If you live in California and don’t have an estate plan — even a simple will — in place when you die, the state will determine how your assets are distributed. This is done based on California’s “intestate succession” laws.

These laws determine which relatives will receive your assets and how much of them each person will get. Succession laws are based on how closely the heirs were related to the deceased person.

The assumption is that the deceased would want close relatives to have the bulk of the inheritance. However, your biological and familial connection may or may not coincide with how close you actually are, how you feel about your family members or whether they need or can responsibly handle the money or property.

California’s intestate succession laws are impacted by the fact that California is a community property state. Therefore, if you leave a spouse behind, he or she will get all of your community property. This property includes most of the assets acquired or earned during the marriage. Unless you and your spouse were divorced or had a legal separation or other property settlement agreement in place, that person will receive all of the marital property — even if you’d been estranged for many years.

The distribution of separate property is done differently. For married people, separate property may include things like inheritances and gifts that one person received before or during the marriage. The surviving spouse will still get a portion of that. How much depends on how many surviving children you have, because your spouse has to share it with them under the law.

Next in order of inheritance are grandchildren, parents, siblings and nephews/nieces. When single Californians with no children die intestate, preference in distribution is also given to those relatives in that order.

The court isn’t going to be interested in how you actually felt about any of these people or whether you intended for them to receive your property or money. Therefore, if you want control over what happens to everything that you worked for and that means something to you, it’s essential to have an estate plan in place. This can also help prevent family squabbles and court battles. An estate plan doesn’t have to be complicated. It just needs to be properly prepared. An experienced California estate planning attorney can help you develop a plan that meets your needs.

Source: The Pasadena/San Gabriel Valley Journal, ““California’s Plan for Distribution of Your Property”,” Marlene S. Cooper, April 04, 2018

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Many people think of trusts as something that only people with considerable assets have. However, many California estate planning attorneys recommend revocable trusts for clients who have average-sized and small estates.

Revocable trusts make it easier for executors to distribute the assets of an estate relatively quickly and easily after a person is gone. With a revocable trust, it’s easier to keep an estate out of probate. As we’ve discussed before, probate can be a costly and time-consuming process for heirs. Further, if an estate doesn’t go through probate, the information in it isn’t made public.

A revocable trust can also help if a person becomes physically or mentally incapacitated and unable to take care of paying bills and other financial obligations. With a revocable trust, the successor trustee can take over those responsibilities.

To place your assets in a revocable trust, you will need to retitle them. The assets in a revocable trust often include bank accounts and property, such as homes. As long as the grantor of the trust is alive and well, he or she can continue to handle the assets as he or she chooses. That includes adding or removing assets at any time. That’s why it’s called a revocable living trust. Some people may choose to have a co-trustee if they have a significant number of assets that they need help managing.

Your estate planning attorney can provide more information about how a revocable living trust can make life handling your estate easier for you and your loved ones based on your individual situation. He or she can also describe how it fits in with the rest of your estate planning documents.

Source: The New York Times, “Life After Your Death? Here’s Why You Should Have a Trust,” Elizabeth Olson, March 22, 2018

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The loss of a loved one is a tragic event in a person’s life. Even if you knew that the person wasn’t going to be around for much longer, the actual death can be difficult to handle. Once you get past the final arrangements and funeral, you will likely have to deal with the estate.

What happens during the probate process depends largely on what type of planning your loved one did before they passed. It isn’t always easy to handle these matters, so being prepared ahead of time for what’s to come might make it a bit less stressful.

When there is an estate plan

When there is a legally-binding estate plan — which is known as dying testate — you will rely on that plan to handle the estate. The plan should appoint a person as the administrator. This individual handles all matters related to the estate, including paying the bills and filing the taxes. The administrator will also find assets and heirs so that the distribution of the estate can occur as it should.

When there isn’t an estate plan

Some people don’t have an estate plan when they pass away, which is known as dying intestate. This makes things a bit more challenging for the heirs because they don’t have any documentation of the decedent’s intentions. In these cases, California’s laws regarding the disbursement of assets applies. The estate will need a person named as the personal representative to handle all of the matters that would fall on the administrator of a testate case. This person will identify heirs and make sure that all estate matters, including the distribution of assets, is handled appropriately.

When challenges arise

There are times when someone will challenge the will. These cases can be very difficult because they pit family members against each other. It might be possible to work through these matters with the person who contested the estate plan, but it might require a trial to get things hashed out. In these cases, it is best to try to remember that the legal case shouldn’t define your relationship with the person. Your relationship might not ever return to what it was before the issue, but you might be able to salvage part of it if you remember that stuff is just stuff.

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We all want our divorced or widowed parents to find love again, particularly as they get into their later years. However, when they decide to remarry, as more and more seniors are, adult children often become concerned about what that will mean for their inheritance.

Sadly, older couples often decide not to marry because their adult children are concerned that the new spouse will get everything and share nothing with them. They may even believe that this is true.

No matter how long a couple may have lived together, if they aren’t married, when one dies, the other likely won’t inherit anything if there’s no estate plan in place. Surviving children would have priority, followed by other biological family, under the laws in inheritance.

However, concerns about adult children’s inheritances shouldn’t stop any couple from marrying. With a will and a prenuptial agreement (both wise choices for anyone getting married later in life), you can stipulate how your assets will be disbursed after your death.

There are still practical and financial reasons why it’s better to remain unwed, In fact, the number of couples over 50 who are choosing to live together without getting married has grown by 75 percent over approximately the last decade.

However, no couple who wants to wed should stay unmarried because of concerns about inheritances. By having everything properly codified in a prenup and your estate plan, you can ensure that your children get the assets you want to leave them and that your spouse will be taken care of as well if you die first. This planning can also help your children and spouse build a good relationship.

Source: The New York Times, “When Your Parents Remarry, Everyone Is Happy, Right?,” Tammy LaGorce, March 22, 2018

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One advantage of having a carefully-considered, detailed estate plan is that you minimize the chance of fighting among heirs after you’re gone. Even close family members can turn on each other if they believe that they were unfairly or mistakenly denied the inheritance they expected.

There are myriad family dynamics that can be predictors of an estate battle. Following are a few, along with steps you can take in your estate planning to minimize resulting issues.

Mental illness or substance abuse

As we’ve discussed previously, when you have a child or other family member with a substance abuse issue, you’re rightfully concerned about their ability to handle an inheritance. The may also be true with family members with serious psychological issues.

A trust is generally the best way to ensure that your loved one is included in the will, but that disbursements of assets are supervised by a trustee. If an heir receives government assistance for a disability, a trust can be set up so that it doesn’t impact those benefits, but he or she can still receive supervised disbursements from the trust.

Sibling rivalry

This can be a big source of conflict. Perceived unfairness in the estate plan can trigger emotions from a lifetime of sibling battles — even if you take pains to treat them equally in your estate.

If you believe that your children will fight over your estate, it’s best not to appoint any of them as the trustee. That will only exacerbate the sense of inequality. Appointing multiple children as co-trustees can make things even worse. Choose someone you trust, but who’s outside the immediate family dynamics. If necessary, you may need to appoint a professional fiduciary.

Remarriage

When people go into a second marriage later in life, relationships between adult children and stepparents are often strained. When people remarry, it’s essential that they update their estate plan. It’s also wise to have a prenuptial agreement. These documents can help ensure that your children get the inheritance you intend. Otherwise, the surviving spouse is at a significant advantage under California law.

You can further avoid familial conflict after you die by discussing your estate planning decisions with your children and other close relatives while you’re alive so that there are no major surprises. It’s also essential to keep your estate planning documents up-to-date to reflect changes in your life and your family.

Source: Everplans, “8 Signs Your Family Will Fight Over Your Estate,” accessed March 19, 2018

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One of the major concerns of family members who have lost a loved one has to do with the financial aspects of the death. People who are dealing with an estate that is a fairly nice size will have to determine what debts must be paid and in what order. The estate administrator is the person who will have to deal with these matters.

When you are going over the assets and debts for an estate, you need to understand how to handle the debts. There are several factors that have to be considered. Here are a few that you need to remember:

Secured vs. unsecured

Secured debts, such as a home that has a mortgage, can usually be collected by the creditor because they can just take the property back. Unsecured debts, such as credit card debts have no guarantee for being paid. California laws set all debts into categories that dictate the urgency to pay. Priority debts must be paid first. Any funds that are left from the estate after those are paid would then trickle down to other debts. When debts that are required to be paid are all taken care of, the heirs will get the remainder of the estate.

Mortgage debt

One interesting thing to note about mortgage debt is that the mortgage company can’t demand that a mortgage is paid off immediately if there is a co-owner on the home. Instead, the co-owner would have to continue making the payments on the home. If there isn’t a co-owner, the person who inherits the home could pay the mortgage off or the estate might pay it off. In some cases, it is possible for an heir to just pick up the payments on the mortgage.

Student loan debts

With the exception of student loans who have a co-signer, there isn’t any guarantee that these loans will be paid when a person passes away. If the estate has the money to pay them, they can be covered. If not, the debt is likely going to have to be charged off.

Other debts

Other debts, such as credit card debts and medical bills, will be paid as possible from an estate. Just like student loan debts, these will have to be dismissed if the estate is unable to pay. As is the case with many things that have to do with probate, administrators should verify the order that bills for the estate must be paid.

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If a loved one asks you to be the executor of his or her estate, it’s understandably not something you want to think about until you have to. However, after your loved one is gone, you’re likely going to be in a state of grief and perhaps denial.

Therefore, it’s important to know what being an executor entails and to be as prepared as possible when the time comes. The more detailed and organized your loved one has been in his or her estate planning, the easier the job will be for you.

First, you need to access the original will and other estate documents. You’ll also need to obtain multiple copies of the death certificate. The funeral home can get you those certificates. If your loved one lived alone, it’s also essential to ensure that the home is safe, that mail doesn’t accumulate and that bills get paid.

If your loved one has an estate planning attorney, he or she will help you deal with the legal and financial issues. If the attorney who drafted the will is no longer around, you should seek guidance from an estate planning attorney in the state where your loved one lived.

If the will has to be probated, there are fees assessed. You may have to pay some costs out-of-pocket. Keep records of those so that you can get reimbursed from the estate.

Administering the estate will consume the bulk of your time and energy. This process includes finding all of the assets owned by the deceased. It also includes paying taxes and debts owed by that person. You’ll need to distribute assets to heirs and beneficiaries as your loved one designated and finally pay yourself as the executor.

If someone asks you to be an executor and you aren’t the closest living relative, consider whether this is something you want to take on before you say yes. It requires time, patience and good organizational skills.

If you agree to be the executor, make sure the person has a current, comprehensive estate plan and that you know where to locate everything you’ll need. Know where all of the documents are, where necessary passwords are stored and who the estate planning attorney is. Make sure you have everything necessary to begin your job when you are called on to do so.

Source: Kiplinger, “How to Perform the Duties of Executor of an Estate,” Daniel A. Timins, Esq., CFP, accessed March 12, 2018

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Creating an estate plan that truly protects your assets and makes your intentions known regarding the dispersal those assets is often far more complicated than one might expect here in California, especially when it comes to real estate.

Without a properly prepared estate plan and will, your wishes for your estate may not align with a slew of state laws that govern real estate and probate. Considering the relatively low threshold for probate in the Golden State, nearly every property owner must deal with probate one way or another in when executing an estate plan. However, a poorly executed will or plan may simply create larger conflicts for beneficiaries and drain the resources of the estate while the matter gets resolved.

If you have real estate holdings in California and wish to avoid or minimize probate, it is crucial that you understand some of the nuances of the applicable laws. An experienced probate and estate planning attorney is a strong resource to help ensure that you understand these issues in detail and have the tools you need to make your wishes clear. Even more importantly, this guidance can ensure that your estate plan is not unnecessarily vulnerable to legal challenges.

Willing property to a trust

One of the most common ways to circumvent probate is by placing property into a trust. However, in California, it is not sufficient to simply list property within a trust in your will. It is also necessary to prepare a deed that transfers the property officially into the ownership of the trust.

If you only list a piece of real property within a trust in your will and do not officially transfer the ownership, you may create massive conflicts between beneficiaries. Without a proper deed transferring the property, it will remain in your ownership no matter what your will dictates.

Unfortunately, addressing this may not be a one-time occurrence. Depending on the length of time that the property remains in the trust, you may need or want to refinance. This often requires returning the legal ownership of the property to your name in order to complete the refinance process and then once again transferring it back to the ownership of the trust, all through creating deeds to facilitate each transfer.

In each of these steps, it is necessary to carefully plan and execute the process, so that there is no ambiguity about your intentions. Unfortunately, the more alterations and transfers a property receives, the greater the likelihood of generating contradictions or omissions in the documentation that may lead to conflicts for your beneficiaries and potential legal challenges to your will once you are gone.

Take your own wishes seriously

Properly expressing and protecting your wishes may take time, but it is well worth it. If you choose to ignore these details, your estate distribution may look nothing like you intended when the time comes. Don’t hesitate to use all the tools you have to make these wishes clear and keep your legacy protected.

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As Americans live longer and have to stretch their retirement savings farther, many people die owing more money than they have. Increasingly, older Americans are in debt — sometimes substantial debt. Almost a quarter of people over 75 are still making mortgage payments. When people who have more debt than assets die, their adult children are forced to deal with their parents’ debt as they manage their estate.

When someone dies, his or her debt transfers to that person’s estate and is paid out of the estate. However, if there aren’t enough assets in the estate to cover those debts, the deceased’s survivors (with the exception of spouses) usually aren’t responsible for the debt if they aren’t co-signers on it.

That’s one piece of good news. Another is that if your parent named you as a beneficiary on a bank account, retirement plan, insurance policy or other asset, you aren’t required to use that money to pay that parent’s debt. You’re free to take it without obligation.

Sorting through a parent or other loved one’s debts can be labor-intensive. However, it’s essential to know how much that person owed and to whom. Generally, if you notify creditors of the death and inform them that the state is insolvent, they will cancel the debt.

Unfortunately, sometimes creditors will try to manipulate loved ones by telling them that it’s their responsibility to pay the debt, particularly if they inherited money. That’s why it’s essential to consult with a California estate planning attorney. He or she can advise you of the proper course of action and let you know what your rights and responsibilities are as you settle the estate.

Source: Washington Post, “When your parents die broke,” Liz Weston, AP, March 05, 2018

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Increasingly, Californians doing their estate planning have to deal with the reality that they have a child with a substance abuse problem. Even when children are in recovery, parents may be understandably concerned about what could happen if they inherited a large sum of money or considerable assets. Even a few thousand dollars given in a lump sum to an addict could lead to tragic consequences.

There are a number of options for parents of addicts. Some involve trusts. It’s essential to have a trustee whom you can rely on to oversee the trust responsibly. Your child’s well-being and even life may depend on it. It may seem obvious to choose another child or other family member for this responsibility, but that’s not always wise. It can complicate an already difficult family situation.

One option is a spendthrift trust. As the name implies, these are often used for children whom parents don’t feel are responsible enough, for whatever reason, to handle a large inheritance. There are variations of this trust, but essentially the trustee has control of giving part or all of the money to the heir as he or she sees fit. The trustee can use the funds to help ensure that the heir has enough for housing, food and necessities, but not enough to feed the addiction.

Some parents use incentive trusts, also known as conditional trusts, for children with substance abuse issues. They determine the conditions under which money can be disbursed, by the trustee, such as completing rehab and remaining sober for a year. They may set a condition where if the child relapses, funds are cut off. These conditions help protect the funds from being misspent and, more importantly, can provide a needed incentive for continued sobriety.

Addiction and legal experts often discourage choosing to disinherit children because of substance abuse issues — even if you’ve given up hope of them ever recovering. People may leave children out of the will with the intention of including them if they turn their lives around, but don’t get to it before they die.

Many people are ashamed to talk about their child’s substance abuse problems with anyone, including their estate planning attorney. However, your attorney needs the facts to help you draw up an estate plan that you feel is best for your family.

Source: Beginnings Treatment Centers, “Inheritance, Estate Planning, and Addiction,” accessed Feb. 27, 2018

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