How to Avoid Probate

A $1,000,000 estate costs approximately $50,000 to probate and takes about 1 to 2 years.  Creating and funding a living trust avoids probate.

1.  Estate Distribution Plans:

A.          Intestate (no will or estate plan)  

B.          Will  

C.          Living Trust  

D.          Others: 
     1. Joint tenancy
     2. Totten trust (savings account, i.e.,
        Mary Jones in trust for Susan Jones)
     3. Small estates (under $100,000)
     4. Community property

2.  Probate:  Court supervised administration of an estate if a

              person dies intestate or with a will.

    Statutory Probate Fees:

    Size of Estate         Attorney Fee     Executor Fee      Total Fee

     $ 100,000            $ 4,000        $ 4,000       $  8,000

       200,000              7,000          7,000         14,000

       300,000              9,000          9,000         18,000

       400,000             11,000         11,000         22,000

       500,000             13,000         13,000         26,000

     1,000,000             23,000         23,000         46,000

     2,000,000             43,000         43,000         86,000

     3,000,000             63.000         63,000        126,000

     4,000,000             83,000         83,000        166,000     

Also, most estates must pay additional fees for extraordinary services.  Examples of extraordinary services are sales of real and personal property, any litigation, preparation of tax returns, carrying on a business, and others.

In addition, there are court costs, filing fees, publication fees, appraisal fees, and other fees.
 

3.  Intestate Succession:

      A.  Estate distributed by default pursuant to rules in   

          Probate Code
      B.        Estate representative (administrator) selected by

    default pursuant to rule in Probate Code
C.        Requires probate, substantial costs and time delays

D.        A $1,000,000 estate costs approx. $50,000 to probate

E.        Probate usually takes 1 to 2 years and more often

    2 years.

4.  Will:

A.          Low establishment costs

B.          Simplicity during lifetime

C.          Can include a trust (testamentary trust)

D.          Guaranteed results

E.          Requires probate, substantial costs and time delays

F.          A $1,000,000 estate costs approx. $50,000 to probate

G.          Probate usually takes 1 to 2 years and more often
     2 years.

5.  Living Trust:

A.          Establishment of trust is a two step process

1.          Creation of trust

2.          Transfer of assets to trust and funding process

B.          Titles of persons involved in process

1.          Grantor or Trustor: person who creates trust

2.          Trustee: person who manages trust, can be same person as grantor

3.          Beneficiary:  person entitled to benefits of trust, can be same person as Grantor and Trustee

C.          Advantages

1.          No court proceeding

2.          Substantial cost savings; probate is avoided

3.          Eliminates time delays

4.          Proceeding is private; whereas probate is public

D.          Disadvantages

1.          Establishment costs more expensive than will, but in   most cases cost is tax deductible

2.          Requires attention during lifetime

3.          Possible mismanagement by Trustee

6.  Federal and state wealth transfer tax system:

A.          Transfers not subject to death taxes:

1.          All transfers to surviving spouse

2.          All other transfers under $3,500,000

3.          Annual gifts of $13,000 per donee

7.  Further elements of Comprehensive Estate Plan:

A.          Pour-over will if living trust is adopted

B.          Durable power(s) of attorney for assets

C.          Advanced health care directive(s) to physicians

D.          Durable power(s) of attorney for health care

E.          Nomination(s) of conservator

F.          Transfers of real and personal property into trust

G.          Letter of instructions

H.          Burial instructions

I.          Location of estate plan documents

J.          Declaration of status of property; community vs. separate

K.          Personalized estate plan data recorder and booklet

L.          Free consultations explaining estate plan and documents

M.          Review of assets and advice regarding estate plan, life

insurance and retirement plans