By Kelley Atherton
Triplicate staff writer
Probate, estate planning, living trust; these are all words most people don't use on a regular basis, but they are important words to know when planning for the future.
The definition according to the State Bar of California: An estate is all of one's assets, including bank accounts, real estate, stocks and bonds, furniture, cars, jewelry. It may also include life insurance policies, retirement accounts and payments due to the deceased. The estate value is based on the "fair market value." This means how much a property would sell for in an open market between a willing buyer and willing seller.
Probate is a court-supervised process for transferring a deceased person's asset to the beneficiary(s) named in his or her will. In the event there is no will, the court will appoint an administrator. If a person's total assets amount to less than $100,000, or is simply transferring property to a spouse, the estate does not have to go through probate.
The issue with probate is the amount of time and money that piles up. During probate, one's estate and assets become public and the process typically takes up to a year. Lawyers fees for probate are based on how much the estate is worth. An attorney is entitled to four percent of the first $100,000 of the estate, three percent of the next $100,000, two percent of the next $800,000 and one percent for the next $9 million. Beneficiaries would also have to pay court costs. Whereas paying an attorney to set up a trust will typically cost either a flat fee or an hourly fee not based on the value of your assets. After the trustor's death, it only takes about 60 to 90 days to hand over assets.
A will is a legal document which names individuals or charitable organization that will receive assets after the owner's death as a gift or trust. It also nominates someone as the executor who the court will appoint to manage the estate. A living trust comes from Old English Common Law. It puts all the assets into a trust and transfers to beneficiaries upon death without going through probate. The trust also names a successor trustee to manage it if the trustor should become incapacitated A will is still needed to cover any assets not included in the trust, which is also known as a "pour over will."
Anyone with assets over $100,000 can consider estate planning to avoid probate for his or her heirs. For traditional bank accounts and investments a person can name a beneficiary to be "paid on death." For other assets, one of two things can be done to avoid probate.
First, property can be gifted to an heir during a person's life time and can reserve the right to live there until death. However, control of the property goes to whom it's been gifted to. The second option is to put assets into a trust. A living trust allows a person to keep control of his or her assets until he or she dies. Upon death, assets are passed directly to a beneficiary(s) with instructions. This completely avoids probate court, saving time and money.
For more information on this topic visit the State Bar of California at www.calbar.ca.gov. There are also several lawyers who deal with estate planning including Gene Schach, Raymond Caine and Ethan Mehr. For more information about finding a lawyer visit www.findlaw.com