2015).

[6] States Struggle to Adopt Uniform Access to Digital Assets Act, ARMA INTERNATIONAL, http://www.arma.org/r1/news/washington-policy-brief/2015/04/08/states-struggle-to-adopt-uniform-access-to-digital-assets-act.

[7] Michael Rosen-Prinz, The Uncertain Future of Estate Planning for Digital Assets in California, 21 Cal. Trusts and Estates Quarterly 43 (2015).

The Many Forms of Nonprobate Transfers

October 7, 2015/1 Comment/in Estate Planning /by Michael Lonich

Many Americans, even those with children, die without a will. State intestacy laws may provide a framework for how a decedent’s asset should be divided amongst his or her heirs. However, many know that it might be wise to avoid the probate process because it ties up property for months and it can be very costly.[1] There are other processes in place for transferring remaining assets after death. In California, there are several options to transfer assets without probate administration.

Here are a few of these options for transferring assets at death, while avoiding probate: 1) joint tenancy, 2) community property with right of survivorship, and 3) California Probate Code Section 13100 et seq.

Joint Tenancy
- Pros
  - Joint tenancy has a right of survivorship.
  - Each joint tenant owns an identical percentage of the entire asset.
  - Clearing the title to a joint tenancy upon the death of a joint tenant is often a straightforward process.
  - Joint tenancy may be severed unilaterally.
- Cons
  - The new joint tenants will have the power to manage the asset along with the original owner, which may not be the intention of the original title owner.
  - The transfer may have gift tax consequences.
Community Property with Right of Survivorship[2]
- Pros
  - Real or personal property may be owned by a married couple as community property, but with the survivorship features of an asset held in joint tenancy.
  - Community property with right of survivorship is normally more favorable than joint tenancy ownership since both the decedent’s and the survivor’s half of the asset receive a basis adjustment equivalent to the fair market value of the asset at the death of the first person to die. When the surviving spouse dies later still holding the asset, the basis will receive another adjustment to the fair market value.
  - A spouse can establish an account that provides for a nonprobate transfer at the spouse’s death to a non-spouse beneficiary.
  - There is no gift tax consequence.
- Cons
  - A spouse may be able to act alone to revoke the right of survivorship.
Probate Code Section 13100 et seq.
- Pros
  - If the total gross value of the decedent’s real and personal property in California does not exceed the amount of $150,000, the decedent’s personal property may be conveyed by affidavit or declaration pursuant to Probate Code Section 13100 et seq. and no court involvement will be required.
- Cons
  - Probate Code Section 13100 et seq. is only available if no probate proceeding will be commenced for the decedent’s estate or the personal representative of the decedent’s estate consents in writing to the transfer of property through this method.
  - May not be used to transfer real property, regardless of the value of real property.

These are only a few of the methods to avoid probate administration of a decedent’s estate. In planning for nonprobate transfers, individuals should be aware of the pros and cons of their options and anticipate which option works best for their needs. Individual should also be aware of issues regarding liquidity and the intended beneficiaries. Even so, many can benefit from the use of the various nonprobate transfers.

Estate planning is a highly complex area of law. If you are interested in nonprobate transfers or have any questions regarding your current estate plan, please contact the experienced estate planning attorneys at Lonich Patton Erlich Policastri for further information. The attorneys at Lonich Patton Erlich Policastri have decades of experience handling complex estate planning matters, including nonprobate transfers, and we are happy to offer you a free consultation. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may detail general legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

[1] http://www.nolo.com/legal-encyclopedia/why-avoid-probate-29861.html

[2] Cal. Civ. Code  § 682.1

[3] California Trust and Estates Quarterly (2014)

Trust Administration: How a Trustee Can Collect Reasonable Fees

Estate Planning for Millennials

Three Things to Know About Creating a Living Trust

Going to California, The Quasi-Community Property State

HOW AN ESTATE PLAN COULD HAVE CARRIED ON PRINCE’S CHARITABLE LEGACY

The Strangest Wills of All Time

How to protect your assets, even if you didn’t win the billion dollar powerball

Important Estate Tax Figure for 2016

Have You Heard of Digital Estate Planning?

The Many Forms of Nonprobate Transfers

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