R.C. Lim, Attorney and Counselor at Law

There’s More Than One Way to Skin a Cat

Perhaps your estate planning attorney will dodge this discussion because it might become more prolonged than he or she would like. But there are eight ways to avoid probate.

1. Take Advantage of Special Rules for Estates Under $100,000
2. Use POD Accounts
3. Hold Property Using Joint Ownership
4. Make Lifetime Gifts
5. Name a Beneficiary for Your Vehicles
6. Name a Beneficiary to Your Retirement Account
7. Use Transfer-On-Death Registration for Stocks and Bonds
8. Create a Revocable Living Trust

Question: Why do everything under the umbrella of a revocable living trust?

Answer: Simplicity.

The IRS treats your revocable living trust like it does not exist, so, from a tax perspective, your life will have been made no more complicated than it was before.

In addition, all of your assets – record collections, rare stamps, and jewelry too – can be titled as belonging to your living trust. So, unlike with probate avoidance measures taken for specific accounts, like bank accounts, retirement accounts, or vehicles, all of your assets can be titled so as to avoid probate. Indeed, all of your assets must be titled to avoid probate for a probate avoidance plan to effective in the first place.

Finally, there are advantages to having all of your assets neatly collected into a single pot of assets. While useful from its inventory-taking function alone, having assets organized in the one pot helps in other ways too. For example, it permits your successor trustee the flexibility to satisfy quite easily bequests of the sort “33⅓% of my property X, 33⅓% of my property to Y. . .” and so forth, and not only ones that must divvy up your property in advance: car to the daughter, and lawnmower to the son.

Why You Probably Want To Avoid Probate

Clients often appear at my doorstep asking for a will. Most often they will have just gotten married, had kids, purchased a house, or perhaps recently received an inheritance. Like most estate planners, I then proceed to try gently to steer them in the direction of a revocable living trust instead, since it avoids the probate process while a will does not. Of course, sometimes they are right and they really do need a will, and I am certainly ready to discuss the circumstances in which such a choice might be warranted, but they are truly rare. So why is this?

The basic story as to why the probate process – and wills – is to be avoided has to do with the fact that probate is: 1. Expensive, 2. Time Consuming, and 3. Public.

How Much Does Probate in California Cost Exactly?

If a person dies with or without a will, the person’s estate goes though probate. The process tends to be expensive because an attorney is retained and court fees must be paid.

The statutory fee that an attorney may charge is:

ESTATE	FEE
$100,000	$4,000
$200,000	$7,000
$300,000	$9,000
$400,000	$11,000
$500,000	$13,000
$600,000	$15,000
$700,000	$17,000
$800,000	$19,000
$900,000	$21,000
$1,000,000	$23,000
$2,000,000	$33,000

In addition to the attorney’s fee, you estate will also pay a probate referee 0.1 percent appraisal fee for determining the value of many of the items within your estate. There are other costs associated with publications costs and court fees and accounting fees. Altogether these additional costs will run between $1500 and $3500.

Most estates end up paying between 4% and 7% of the overall value of the estate in fees (not taxes!). And if your will is contested, then all bets are off on the expense.

How Long Does Probate in California Probate Take Exactly?

In California, a person’s estate appoints a personal representative. This representative has up to one year to complete the probate process, unless the personal representative must file an estate tax, in which case he or she can take 18 months.

Other than your personal representative’s haste, other issues that affect the timing are whether your estate presents any complicated issues before the court and the fullness of the probate court’s schedule in your county.

During this time, your assets are essentially frozen and cannot be reached by your heirs even though it ought to clearly have been your intent. For instance, your business may stumble as it struggles to reach your assets to pay off its debts. Alternatively, your children may have to halt their schooling because their tuition bills will not be paid. The basic deal is that nothing can happen - no expense can be paid - without approval of the judge. Although it is not always the case, this sometimes proves to be an onerous burden on your assets at the worst of all times.

Why Is It Bad That Probate Is Public?

Since it is a court proceeding, probate produces a series of public documents. These documents will identify you, the value of your assets, and the amounts that each of your beneficiaries receives.

Like most things, this is not necessarily bad. In fact, sometimes, the public review and court scrutiny of your estate could be a desirable thing. Or perhaps, you are like Leona Helmsley and want to announce to the world that you favored your pets over your offspring.

However, for most this presents another disincentive to using a will instead of a revocable living trust. Grifters have been known to follow the probate court filings to find fresh targets. But it’s not just the con-men, because sharp car dealers have been known to look for fresh prospects in the same fashion. This might be a particularly strong consideration of yours if you have some reason to doubt that your heirs will make good business decisions or might crater when confronted with a purring V8.