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Orange County Probate & Estate Administration Law Blog

Prudent steps to take in estate planning

California residents may be aware of the importance of backing up the hard drives on their computers with a regular schedule because a backed up drive may be very easy to download and restore. The same kind of planning can also help to streamline the closing of an estate after a person has passed on.

A 2012 survey reveals that 41 percent of baby boomers do not have wills, and 71 percent of those under the age of 35 are missing documentation of their wishes at passing. Without a will, property will be distributed in accordance with state laws of intestacy, and the court may even make personal decisions about who will care for a decedent's minor children. In addition, the lack of a will may delay the distribution of assets to loved ones. Estate documents typically consist of a will, a durable legal power of attorney, a durable medical power of attorney and a living will.

Robin Williams set up a trust during estate planning

Robin Williams' death on Aug. 11 has made many think more about estate planning. According to initial reports, Williams had a solid estate plan that protected the needs of his family. At least one revocable trust was included in his plan, which one report suggests will eliminate many of the hardships that families of other celebrities have had to cope with. Many other celebrity deaths, by contrast, have been associated with poor estate planning and resulted in turmoil.

Many celebrity deaths have been associated with controversy because of non-existent or poor estate planning. In many cases, their deaths are highly publicized, and depending on how their estate was set up, disputes or problems faced by heirs often become public matters as well because the estate may have to undergo probate. This makes the listing of the assets available to news outlets who might be following the proceedings of a deceased celebrity's estate closely.

How trusts assist in estate planning

California residents who would like to set parameters around the distribution and use of their assets may choose to create a trust. Both a revocable trust and an irrevocable trust can resolve issues that may arise in the probate process.

For example, parents may use a trust to appoint a particular guardian or successor trustee to help manage funds for their children. This arrangement can prevent assets from going to other family members after the person's death. One factor that draws many individuals to trusts is that they are private financial tools. In comparison, wills are read publicly during the probate process. However, trusts are administered outside of the probate process and away from the control of a court.

Update estate planning documents when moving to a new state

Individuals who are moving to or from California may wish to review their estate plans to see how the move may change some of its provisions. Moving to a new state does not invalidate a will or trust, but the way in which state laws govern property and other aspects of estate planning might create complications. For example, California is a community property state, so there may be implications for a couple moving there from a non-community-property state.

Adding a codicil to a will or an amendment to a trust might take care of the change that may result from any state laws, but there are other estate planning documents that will need to be reviewed as well. For example, some individuals write a living will, an advance directive or another type of document specifying their medical wishes in case they are incapacitated.

Sorting out the estate of a family member

When a family member dies, someone has to take control of and appropriately distribute the estate. This can be an unpleasant task, especially if the deceased family member was a parent, grandparent or other close relative. Although no one really wants to consider financial affairs at such a sad time, it is better to sort things out early in order to avoid calls from creditors wanting to know when they will be paid. California residents may not know the law regarding debt collection after death.

If the deceased person left a will, he or she most likely named a person as an executor or personal representative. If no will exists, an administrator can be appointed by a probate court. It could be a surviving spouse, a child or another person competent to handle the affairs. An executor or administrator is bound by law to act in good faith to handle the estate openly and honestly and attempt to carry out the wishes of the deceased.

Actor reportedly refused to set up a trust for his children

California residents may be eager to know why Phillip Seymour Hoffman gave his entire fortune to his girlfriend. According to the will of late actor, his longtime girlfriend received the bulk of his estate while his three children received nothing. A trust was set up for his oldest son in 2004, however, the trust was only meant to be used if both he and the boy's mother passed away.

Reports say that he believed that his girlfriend, who is the mother of all three of his children, would take care of them properly. His will also stated that he hoped that his son would live in Manhattan, San Francisco or Chicago if an outside guardian had to be appointed to take care of the children. This was included in the will because he believed that the child should be exposed to the culture, arts and architecture of those cities. If it was not possible for a guardian to reside with them there, he asked that the visit those cities at least twice a year.

California residents should avoid Lou Reed's estate plan model

Lou Reed, lead singer and guitarist of The Velvet Underground, and his estate plan serve as a cautionary tale. Many rockers are known for their wild side, but Reed's wild tactics also seemed to manifest in his estate planning. Conscientious Orange County residents should take care to avoid the possible mistakes made in this particular estate plan.

Reed's estate was worth $30 million and potentially more. Filings with probate court show that he had earned over $20 million from his copyright, performance and publishing royalties since his death in 2013. Additionally, his estate had received a portion of this money from business deals contracted by his manager and friend, who was also one of the executors of his estate. According to the manager, there are assets valued at about $10 million for his wife and his sister as well as an additional half million that is to be used for the care of his 93-year-old mother that will pass to his sister to use on her behalf.

Heirs battling over inheritances becoming common

California residents could be interested in recent findings regarding the extreme effects of sibling rivalries leading to court battles. Many baby boomers are in line for part of the estimated $8.4 trillion that could be inherited by children of depression-era parents, according to a MetLife study on the transfer of inter-generational wealth. The study shows that the median inheritance amount is about $64,000.

Until recently, fighting over the family will was considered to be disgraceful, according to a trusts and estate lawyer. He went on to state that these are more desperate times and desperate people are no longer embarrassed about airing their grievances regarding money in public. Sibling rivalries are now tearing families apart as they take each other to court. According to a former committee chairman of the American Bar Association, disagreements leading to court battles over the family will are increasing. He also stated that usually the courts are referring those cases to some sort of mediation rather than a full-blown trial. When the inheritance issues are resolved via settlement, reconciliation between siblings is more probable in the future.

Choosing a proper trustee is essential

California residents often want to leave more specific instructions for their property than a simple will. It is possible to set up trusts that will administer their estate and carry out their last wishes in a variety of complex ways, but it is essential to choose a responsible and qualified individual to administer the trust as its trustee. The choice of trustee can be one of the most critical details of the trust.

The first and most important factor with any trust is the beneficiary. It makes an enormous difference in planning if the inheritor is a minor who needs only periodic payments until they reach an agreed-upon age as opposed to a beneficiary who is an incapacitated or unreliable individual who cannot be relied upon to make responsible financial decisions. There are also charitable trusts and those in which an organization benefits instead of a person.

Transferring a home without a tax burden

For many California residents, their home is their most valuable asset. Therefore, it may make sense to look into putting that home into a Qualified Personal Residence Trust as part of prudent estate planning. The trust is easy to set up and the owner of the home can still use the home after it has been transferred to its new owners as long as rent is being paid.

The QPRT is established by having an attorney draw up the appropriate paperwork. At the time that the trust is established, the homeowner will determine how long the trust will be in existence for. After the term is over, the property is transferred to the beneficiary. For example, if someone wanted to transfer a property to their children a decade from now, that person could do so with a QPRT.

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