|The High Cost Of Dying!|
|Probate and Federal Estate Tax Avoidance|
|HOW CAN I AVOID PROBATE AND TAXES?|
|Since many of you have been asking for further information, for both yourselves and your families, on the full purpose and meaning behind trusts, I have attached an article that I have compiled which summarizes the basic benefits for you. Feel free to make copies for distribution, if you so desire, to those that you feel would benefit. I look forward to continuing to answer any questions that you have and once again, I very much appreciate those of you who have sent family and friends to me for their estate planning advice.|
|THE PROBATE AND DEATH TAX PROBLEM|
|Giving everything away during your lifetime will obviously avoid probate because, upon your death, there will be nothing in our name to be transferred by probate to your survivors; this also effectively eliminates the federal estate tax. However, this technique makes little sense to most since it is usually difficult to predict when to gift what amount and because few of us relish the idea of becoming paupers and rendering ourselves financially dependent upon others. The donor may also incur a gift tax in excess of the $13,000 per donor per donee annual gift tax exclusion.|
|With some exeptions for very small estates, when you die, leaving assets in your sole name, your survivors must "probate" your estate in order to collect their inheritance. Probate is the legal court procedure by which the state ensures that your creditors will collect their claims, your rightful beneficiaries or heirs will be identified, and your remaining property distributed according to your Will, if you left one, otherwise according to the laws of intestacy of the State of California.
The probate procedure, while having some advantages with respect to dispute resolution among beneficiaries in conflict, has sufficient detriment relative to expense, time consumption and bureaucratic frustation to the beneficiaries that its avoidance has become a popular pursuit.
The primary detriment of the probate procedure is a financial one. Currently, attorney's fees for a probate procedure are statutorily controlled at a rate that amounts to approxamately 6%-10% of the gross estate value. Thus, a $300,000 estate would incur nearly $15,000 of expenses in attorney fees, executor fees, court costs and filing fees.
The time period involved is the next most frustrating aspect of having your estate pass through probate. Presently, an estate will generally not complete the process in less than six months and will often go as long as two years or more. Finally, the probate procedure is a matter of public record and anyone can find out what is owned, what it was worth, and who was disinherited and who inherited how much of it.
|A second method of avoiding probate, and the technique most widely, but unwisely used, is transferring assets into joint ownership or joint tenancy between yourself and one or more joint owner(s). without the necessity of any probate administration. Spouses will most often do this with a home. The same technique can be accomplished with regard to bank accounts, automobiles, or practically any other asset to which title can be held through the physical form of a document.
Although joint ownership usually accomplishes probate avoidance on the death of the first joint tenant, it will not save the last joint tenant from probate and creates some other detrimental risks worth exploring. Joint ownership inevitably results in some permanent loss of control of your property. For example, if you now deed your house into joint tenancy with your adult son, you cannot later remove his name from the title without his consent. You have made an irrevocable gift. In other words, you have locked yourself into an irrevocable arrangement which will preclude you from making a later sale of your own home. Worse yet, you may also be vulnerable to creditor's claims and other lawsuits brought against you by your joint tenants. Further, if your only joint tenant predeceases you, the jointly owned property reverts back to your sole name and if you make no other arrangements, it will still not escape probate on your death.
|AVOID PROBATE AND FEDERAL ESTATE TAX|
|Given the detriments of the probate system, there are essentially three ways to avoid it: (1) Give away your property before you die; (2) Transfer your property into a joint ownership with another; or (3) place your assets into Trust.|