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Elderlaw: 12/15/2012

Elderlaw Advocates



Dear Len & Rosie,

I have heard conflicting information about trusts vs. wills regarding probate. If you only have a will, does it have to go through probate in California? If so, how long does that process take and how much does the family “lose” to probate?

Charlotte

Dear Charlotte,

The answer to the question “Is my estate going to pass through probate?” does not depend on whether or not you have a will. The need for probate depends on the value of your probate estate. If the total value of your estate is less than $150,000, your heirs can collect your estate 40 days or more after your death with small estate declarations under California Probate Code section 13101. Many banks have their own forms for this, so a lawyer may not be needed at all. Transferring real property of small value is harder. Your heirs will have to have the property appraised by a California Probate Referee and petition the court. But it's still a lot easier, faster, and cheaper than a full-blown probate.

If the total value of your estate is $150,000 or more, then probate is necessary. Probate is time-consuming and typically takes anywhere from nine to 15 months. Probate is also expensive. Probate lawyer fees are set by statute as follows:

4 percent of the first $100,000

3 percent of the next $100,000

2 percent of the next $800,000

1 percent of the amount above $1,000,000

The lawyer for a modest $500,000 estate gets paid $13,000. If the estate is worth $1,000,000 the lawyer is paid $23,000 for exactly the same amount of work. And since the executor gets the same statutory fee, it's doubled unless your executor waives fees. And this does not count “extraordinary” fees that are routinely approved by the court for “extra” work such as selling your home.

How can you avoid this? The operative word here is “estate.” Assets in your probate estate must pass through probate or by small estate declarations and petitions. The trick is to hold title to your assets outside of your probate estate so they will not be subject to probate after your death.

You can avoid probate by holding title to your assets in joint tenancy with your heirs, or by using bank account pay-on-death beneficiary designations. Surviving spouses inheriting an estate can also avoid probate with a Spousal Property Petition. The problem is that joint tenancy can backfire. Your children may decide to take the money and run - it happens sometimes. Also, if your children are on title to your home, you'll have to ask them permission if you want to sell your home or take out a new loan. Your home could even be subject to the claims of their creditors.

For these reasons, the best way to avoid probate is with a revocable trust. Trust assets are not part of your probate estate and are therefore not subject to probate. A revocable trust is also completely under your control so you will not have to seek your children's approval for what you do with your own property.

Len & Rosie

Dear Len & Rosie,

I have been married to my husband for 10 years, but we lived together for 13 years before marrying. My husband has children and grandchildren from a previous marriage. He has all of his financial accounts in his name only, and our home is in a trust in his name only. He refuses to add my name to the deed. The trust is revocable, but I will get to “use” the home until I die, and then his heirs inherit. Under the circumstances, is any of his property community property? Or will I be left with nothing when he's no longer living? I wonder if I would be more secure divorced than married, financially, since I worry that his children will contest anything that my husband leaves me in a trust or will.

Susan

Dear Susan,

This is a common theme in blended families when either or both spouses have children from a prior relationship. Your husband fears that if he dies first, you'll get everything, and it'll wind up staying in your family instead of passing to his children and grandchildren. So, his trust was drafted to provide you with a place to live for the rest of your life, and perhaps income on some of his investments - we'd have to review his trust to be sure.

Is there any community property? Maybe. Community property is defined as assets which either of you acquire during the marriage, except as a result of a gift or inheritance. Everything your husband owned 10 years ago before your marriage is separate property owned by him and him alone. If he wasn't retired by then, his earnings after the date of your marriage are community property half owned by you, and so is whatever he purchased with his employment income.

So, even if the home is in his name alone, you own a partial community property interest in it, if he's been using community property income to pay the mortgage. This doesn't mean the entire property is community property; only the portion actually purchased with community property is. Keep in mind that if the two of you signed a prenuptial agreement, then all bets are off. If you did, you may have agreed that his income would remain his separate property.

Assuming you don't get fed up and divorce him because of his reluctance to provide for you in a manner sufficient for your needs after his death, you may be able to assert that you own part of his trust because it's community property. But you have to be careful. His estate plan could include a “forced election” by which you would have to choose between your community property rights and your lifetime right to occupy his home together with whatever else he leaves you.

What you ought to do now is to try to talk to him gently about what you're going to need to provide for yourself after his death. You've been together for 23 years, so there's a good chance he'll listen as long as you acknowledge his need to provide for his descendents.

Len & Rosie

Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, by phone at 996-4505, or on the Internet at www.lentillem.com.. Len also answers legal questions each weekday, 3-4 p.m., on KKSF Newstalk 910 AM.


Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, by phone at (707) 996-4505, or on the Internet at www.lentillem.com. Len also answers legal questions each weekday, Noon-1 p.m. and Sundays, 4-7 p.m. on KGO Radio 810 AM.
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