No matter how good the estate plan is, there will be need for legal advice when a person dies.
If your primary estate planning document is a will, then the legal advice will focus on California’s probate procedure. Probate is the process through which a court authorizes your representative (whom you can designate) to take control of your assets, pay your debts, and then distribute your assets to the people you have identified as your beneficiaries. Probate has three significant drawbacks.
- It is a slow process. If you move as quickly as possible through all of the steps required by the California Probate Code, the process will take about 10 months. It is common for probate proceedings to last 18 months or even longer if there are any income or estate tax issues to be resolved.
- It is an expensive process. Fees for your representative and his or her lawyer are set by the California Probate Code as percentages based on the gross value of assets passing through the system. Effectively, those percentages are 2.3% on the first $1 million, 1% on the next $9 million, and .5% on the next $15 million. Creating a will is cheaper than creating a trust, but administering a typical will is substantially more expensive than administering a trust.
- It is an entire public process. Every asset you own, with values, and every debt you have, also with values, becomes part of the public record when you go through probate. The dollar figure each beneficiary receives from you with a description of the assets each receives will also be open for public inspection.
If your primary estate planning document is a trust, then the legal advice will focus on the rights, duties and obligations of your successor trustee.
Trust administration differs significantly from probate because your successor trustee will not need the court’s authorization to take control of your assets. The trust “funding process” (discussed above) means your successor trustee can take control of your assets without involving the court. He or she can also distribute your assets according to the terms of your trust without disclosing the distributions publicly.
But do not jump to the conclusion that having a trust avoids all need for admininistration. Your successor trustee will need to make an inventory of your assets, determine fair market values for those assets, identify any debts, pay those debts, pay your taxes, and then decide how to carry out the distributions you wrote into your trust.
Although a trustee can move faster than a probate court representative, the trustee’s progress will depend on the speed with which other interested parties move. For example, banks and financial institutions impose their own processes on a trustee, which means he or she can proceed only as quickly as the institutions proceed. If the value of your assets exceeds your federal estate tax exemption amount, your trustee will need to prepare and file an estate tax return within 15 months of the date of your death and the IRS can take just as long to review that return.
Other Administration Alternatives
If you own assets in joint tenancy with other people, as community property with your spouse, or subject to shareholder or partnership agreements, there may be different administration issues to resolve. These issues are highly fact specific, and it is not possible to summarize them. The best way to facilitate administration of these assets is to work closely with your estate planning attorney during the planning process.