What Happens To Your Estate
When You Pass Away?
When a person in
California dies, his or her estate transfers to his or her heirs. This is
controlled by the existence or the non-existence of an Estate Plan. If a
resident of the State of California dies with assets in California, all assets
can go through a legal procedure known as Probate if the total gross value of
the estate exceeds $100,000, or if the decedent owned real estate with a gross
value in excess of $20,000. If the decedent's estate reaches either of these
minimums the probate process will occur if
the decedent had no estate plan or even if the decedent had a Will! Many people
are surprised to find out that: Their estate must go through Probate whether
they have a Will or not!
If the Estate Plan
consists of a Will, a Probate Judge and Probate Attorney usually control the
transfer of the estate to the people named in the Will. This assumes that there
are no Will contests or other complications that often occur during Probate.
If a person dies
without an estate plan (no Will or Trust), a Probate Judge and Probate Attorney
control the transfer of the estate to the legal heirs of the decedent through a
process known as Intestate Succession. This is the process whereby the law
determines to whom your estate will be distributed, not you, nor your family.
When the total gross value of the estate does not exceed
$100,000 and the decedent owns no real estate, a Will may be the best way to
pass an estate to his heirs. If a person has an estate worth less than $100,000
gross value, a relatively simple process known as a Summary Probate is all that
is required to transfer property according to the Will.
If a person does not plan properly and has a
GROSS estate in excess of $100,000, his family can face the three legal
procedures known as Probate, Conservatorship and Estate Taxes. Remember what
the gross value of your estate means. For the most part it will be the assets
that you own at death, including all real and personal properties. It usually
does not, however, include assets owned in joint tenancy with other parties,
pay on death accounts, and the like. For a discussion on these assets, see
below.
PROCEDURE #1 - PROBATE
As stated above, Probate is a Court
proceeding, administered by judges and lawyers. Probate accomplishes the
official transfer of a persons assets from the deceased to the heirs and
beneficiaries of the deceased. Because this transfer is handled in court, it
becomes so complex that most people need a Probate Attorney to provide them
with legal service at this time.
The fact that a person has a Will mandates
that the Court will be involved in the interpretation of the decedent's wishes.
The Will assists the Court in the distribution of the deceased person's estate.
The Probate Judge and lawyer(s) use the Will as a guideline for distribution
wishes. A Will does not prevent Probate.
What Is So Bad About Probate?
EXPENSE - Probate is relatively expensive.
Most people have heard that Probate is expensive, but few people are aware of
just how expensive it really is. The following chart reflects California's
statutory Probate fees. These fees include court costs, filing fees, attorneys
fees, and executor fees, but do not include fees referred to as Extra-ordinary
Fees. The probate code allows an attorney the right to charge extra-ordinary
fees for many different services. These extra-ordinary fees are then added to
the minimum statutory guidelines below. The Code provisions governing the
personal representative's and the attorney's compensation are set forth in
Probate Code 10800-10832.
PROBATE FEES
CHART
|
Estate Value |
Probate Fees |
|
$100,000 |
$8,000 |
|
$200,000 |
$14,000 |
|
$300,000 |
$18,000 |
|
$400,000 |
$22,000 |
|
$500,000 |
$26,000 |
|
$800,000 |
$38,000 |
|
$1,000,000 |
$44,000 |
|
$2,000,000 |
$66,000 |
|
$3,000,000 |
$86,000 |
The important thing to remember about Probate
is that the actual fees are based on the GROSS value of the estate and not on
the NET value. To illustrate how your heirs could wind up with nothing, look at
this example.
A person dies with an estate comprised only
of a home with a market value of $100,000. There is a mortgage on this home of
$90,000. Even though the decedent had an equity of only $10,000, the Probate
fees would be calculated on the GROSS value of $100,000. The Probate fees, in
this case, would equal $8,000. If a real estate agent were hired to sell this
home, he would normally charge 6% or $6,000 in this example. To distribute this
small estate, it would cost the heirs $14,000. The heirs inherit NOTHING. The
Probate attorney and the real estate agent receive all of the benefit.
TIME DELAY - If the cost of probate isn't bad enough, consider
the time it takes to complete the Probate process. According to my research,
the average time Probate takes in California is 18 months to 2 years. Some
estates take much longer than this to complete Probate. It is not unusual to
hear of probates taking 3, years, 5 years, 10 years or more. Throughout the
process, the assets are normally tied up and controlled by the Probate Court.
PUBLICITY - Another important problem with Probate is that any
time an estate is probated, a permanent public record is created by the Probate
court. Usually, anyone can find out all the details of the decedent's estate
including who is to receive how much and exactly what assets made up the estate
when he or she died. Even the addresses of the heirs can be available to anyone
who wants to know. You may wish to Avoid Probate!
PROCEDURE #2 - CONSERVATORSHIP
What Is A Conservatorship? A Conservatorship
is another court proceeding. It is designed to protect a person who is
incapacitated and cannot make decisions regarding financial matters for
himself. The process is very similar to Probate. In fact, it is often referred
to as a Living Probate. The difference is that the person or persons affected
are still alive.
In this court proceeding, a person (usually a
spouse or a child) is appointed to manage the financial affairs of the
incapacitated person. This agent must account for every single penny spent on
behalf of the incapacitated person. It is often referred to as a very
humiliating, frustrating, costly and time-consuming process for everyone
involved. It usually costs thousands of dollars for a Conservatorship because,
once again the court system and attorneys can get involved in your private
family affairs for years.
Because people today are living much longer
than in the past, it appears that there are actually more conservatorship
proceedings in Courts than there are Probates in most jurisdictions. You may
wish to Avoid Conservatorship!
PROCEDURE #3 - ESTATE TAXES
What Are Estate
Taxes? In 2001, Congress passed, and President Bush signed into law the
Economic Growth and Tax Relief Act. The Act provides that the entire bill will
expire on December 31, 2010. After that date, all provisions of the Internal
Revenue Code impacted by the Act will revert to the law in effect prior to
passage of the Act. Obviously, that means that the top marginal estate tax rate
will revert to 55% (plus a 5% surtax on certain large estates) and the amount
exempt from estate taxes will be only $1,000,000 (i.e., the amount that the
exemption is scheduled to be in 2006 under former law). In this summary, we
will make reference to years after 2010. However, please keep in mind that no
changes can remain after 2010 without subsequent legislation that is passed by
both houses of Congress and signed into law by the then president. Under the
Act, Estate Taxes are assessed on every decedent's estate in excess of certain
threshold valuations. This tax will remain very high. The good news is that
Estate Taxes are calculated on the NET value of the estate and not the gross
value like Probate fees. The bad news is that even though each person is allowed
their exemption tax free, married couples are allowed only allowed one
exemption for both of them unless they take proper precautions during
their joint lifetimes. To give you an idea of what your family will pay in
Estate Taxes, see the tax table below:
FEDERAL ESTATE TAX TABLE: for years prior to 2009
|
Net
Estate Value |
Married
Without |
Married
With |
|
$2,000,000 |
$0 |
$0 |
|
$2,500,000 |
$225,000 |
$0 |
|
$3,000,000 |
$450,000 |
$0 |
|
$3,500,000 |
$675,000 |
$0 |
|
$4,000,000 |
$900,000 |
$0 |
FEDERAL ESTATE
TAX TABLE: for 2009
|
Net
Estate Value |
Married
Without |
Married
With |
|
$2,000,000 |
$0 |
$0 |
|
$2,500,000 |
$0 |
$0 |
|
$3,000,000 |
$0 |
$0 |
|
$3,500,000 |
$0 |
$0 |
|
$4,000,000 |
$225,000 |
$0 |
|
$7,000,000 |
$1,575,000 |
$0 |
The Internal Revenue Service does, in certain
instances, allow an entire estate, no matter what the size, to pass to a spouse
with no estate taxes assessed. The surviving spouse receives what is referred
to as an UNLIMITED MARITAL DEDUCTION. However,
before you start congratulating the IRS for being so nice, keep in mind that
they are only waiting for the second spouse to die. It is then that they know
they will get their due. MINIMIZE or ELIMINATE your exposure to Estate
Tax!
If a husband and wife owned their assets in
joint tenancy (for a discussion of joint tenancy see below), all of the assets
will be subject to estate taxes at the death of the surviving spouse, if the
assets exceed a net value of $3,500,000. If they establish a trust, either
testamentary or intervivos, which splits their estate into two parts on the
first spouse's death, no estate tax will be paid upon the death of the
surviving spouse unless their net estate exceeds $7,000,000. By referring to
the table above you can see that this saves the family up to $1,575,000 in estate
tax. Who do you want that money to go to?
If current law stays in place, the exemption
level will increase as follows:
|
YEAR |
EXEMPTION |
|
2002
& 2003 |
$1,000,000 |
|
2004
& 2005 |
$1,500,000 |
|
2006
through 2008 |
$2,000,000 |
|
2009 |
$3,500,000 |
|
2010 |
Estate
Tax Repealed |
|
2010
on-New law? |
Who
knows! |
|
|
|
|
|
|
|
|
|
Does Joint Tenancy Avoid Probate?
Joint
Tenancy does not avoid Probate; it only postpones it. Joint tenancy is
simply a form of ownership. If you own property in Joint Tenancy with another
person, your property will avoid Probate upon the death of the first person.
After the first death, the property becomes the sole property of the survivor.
However, without proper planning, Probate will occur upon the death of the
second person. A will has no legal effect on property held in joint tenancy,
and will not control who is to receive that property. The will is a testamentary
document, which means it has no effect until after the decedent has passed
away. If the decedent dies with a will which addresses what the decedent wanted
to be done with a piece of property he or she owned, but he or she held the
subject property in joint tenancy with another individual, the WILL HAS NO
EFFECT as to that piece of property. By operation of law, upon the death of the
decedent, his or her interest in the property passes to the surviving joint
tenant. Therefore, some of the best thought out estate plans can be totally
frustrated by holding assets in joint tenancy form.
Furthermore, there may be a very high price
to pay for holding your property in Joint Tenancy. Since some people think that
Joint Tenancy avoids Probate, they attempt to beat the Probate system by
holding property in Joint Tenancy with their children or other heirs. Seek
legal advice before doing this!! While you may postpone Probate, you may be
risking other problems which can be much greater than Probate.
PROBLEM #1 - First, property owned in Joint Tenancy with another
person may expose that property to lawsuits, attachments, or garnishment by
creditors in the event any liability is created by either party.
Example: A widow owned a $200,000 home with
her son in Joint Tenancy. The son was involved in an automobile accident
causing the death of several school children. The son was liable for $1,000,000
in damages to the parents of the children. He had $500,000 in liability
insurance, which the insurance company paid. The son did not have the amount
necessary to pay the balance. Since the son owned an undivided one-half
interest in the house with his mother in Joint Tenancy, the lawyers of the
children were able to execute judgment on the house. The widow was evicted and
the home was sold to satisfy the judgment. The widow was forced back to work to
support herself and ended up living in a small apartment the rest of her life.
PROBLEM #2 - The second problem with Joint Tenancy is Gift
Taxes. The IRS allows a person to give up to $13,000 per year to anyone he
chooses without Gift Tax liability. When you put a child, or anyone else, on
your deed as Joint Tenant you have just given him a one-half interest in the
property that, in most cases, exceeds $13,000. A federal gift tax return is
due, and you may have just exposed yourself to a Gift Tax. The $13,000 annual
exclusion for gifts is now indexed for inflation, however, the lifetime
exemption, as enumerated above, will not be so indexed.
PROBLEM #3 - The third problem with Joint Tenancy is that there
may be Capital Gains Tax and/or income tax exposure to the surviving Joint
Tenant that could easily be avoided by holding the property in a different form
of ownership referred to as Community Property (if you are married) rather than
in Joint Tenancy. This is because when one spouse dies, the entire property
receives a step-up in the basis (cost of the property) if the property is owned
in Community Property form. This means that if a spouse needs to sell an asset
upon the death of the first spouse, he or she will completely avoid Capital
Gains Tax. If you are single, upon your death the entire property will also
receive a step-up in basis. However, if you hold the property in Joint Tenancy
with your children, only your ownership share of the property receives the
step-up in basis. Furthermore, Joint Tenancy does nothing to protect the estate
against Estate Taxes. Joint Tenancy can be very dangerous and ultimately
expensive. If you own property in joint tenancy with your spouse in a community
property jurisdiction, I highly suggest that you speak with an attorney about
changing that form of ownership to community property form. Remember, as of
July 1, 2001, a new form of ownership is now available in California. The form
is Community Property with Right of Survivorship. Again, I highly
suggest that you speak with an attorney to understand the implications of
various forms of title and how they may affect your particular case.
For example, suppose a husband and wife
bought a piece of property in 1960 for $50,000 and it has appreciated to
$250,000 today. Upon the first spouse's death, the surviving spouse decides the
property is too much work to take care of by herself, and decides to sell the
property. The income/capital gains tax consequences of the sale by the
surviving spouse will depend on the form of title held at the time of death. If
title was held in Joint Tenancy, the decedent's one-half interest will get a
stepped-up basis to $125,000, but the surviving spouse's basis will remain
$25,000 (her one-half interest at purchase). Therefore, the surviving spouse
would realize a $100,000 capital gain. If, however, title had been held in
Community Property form at the decedent's death, each spouse's interest in the
property would receive a stepped-up basis. This is normally referred to as a
full step-up in basis. If this were the case, there would be no capital gain,
and therefore no tax to pay. Obviously holding assets in community property
form rather than in joint tenancy form can result is very substantial tax
savings for a married couple. Remember, only legally married couples can hold
property in Community Property form.
Don't be confused because you have heard that
the State of California is a Community Property state. The IRS has ruled time and
time again, that for purposes of Capital Gains, your form of title will
control. That is to say that your deed, or the name on your accounts, can
control what a survivor will pay, if anything, in capital gains upon the resale
of that asset. It is actually possible to completely eliminate the survivors
capital gains tax exposure with some very simple planning. It is important for
you to KNOW IN WHICH FORM OF OWNERSHIP YOU CURRENTLY HOLD YOUR ASSETS. It
should be on your deed, your tax statement, and your account statements.
GAINS ON SALE OF PRINCIPAL RESIDENCE:
OLD LAW:
Tax deferred if new residence of equal or
greater value purchased within 2 years. Taxpayers over age 55 could elect a
one-time exclusion of $125,000 of gain. If married, and either spouse had used
theirs, whether married to that spouse at the time of use or not, the other
spouse was considered tainted, and he or she could not use theirs.
NEW LAW:
Old law repealed effective May 6, 1997.
Replaced with new general exclusion of gain. Gains on the sale of PRINCIPAL
RESIDENCE may be excluded up to $500,000 on a joint return, and $250,000 on a
single return. Gains in excess of the exclusion amount will be subject to tax,
irrespective of reinvestment in a new principal residence. Exclusion is limited
to one sale or exchange every two years, and no longer a one time lifetime
exemption. Additionally, you must have lived in your principal place of
residence in 2 of the previous 5 years. This is great new law, especially for
homeowners in California, and it gives rise to some very interesting tax
posturing. If you have questions on these areas, give me a call and I will be
happy to speak with you.
OPTIONS
These PROCEDURES/TRAGEDIES can be overcome.
One solution is a properly drafted Revocable Living Trust Package. If you have
an estate with a gross value of only $110,000 you can save your family $8,000+
in Probate fees alone. If your estate is worth more, the savings can be much
greater. In addition, you can save your family months or even years of trouble
dealing with the Probate system, lawyers and judges. Furthermore, should you
become incapacitated during your lifetime, you and your family can avoid the
tragedy of Conservatorship.
What is a Living Trust?
There are three participants involved in a
Living Trust. These are the Trust Creator(s)/Trustor(s)/Settlor(s), the
Trustmanager(s)/Trustee(s), and the Beneficiaries. Throughout a married
couple's lifetime, they, the Trust Creators, occupy all three positions. This
means that they have total control of all assets owned by the Trust. When one spouse
dies, the estate is controlled by the surviving spouse. (When a single person
creates a trust, they occupy all three positions, and there is obviously no
surviving spouse). When the last Creator of the trust dies, instructions in the
Trust identify the person(s) who will step in to manage the Trust. If the Trust
states that the property is to remain in Trust for a Beneficiary for a period
of time, the Successor Trustmanager has the legal duty to manage that
Beneficiary's share until the Trust designates final distribution. If you elect
to distribute your estate immediately upon the death of the last Creator, the
Successor Trustmanager can manage that distribution according to the
instructions in the Trust. (Without the need for probate).
An easy way to understand a Living Trust is
to think of it as a contract between the Trust Creator(s) and the
Trustmanager(s). In this contract, very specific language is used to accomplish
the following objectives:
Control - Throughout your lifetime, the Trust is written so that you have
complete control over all of the assets owned by the Trust. This means you may
buy, sell, exchange, spend, give away, or do anything else you could do with
the assets before you created the Living Trust.
Nuisance Factor - While you are alive, the Trust allows you to live
your life exactly as you did before the Trust was created. Once existing assets
are transferred to the Living Trust, a Trust causes you no more difficulty than
if you had created a Will. A revocable living trust, also sometimes referred to
as a revocable family trust or an inter-vivos trust, is nothing more than an
alternative to a Will. All these terms mean is that a trust has been set up
during the lifetime of the individual(s) establishing the trust. This is
compared to a testamentary trust, which is set up during the probate procedure,
after death.
Incapacity - If you become incapacitated, the Trust names your
spouse, or, if you are single, someone else you choose, to manage your affairs
without a Conservatorship and without court intervention. If you are single, or
if both married spouses become incapacitated, the Trust names a Successor
Trustmanager to care for you. The Trust states in specific language that you
are to be cared for in the manner in which you are accustomed throughout your
remaining lifetime, or until you recover.
Proper Distribution - Upon the death of the last spouse, (or if you are
single, upon your death) the estate will be distributed according to your exact
written wishes. These written wishes spell out exactly who is to receive what
and when s/he is to receive it. Through the Trust, you can keep the
distribution process out of the court system - a non-probate transfer. All
matters can be handled by the family. If the court system is ever needed to
settle a dispute, it is always available to the family. Since the language of
the Trust is so clearly written, families rarely have disputes with a Trust.
Estate Tax Avoidance - In the case of married couples, Estate Taxes are
eliminated on estates with a value of up to $7,000,000. This is accomplished
because a married couple's estate will divide into two trusts upon the death of
the first spouse. These Trusts are known as A-B Trusts. By creating an A-B
Living Trust, your family can save hundreds of thousands of dollars in Estate
Taxes. Remember, you can also avoid these estate taxes by drafting into your
Will proper testamentary trust protection, however, that Will must still be
probated.
For estates greater than $3,500,000, if you
are single, or $7,000,000, if you are married, you should seek competent legal
advice on avoiding further exposure to estate tax. Feel free to call our
office.
Changes - While you are alive and competent, you can amend or completely
revoke the Living Trust with absolutely no penalty whatsoever.
How
Can I Create A Living Trust?
When you decide to protect yourself and your
family from the procedures/tragedies of Probate, Conservatorship, and, if you
are married, Estate Taxes, creating a Living Trust is easier than you may
think. It is not necessary to gather all of your assets together to begin the
process. All you need to do is make some basic decisions about your estate
distribution.
DECISION #1 - What is your choice for the final distribution of
your estate? You may specify any manner of distribution of your estate upon
your death. There is virtually no limitation regarding the way you do this.
However, keep in mind that the simpler
your distribution plan, the easier it will be for your Successor
Trustmanagers to administer.
DECISION #2 - When do you want the estate to be distributed? Most
people choose immediate distribution upon the death of the Creator(s). When
there are minor children, handicapped beneficiaries, or other special
situations, the estate can be held in Trust for a specified period of time.
Sometimes people want to control the distribution to their children or other
beneficiaries over a period of time instead of giving them everything at once.
Again, any timing needs that you and your family may require will be included
in your Trust documents.
DECISION #3 - Whom do you want to name as Successor
Trustmanager(s)? Successor Trustmanagers are the person(s) who take your place
as Trustmanager upon your death or incapacity. Successor Trustmanagers should
be people who you know will look out for the best interests of the
Beneficiaries. Most people choose their adult children for this position.
Sometimes, because of special situations, people choose friends, financial advisors,
or a professional Trustmanager to manage their estate upon their death or
incapacity.
DECISION #4 - Do you need Guardians? Guardians are individuals
whom you wish to raise your children until they are eighteen years of age for
you should something happen to both parents prior to that time. Do you want to
disinherit someone? Do you have other special needs, such as beneficiaries who
are handicapped, deceased, etc.? All of these situations will be addressed in
your Trust documents.
After you have made these decisions, you need
to communicate your special needs to the lawyer who will draft your Trust.
Because the Dimeff Law Office has extensive experience creating thousands of
clients' Trusts, a simple but effective form of providing your special information
has been created. Special worksheets , when properly filled out,
give us all of the required information.
Considerations to keep in mind when choosing
the source for your Living Trust:
Lawyer vs. Non-lawyer. Always insist that a licensed attorney who practices
in the field of estate protection drafts your Trust. For your own protection do
not consider non-attorneys or do-it-yourself packages. IT IS AGAINST THE LAW
FOR A NON-ATTORNEY TO DRAFT A TRUST FOR YOU. Additionally, if you use a company
that claims to have attorneys on staff, the attorneys are working for that
company. Your attorney is supposed to be a neutral and objective attorney
working for you, and not some company that is trying to sell you some other
insurance product. A law firm must always operate under the protective eye of
the State Bar. If a private organization creates your Trust, you have no such
protection in the event of bankruptcy or other problems. As a further
protection, make sure that the attorney you select is exclusively committed to
estate planning and estate protection. These laws can deal with the probate
code, the code of civil procedure, the civil code, the family code, welfare and
institutions code, the Internal Revenue code, Probate Courts, and other federal
and state rules and regulations. These laws change from time to time. If the
firm that drafts your Trust does not keep current with the law and your
documents are not drafted correctly, your family may face thousands of dollars
in fees and taxes that could be avoided. Do you want to risk the severe
penalties of Probate fees and Estate Taxes by not insisting on the best Trust
and legal service available?
COMPARISON CHECKLIST
If you live in California or Alaska, we
invite you to shop around to verify that working with the Dimeff Law Office is
the right decision for you and your family. During your investigation, ask the
attorney if he or she provides the following documents and services:
1. Complete Package. Always insist that you receive a Complete Package.
The Living Trust alone is not enough for complete protection. Other necessary
documents compliment and provide safety nets for all contingencies. This law
firm provides the following:
|
Living Trust (Simple, A-B or A-B-C) |
Assignment of Personal Property |
|
Pour-Over Will(s) |
Burial and Funeral Instructions |
|
Durable Power(s) of Attorney |
Successor Trustmanager Instructions |
|
Health Care Power(s) of Attorney |
Personal Property Designation |
|
Living Will(s) (Physician's Directive) |
Abstract of Trust |
|
Community Property Agreement (if
married) |
Plus Many Estate Organizational Aids |
2. Maximum Flexibility. Make sure that your documents are designed with the
flexibility you need. Many trusts are drafted in such a manner that you may
need to revise and amend your Trust when the laws change or if the size of your
estate changes. Proper drafting of your documents will provide maximum
flexibility so that once you create your Trust, you shouldn't have to worry
about the estate tax exemption law changing. There are basically three
different types of Living Trusts today:
I.
Simple: This is generally the type of trust needed for a
single person. The reason for this is generally, a single person only is
entitled to one estate tax exemption. Married couples, also, may only need a
Simple Trust if their estate DOES NOT EXCEED $3,500,000 net (under current
law).
II.
A-B Trust: This is generally the type of trust married
couples need if their estate, upon the death of the first spouse to pass away,
is valued between $3,500,000 and $7,000,000 net (under current law). The A-B
Trust is the type of trust that utilizes both spouses UNIFIED CREDIT AGAINST
ESTATE TAXES (both $3,500,000 estate tax exemptions).
III.
A-B-C Trust: This is generally the type of trust married
couples may need if their estate, upon the death of the first spouse to pass
away, is valued at greater than $7,000,000 (under current law). It may also be
needed if upon the death of the first spouse, his or her half of the community
property and his or her separate property interests were worth more than their
exemption of $3,500,000.
The documents we create for all of our
clients have been designed to offer the maximum flexibility that they can
possibly receive under the law. Again, remember, even a properly drafted living
trust for a married couple only protects a net estate of up to the cumulative
value of the respective spouses exemption levels in the year of their
respective deaths.
3. Many attorneys promise good service. If you have a question, can you easily get it
answered or will you have to come into the office and sit down with the
attorney and be charged for the answer? If you join our Concierge Estate
Plan (See below) our clients always have access to us by telephone and/or
computer, and it is not necessary to make an appointment, drive across town,
find a parking space and wait in the lobby to talk to Mr. Dimeff. All questions
can be handled conveniently, quickly and efficiently by telephone or e-mail.
The Dimeff Law Office is as close as the nearest telephone. In addition, there
are local affiliate offices located throughout California.
4. Concierge
Estate Plan. During
the past 20 years we have had twelve years of Republican Leadership (Bushes)
and eight years of Democratic Leadership (Clintons). In that time the income
tax, estate tax, and capital gains tax laws have been in a constant state of
flux. Now, with a new democratic president with a solid majority in congress,
there will be even more changes-big changes. This time, the changes we are
expecting will have a negative impact on your estate plan and beneficiaries.
To adapt, it is important that you monitor your
family situation, your trust, asset protection, beneficiary plan and the legal
environment on an annual basis in order to assure the outcome you get is
exactly what you want. This is especially true as income tax, estate tax and
capital gains taxes are going up.
It is strongly recommended that you update your
estate plan at least annually. To help keep your cost down and to provide the
best estate planning services possible we have developed a new service for our
clients that will help you stay ahead of this perfect storm we see on the
horizon.
The Dimeff Law Office (DLO) is proud to announce the prepaid Concierge Estate Plan exclusively available to
our existing clients. As a member you can take advantage of a series of
services that we have developed exclusively for our clients. These services
will allow you to rest assured that your estate plan is always up to date. The
Concierge Estate Plan includes:
1.
Annual Reviews of
Your Estate Plan: the meeting will be between DLO, you and as many, or few, of your
beneficiaries as you would like. The meeting can take place in our office or
over the phone. The membership includes drafting of an amendment, if needed,
for free. Beginning January 1, 2009, that cost to non-members will be $500.00
per Amendment.
2.
The Quarterly
Conversation: Each quarter DLO will
send a CD that you will want to listen to on your drive home, or in the comfort
of your home. Every day we’re seeing changes in tax laws, asset protection
laws, and numerous maneuvers by scam artists, creditors and tax collectors. DLO will sort through the important developments
and we’ll have a few moments together as I explain how you might be impacted.
If anything comes up between our CD conversations.
3.
Free Telephone
Support: for all your estate planning inquiries. Whenever you’re worried about
an event or beneficiary, simply call us on the phone. We’re here and ready to
help. As a Concierge Estate Plan member
you will not be charged for the call, no matter how long it takes to answer
your inquiries.
4.
Go
Paperless/Green: starting in 2009 DLO will be providing all our Concierge
Estate Plan members use of our secure document management service. Simply scan and
email your estate planning documents, tax returns, insurance, medical or any
other important papers into your personal web site. Your document retrieval
system will be set up so you can quickly find any critical piece of paper in a
matter of seconds. You’ll never lose an important document again. Additionally,
when your family needs those documents after something has happened to you,
they will also have easy access to important legal papers.
5.
Post Mortem
Assistance For Your Family: With the passing of any member of the Concierge Estate Plan, we’ll provide post
mortem administrative services, if needed, at a 40% reduced cost to our
members’ families. Remember, what services your family may need at that time
(of your passing) will be based on the law then in effect and the size of your
estate at that time, so there is no way in which to advise you, at this time,
whether your family will need these services.
Members of the Concierge
Estate Plan will be able to avoid our normal fees, that will be billed to
non-members staring January 1, 2009, of $395 per hour for communications with
the lawyers of the firm, the $195 per hour for communication with our
associates and the $60 per hour we charge for communications with our
Paralegals. As a member all communications regarding the updates and
modifications of your trust and estate plan are covered for one low fee of $395
per year. That is just one hour of our normal billing. Remember, we will be
giving you tax advice, and tax advice is deductable.
5. Client Independence. While many attorneys may tie you to them with
continuing legal services, this law firm's goal is to make you independent so
that YOU can operate your own estate plan. The firm is always available to
guide you, should you need it.
6. Understandable Documents. Our goal is to make each client independent of courts
and lawyers. Our documents are written in plain English as much as possible.
This is done so clients can read and understand their documents. In addition,
complete, step-by-step and easy-to-understand instructions accompany the Trust
Package.
7. Instruction Manual. Included with each trust package is an instruction
manual that gives you the basic information about your trust AT YOUR
FINGERTIPS. If additional information is required, simply call.
8. Amendments and Reviews. Should your needs or your family's situation change,
if you are not a member of our Concierge Estate Plan (see above) we will
make normal amendments to your Trust at a nominal fee ($500.00 after
January 1, 2009).
9. Practice Focus. This area of the law is very complex. If an attorney
does this on a part time basis, or does not belong to important related
professional organizations, they may not be aware of the fast changing laws
regarding trusts. The Dimeff Law Office's practice is a tax and estate-planning
firm. The practice is dedicated to protecting estates. Mr. Dimeff is a member
of the Estate Planning, Trust and Probate Law Section of the California State Bar . In addition he is a
member of the National Academy of Elder Law
Attorneys, and the American Bar
Association Real Property, Probate, and Trust section. His practice is dedicated
solely to the protection of estates. His time is spent exclusively in the field
of Estate Protection.
A WORD ABOUT PROCRASTINATION .
Procrastination is the number one reason that
everyone in California has not created a Trust. When you consider the low
initial cost of a trust by the Dimeff Law Office, the quality of the documents,
and the quality of the support service, why wait any longer? Add to that the
firm's dedication to helping people provide the maximum estate protection to
their families, and there is no other reason to continue to procrastinate.
If you need help in deciding a distribution
plan for your family or any aspect about protecting your estate, please feel
free to call us. There is no charge or obligation for this service.
WHEN SHOULD I TAKE CARE OF MY ESTATE PLAN?
Should I
take care of it after we get back from the vacation? NO! Should I take
care of it after I get out of the hospital-its only a minor procedure? NO!
NOW is the time to take care of the
estate plan that will protect your family and loved ones. The process is made
easy through the Worksheet forms. Remember, once you have created and funded
your Living Trust, you will have the peace of mind of knowing that you and your
family will never have to face the tragedies of Probate, Conservatorship and,
if you are married, Estate Taxes. Follow this link to
start the process of creating your own trust.
The
Dimeff Law Office
Main Office
999 Eolus Ave., 2nd Floor
Encinitas, CA 92024
Additional
affiliate offices throughout California
FREQUENTLY ASKED QUESTIONS
ABOUT LIVING TRUSTS
Can
Beneficiaries and TRUSTMANAGERS who live out of state be named?
YES. It does not matter where Beneficiaries
and TRUSTMANAGERS live.
Is
the Living Trust still valid if I move to another state?
YES. It does not matter where a Living Trust
is written; it should be valid in all 50 states. A Living Trust also protects
you from Probate in every state where you might own assets. However, if a
client moves to another state, I advise that you have your trust package
reviewed to make sure it complies with that state's statutorily drafted
documents. As a member of the National Academy of Elder Law Attorneys, I will
be happy to refer you to an attorney in that area. There are approximately
three thousand of us whose practices are focused in the area of estate
planning.
Does
a Living Trust get recorded or registered?
NO. Not in California. A Living Trust is a
private document that is not recorded. Documents showing all, or partial, title
to real estate are recorded to show ownership by the Trust. The IRS does not
require any new tax forms to be filed.
Are
property taxes affected by a Living Trust?
NO. Transfers from you to your Living Trust
should not affect property taxes. For purposes of Proposition 13, the transfer
of your property into your revocable living trust is not a change in ownership.
Can
the terms of a Living Trust be changed?
YES. The CREATOR(S) can change, amend or
revoke the Living Trust without penalty at any time, provided they are mentally
competent.
Is
a Living Trust beneficial to a single person?
YES. For unmarried, widowed and divorced
persons, a Living Trust avoids Probate and Conservatorship no matter what the
size of the estate.
Is
a Living Trust only for the rich?
NO. Although very rich people seem to be the
first to take advantage of Living Trusts, a Living Trust affords the same
protection against Probate and Conservatorship for all people with an estate
valued at greater than $100,000. If your estate is worth more than $100,000
gross value, a Living Trust can save you and your family money. Many people
advise that if your estate does not go over $1,000,000 net value, you don't
need a trust. Look at the statutory probate fee chart included in this
document, and guess who might be advising people that if their estate is only
$750,000 they don't need a trust.
Is
it more complicated to buy or sell assets once you create a Living Trust?
NO. Other than adding the word Trustee after
your signature, assets in a Living Trust are sold exactly like assets that are
not protected by a Living Trust. There is no additional Hassle Factor by
creating a Living Trust.
Is
the process of transferring assets into the Living Trust difficult?
NO. Complete instructions are included in the
Complete Living Trust Package. It will require some time and effort on your
part, but it is not difficult. The time and effort that you spend now will reap
many benefits for you and your family in the future. Should you ever experience
any difficulty, simply call the special client 800 number and we will provide
any help you might need.
Are
all assets usually transferred into a Living Trust?
NO. Usually people will keep a checking
account with a minimal balance outside of the Trust because it is easier to
write checks for bills and shopping. In California, as long as the total amount
outside the Trust is less than $100,000, there is no Probate. Life insurance
and Annuities already have a named Beneficiary and are therefore not subject to
Probate. Remember each state has its own probate procedure, which will be
triggered at various levels. Additionally, by statute, virtually all P.O.D.'s
(pay on death accounts) such as IRA's, SEP IRA's, Keogh's, 401(k)'s, 403(b)'s,
pension plans, deferred compensation, life insurance policies, and annuities do
not trigger probate. Therefore, they normally do not need to be funded into
your trust. There are, however, occasions and circumstances under which you may
wish to name your trust as a beneficiary of such accounts. Please call my
office if you have questions on your particular situation. Remember, your
particular situation is unique, and you should strive to keep as much in your
family's pockets as possible by seeking competent legal advice.
Is
Separate Property along with Community and Joint Tenancy Property transferred
into the Living Trust?
YES. In order to protect all property, it
must be owned by the Trust. There is a Schedule A in the Trust package that
assures that Separate Property will remain separate. Joint Tenancy Property
will be changed to Community Property in order to gain the maximum step up in
basis (Capital Gains Tax savings). The Community Property is then transferred
into the Trust.
Are
there any income tax savings with a Living Trust?
YES. While a Living Trust does not affect
your normal filing of any income taxes, a Trust will provide some protection
regarding Capital Gains Tax if you are married. See question above.
Additionally, if your income producing assets are probated, the income generated
during that procedure will be taxed to a much greater extent, than if that
income had been earned by the beneficiary. This is due to the fact that your
estate will have to pay the income tax generated during the probate procedure,
and your estate is exposed to a much greater income tax burden than is the
beneficiary.
What
happens if Congress changes the Estate Tax threshold from the current
$3,500,000 to some other level, which they have done? Do I have to have my
Living Trust re-drafted or changed? (Remember, the exemption level will now
change every few years until the year 2010)
YES. A change in the law, or the size of your
estate, could require at least a review (and probably a fee, if you are not a
member of the prepaid DLO Concierge Estate Plan). However, a properly drafted
revocable living trust should not require redrafting if Congress changes the
law. Our clients' trusts, have the maximum flexibility allowed by law.
What
happens if the size of my estate changes during my lifetime? Do I have to have
my Living Trust re-drafted or changed?
YES. Exactly the same answer applies to this
question as it did for the question immediately above.
The
Dimeff Law Office
999 Eolus Ave., 2nd Floor
Encinitas, CA 92024
Phone: 760-633-1934
FAX: 760-633-1844
E-Mail: carl@dimeff.com
Copyright & Protected Work Product: 1997-2009. The Dimeff Law Office.
All rights reserved
URL: http://www.dimeff.com/trust/maininfo.html
Date last changed: 4/6/2009