Losing a loved one is a difficult time. You may have to deal with your loved one’s estate after the death if he or she had any assets. Many estates have to go through probate. Understanding some basic points about probate can help if you are facing this situation after your loved one passes away.

#1: Do all estates go through the probate process?

All estates don’t have to go through the probate process. There are specific criteria that must occur that can mean an estate won’t have to go through probate. Typically, estates with a value of $150,000 would need to go through this process. If a person died intestate, or without a will, probate is likely necessary. Seeking out the help of an attorney is important in these cases.

#2: How are bills of the decedent handled?

A solvent estate is one that includes enough assets to pay the decedent’s bills. An insolvent estate doesn’t have enough in assets to pay all the bills. The personal representative needs to find out how the law requires payment of bills. The estate is used to pay creditors according to applicable laws, which dictate the payment order for various types of bills. Some creditors might not be paid based on the order of repayment set by the law.

#3: Do I have to use life insurance to pay bills?

Life insurance funds don’t have to pay bills the decedent leaves behind. The life insurance funds aren’t usually part of the estate. Life insurance funds help to pay the decedent’s final expenses and to help the beneficiary.

#4: What does payable on death mean on financial accounts?

Some financial accounts have a payable on death designation. This enables the owner of the account to list a beneficiary. The beneficiary gets access to the funds when the owner dies. This means that the account isn’t subject to the probate process so the beneficiary can access the funds immediately.

#5: What is right of survivorship?

In the case of real estate, if one property owner dies, the other one gets full rights to the property. This concept is known as right of survivorship. It is the way that one spouse is able to remain in the marital home if the other spouse passes away. Unmarried couples and same-sex couples should learn how right of survivorship applies to their cases wh en one partner dies.

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Most people think of estate planning as designating how assets will be handled after they die or if they are no longer able to speak for themselves. However, certain aspects of estate planning, like living trusts, are important for protecting your assets while you’re still alive and well.

There is something called a “life estate” that covers residential property that is owned by people while they are still alive. Life estates are often created so that people don’t have to risk giving up their property if they go on Medicaid.

When someone creates a life estate, it is valid for as long as the “life tenant” or grantor is still alive. That person still has possession of the property and any profits or rent obtained from that property.

However, that life tenant still has an obligation to “remaindermen” not to waste or sell the property. These remaindermen are the ones who will own the property when the life tenant passes away, and there is no probate proceeding.

While a life estate may be a good idea for those who don’t want to risk losing their home to cover health care costs, it’s not the best solution for everyone. Those with significant resources and their beneficiaries may need to deal with estate and gift taxes.

Estate laws vary significantly by state. That’s why it’s essential to consult with an experienced California estate planning attorney in order to determine how to best protect your assets while you’re still alive and to ensure that your wishes are carried out if you become incapacitated or die.

Source: FindLaw, “Life Estate Q and A,” accessed March 08, 2017

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Everyone wants their heirs and beneficiaries to get as much money as possible when they pass away. They’ve worked hard for that money and assets that they’ve accumulated, and they want to see it continue to be used for good and for the benefit of their family.

President Trump has said that he’ll repeal the federal estate tax, which is currently at 40 percent. This appears to be good news for people who inherit a significantly large estate ($5.45 million or more). With a majority-Republican Congress, the president may well get his way. However, one California state senator is seeking to keep the estate tax in our state.

The state senator from San Francisco, Scott Wiener, says “If Donald Trump and congressional Republicans are hell-bent on cutting taxes for our wealthiest residents, we should counter-balance those tax cuts by recapturing the lost funds and investing them here at home in our schools, our healthcare system, and our roads and public transportation systems.”

With careful estate planning, you can minimize and maybe even avoid having your heirs pay an estate tax (sometimes referred to as a “death tax). That can be difficult if you have a family business or a family farm. With state inheritance taxes, your combined tax rate could be as high as 68 percent.

No one knows what federal and state laws will impact Californian’s estates. If you have a large estate, when doing your estate planning, you want to spare your heirs and beneficiaries from unnecessary taxes. An experienced California estate planning attorney can help you do that.

Source: Forbes, “Trump Vows Estate Tax Repeal, But California Plans Its Own 40% Estate Tax,” Robert W. Wood, Feb. 23, 2017

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The duty of a trustee is to manage the assets in a trust in accordance with the terms designated for the benefit of the trust’s beneficiaries.

If you set up a living trust for yourself and are the beneficiary, you have the right to take money or assets from it as you choose. However, if you are the trustee of a trust that’s been set up for someone else, removing funds, even if you intend to replace them, is considered embezzlement. California law defines embezzlement as fraudulently appropriating property entrusted to you but belonging to someone else.

Those convicted of embezzling from a trust can face criminal penalties including prison time. They can also face civil sanctions and have to pay restitution and penalties.

It can be tempting to “borrow” money from a trust. Sometimes people find themselves in financial trouble and figure that no one will miss the money since they plan to repay it before the beneficiary needs or is entitled to receive it. However, that “borrowing” is still illegal.

Too often, older people — particularly those who are mentally incapacitated — become the victims of trust fund embezzlement by caregivers or even family members who assume that they’ll never miss the money. This is a form of financial elder abuse.

Beneficiaries have the right to seek information about the status of their trust if they have reason to believe that the trustee is not maintaining it legally. They can also ask a court to remove the trustee if there are grounds to do so. An experienced California estate planning attorney can provide legal guidance to help you protect the integrity of your trust or that of a loved one.

Source: Lake County News, “Estate Planning: Trustees who ‘borrow’ trust funds,” Dennis Fordham, Feb. 18, 2017

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Some Californians live on top of gas and oil. If these valuable resources are in the ground under your property, you may be getting some nice royalty income on a regular basis. Even if you sell your home, you can retain the rights to what is underneath it.

The disposition of those royalties should be dealt with in your estate plan. What’s the best way to do that? If you want to ensure that the royalty income never goes to anyone but your descendants, you can place the royalties in a trust. The trust specifies that these rights only pass on to those within your own bloodline.

People may think that they have this covered by leaving the royalties to their children in their wills and specifying that they in turn must keep them in the bloodline. However, unless those beneficiaries have estate plans designating the same thing, their share of the royalties could end up in other hands.

One California attorney gives an example of a woman who passed her royalties down to her daughter. In turn, the daughter left the mineral rights to her children when she died. Both made the stipulation that the royalty rights remain in the hands of blood relatives.

Unfortunately, one of those adult children died without a will. Because he had no spouse or children and his mother predeceased him, under California law, his father was his sole heir. The father had children from an earlier marriage and may marry yet again. Since his son had no will designating to whom the royalties could be bequeathed, the father can legally give them to anyone he wants to.

Not everyone is particular about what beneficiaries do with their inheritances or to whom leave it when they die. However, if it’s important to you that assets stay within a family, a trust can provide this assurance. Your California estate planning attorney can offer guidance on how to do this.

Source: Pasadena Journal, “All in the Family,” Marlene S. Cooper, Feb. 01, 2017

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As a young adult, you have a lot of new responsibilities. You might think that you have everything covered, but have you made an estate plan? An estate plan is an important part of being an adult, especially if you have a spouse and children, because the estate plan lets those who are left behind know what to do with your assets.

Myth 1: You are too young to have an estate plan

If you are an adult, you need an estate plan. These plans aren’t only for the wealthy. Even if your only asset is you’re a vehicle or cash, an estate plan is still a good idea. Estate plans don’t include only how to handle your assets, they also include information about what will happen if you become incapacitated.

Myth 2: You can create the plan and forget about

You should revisit your estate plan at least annually once you have it completed. You may have to change the estate plan if you have a new child, get married, get divorced, or have other significant changes in circumstances.

Myth 3: You can forget about digital assets

Digital assets, such as social media accounts, should be included in your plan. This is especially important if your accounts include pictures and other sentimental items that your family members may want access to after you pass away.

Myth 4: Anyone can handle your estate

You should choose the people who are going to handle your estate carefully. Trustees and administrators should be trustworthy and honest. They should know you and what you would want to happen in specific circumstances.

Myth 5: Beneficiaries on financial accounts don’t need to change

As your life circumstances change, you might need to update beneficiaries on financial accounts. Check the person listed on payable on death accounts, such as bank accounts. Double check beneficiaries on life insurance policies.

Myth 6: Nothing will happen to you

Once you have children, you need to plan for them. It isn’t pleasant to think that something will happen to you, but it is a possibility. You must include guardianship information in your estate plan so your children aren’t left hanging in limbo in foster care.

Myth 7: Someone will care for your pets

Beloved pets are often pushed to the wayside when the owner dies. If you don’t want your dog, cat or other pet to end up in a shelter, include provisions for them in your estate plan. This can include a pet trust if necessary.

Myth 8: You will stay healthy until you die

Your estate plan should include a health care power of attorney. This person makes decisions for you if you are unable to do so for yourself. A living will is another tool to help you make your wishes known about life-prolonging care if you can’t speak up because you are incapacitated.

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You’re the trustee of a trust for a beneficiary who owes money to creditors. Can you be required to use assets in that trust to pay that beneficiary’s debt? Under California law, you may be able to avoid having to do that. However, it depends in part on how the trust was established.

A trustor or grantor (the person who creates the trust) can put protections in place against some creditors. However, it should be noted that these don’t apply if the beneficiary’s debts involve reimbursement of public benefits, criminal restitution or child or spousal support.

For example, a trust can have something called a “spendthrift clause” that prevents the beneficiary from using money in the trust to pay creditors — either voluntarily or involuntarily — unless a creditor obtains a court order. However, if the money is deemed necessary to support the beneficiary and his or her family, it can’t be taken, even with a court order.

Another way to avoid having assets in a trust taken by a beneficiary’s creditors is to set up a support trust. These trusts require that the principal and/or income of the trust be used for the support or education of the beneficiary. A creditor would have to prove that all of the money is not needed for that purpose to claim it.

Another type of trust that can provide protection against creditors is a discretionary trust. The trustee has sole discretion over distributions from a discretionary trust. A trustee may be able to help the beneficiary by making payments or purchases for the beneficiary (such as paying for housing, for example) without actually distributing the money from the trust directly to the beneficiary, where it could be taken by creditors.

Once assets are distributed from a trust, collection actions can be taken by creditors to take their share of the money. Even if they haven’t yet been distributed, a creditor can take action to require that any mandatory distributions be taken by something called “step[ping] into the beneficiary’s shoes.”

Any trustee who is dealing with issues involving a beneficiary who has creditors seeking all or part of the assets in a trust should seek experienced legal guidance to help ensure that he or she isn’t in violation of any laws or court orders.

Source: Lake County News, “Estate Planning: Trusts and judgment creditors,” Dennis Fordham, Feb. 04, 2017

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Many Californians are permanent legal residents from countries around the world or are married to someone who is. In the tax world, these people are referred to by the rather un-politically correct term “resident aliens.” This is an important term to know when you are developing your estate plan and have a large estate because the taxation rules for non-citizens are different than for citizens.

As of tax year 2016, if you leave an estate that’s valued at more than $5,450,000, the Internal Revenue Service gets 40 percent of the amount over that limit. That’s what’s known as the “estate tax.”

Surviving spouses who are U.S. citizens have an unlimited marital deduction, so are not subject to this tax. However, surviving spouses who aren’t citizens are required to pay it, and it can be substantial on a large estate.

With careful estate and tax planning, people can reduce or even eliminate the federal estate taxes for non-citizen spouses and other heirs. Non-citizen spouses get a considerably larger annual exclusion on gifts than others you may choose to give money while you’re still alive. By keeping your gifts to your spouse under the current annual amount each year ($149,000 in 2016), you can reduce or eliminate your spouse’s tax burden after you die.

If your spouse becomes a citizen prior to the date when the federal tax return needs to be filed for your estate (usually nine months after death), he or she is entitled to the unlimited marital deduction.

Another alternative is what’s known as a qualified domestic trust. You would need to designate in your will that a QDOT be formed by your estate’s executor or by your spouse. The assets that are bequeathed to your spouse are put into the trust. Taxes on the money are deferred until your spouse withdraws them. However, if your spouse becomes a citizen, he or she can withdraw the money with no tax bill.

When you’re preparing your estate plan, it’s essential to discuss these issues with your attorney if your spouse is a non-citizen, regardless of your citizenship status. It’s not necessary to put off estate planning until your spouse gains citizenship. If his or her citizenship status changes, your attorney can advise you about changes you may want to make to your plan.

Source: MartketWatch, “Estate planning with a non-citizen spouse,” Bill Bisichoff, accessed Jan. 30, 2017

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Politics impacts virtually every aspect of our lives, whether we realize it or not. That’s because our elected leaders make and sign the laws by which we all are required to live. The new Trump administration and the Republican-led Congress have indicated that there are a number of areas in which they plan to exert their authority in the near future.

Of course, talking about sweeping changes and being able to implement them are two very different things. The details of some reform plans remain unclear, leaving Americans with a good deal of uncertainty about things like health care, immigration and even estate planning.

According to one estate and wealth planning advisor, “Estate-tax repeal is now a political issue, not a revenue one.” Donald Trump has long talked about his intention to repeal the estate tax (often referred to by those who oppose it as the “death tax”).

As the tax levied on high-value estates, currently, individual estates of $5.45 million and above are subject to estate taxes. It doesn’t impact the vast majority of Americans, but those who are affected can end up paying a good deal of money in taxes on a loved one’s estate.

Estate planning advisors say that people shouldn’t amend their estate plans based on how a potential estate tax repeal and other tax reforms may play out. One says, “Now is not the time to make drastic changes to estate plans.”

There’s a possibility that if the estate tax is repealed, it could be replaced by a capital gains tax, which Trump has mentioned in the past. Whether the tax would kick in only when someone sells an asset in the estate or would apply to unrealized gains remains to be seen.

Of course, those planning their estates and those inheriting them also need to be aware of state laws and potential changes to them. That’s why if you live here in California or are inheriting all or part of an estate here, it’s essential to have the guidance of an experienced estate planning attorney who is up-to-date on both state and federal laws impacting California estates.

Source: CNBC, “Estate-planning pros take wait-and-see approach to Trump,” Andrew Osterland, Jan. 11, 2017

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It can be a huge hassle for an estate administrator to force his or her own family members to move out of a deceased parent’s or other relative’s former home. But this might be necessary to manage the property and get it ready to put on the market. Because of familial ties, these individuals may press all the guilt buttons while continuing to squat on the property.

However, business is business. As estate administrator, you have the duty to preserve the full value of the estate. That may not be possible while unauthorized family members continue to occupy the property.

Assessing the situation correctly is critical

It’s vital to determine exactly what is going on with the property. Did this relative live on the property with the deceased for some time before the person’s demise? Did he or she move in to provide care and supervision during the decedent’s final illness, or had the individual been living there already, perhaps even for decades? Did he or she only move in after the former property owner passed away? Answering these questions allows you to formally define the relationship between the person and the property he or she is occupying.

Is the relative maintaining the property and paying the taxes and other expenses?

If someone is occupying a property and paying for its upkeep, e.g., making necessary repairs or improvements, paying the property insurance and taxes, keeping the grass cut, etc., these contributions could be viewed in the most positive light. After all, a vacant property is more likely to be vandalized or to fall into disrepair. The relative’s contributions may, in some cases, be construed as a form of rent.

Nonetheless, you may still need to insist that he or she relocates, despite the apparent reluctance to do so. But this scenario could affect the strategy you use. Rather than appearing heavy-handed and authoritarian, you might try to approach your relative with a spirit of cooperation. Let him or her know that you appreciate the efforts to maintain or improve the property “to get it ready to put on the market.” Ask whether their intent is to purchase the home from the estate and how you might be able to help facilitate that. This could mean contacting other heirs to discuss a buy-out, among other things.

Are you on the hook financially for all the expenses?

If, as estate administrator, you’re left paying all the household bills, insurance and property taxes, your tone and approach may need to be a bit different. Figure out exactly how much is spent monthly or annually to maintain this property. Put it in writing and show or send it to the occupying relative, requesting that he or she pays you or the estate back for these expenditures. Make sure that you do not use the term “rent” at any point, because you don’t want to establish a landlord-tenant situation when you are trying to sell a property on the market.

Turn to the law to for assistance

One of the difficulties associated with removing a relative from a decedent’s estate property is that you could be dealing with your own sibling or cousin. It’s natural to dread the bad blood your actions will cause. While that is understandable, as the repercussions could be permanent, it doesn’t negate your duties as estate administrator.

Many estate administrators in this situation turn to California probate attorneys to be the “bad guys” who oust these squatting relatives. This allows you to remove yourself from the most difficult of the proceedings, i.e., evicting the squatters, and may preserve what remains of your relationship with your relative(s).

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