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What is Estate Planning?
Estate planning is the process of evaluating your present situation and planning for the future. It's a life long process that involves all of your assets and your plans for retirement, disability and death. Estate planning is necessary to make sure you and your beneficiaries get the most out of your estate. Just like everything else in life, planning now will save trouble later. When dealing with disability or death, the trouble saved will be to your spouse, children, friends and relatives.

Do I Need a Will?

A will is simply a document that follows certain legal guidelines and gives instructions to those who survive you regarding your estate. If you don't have a will, California law determines how your estate will be distributed whether you want it that way or not. For instance, your estate, under certain circumstances, could be distributed to an aunt or uncle or in extreme cases, the state of California (See Probate Code § 6400 - 6402.5)

What is Probate?
Probate is court supervision of the identification and distribution of a deceased person's estate. A personal representative known as an executor is appointed to do the leg work, the assets are identified and valued, the beneficiaries are notified and the court orders how the assets will be distributed, generally according to the terms of the will. This process can take up to nine months to complete. California law allows the executor to be paid a fee for these services. In addition, it the executor needs the assistance of an attorney, the attorney is also allowed a fee. The following is the fee schedule found in Probate Code § 10810. If both an executor and attorney are required, the fee is doubled.

Size of Estate
Size of Estate
Executor Fee
Attorney 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
600,000 15,000 15,000 30,000
700,000 17,000 17,000 34,000
800,000 19,000 19,000 38,000
900,000 21,000 21,000 42,000
1,000,000 23,000 23,000 48,000
2,000,000 33,000 33,000 66,000

Can I Avoid the Cost and Time of Probate?
Generally, estates with a gross value of more than $100,000 are subject to probate. There are two common methods of avoiding probate. First, property can be held by the owners as joint tenants. Each joint tenant has equal, undivided share of the property and a right of survivorship. For instance, if a husband and wife own their home as joint tenants, each owns an undivided one-half of the home and if one of them dies, that person’s one-half will automatically pass to the other spouse.
The second method is by creating a trust and giving the property to the trust. One of the most common types of trusts are “living” trusts, or trusts created during a person’s lifetime.

What is a Living Trust?
A living trust is a trust that is created by person (called a trustor) that owns some type of property who then gives that property to the representative of the trust (called a trustee). The terms of the trust spell out who gets to use the property, or who it is left to under certain circumstances (the beneficiaries), including the trustor's death. In a living trust, you can be the trustor, the trustee and the beneficiary. Living trusts are also revocable, which means you can change or end the trust during your lifetime.
You establish the trust, appoint yourself as the trustee and use and enjoy your property during your lifetime. For all practical purposes, the trust is treated as a fictional entity during your life time. You file taxes for yourself and include income from the trust as if you earned yourself, and so on. After you die, the trust becomes irrevocable and is treated as a separate entity. Because the trust, not you, owns the property when you die, it's not a part of your estate and is not subject to probate. As a result, you save both time and money. Remember, the statutory fee for an executor a $100,000 estate is $4,000. That amount doubles to $8,000 if both an executor and attorney are needed.

Can a Living Trust Help Me Reduce My Estate Taxes?
Yes. The benefit of a living trust for smaller estates is avoiding the cost and time of probate. For moderate to larger sized estates, there are two devices that when used with a trust, can help you save estate taxes. Remember, every penny save is a penny more to be used as you direct in your trust. First is the marital deduction. A deceased spouse can pass an unlimited amount of his or her estate to the surviving spouse tax-free. However, the remainder of the surviving spouse's estate will be taxed on his or her death. The second device is each individual's estate tax exemption amount. This is an amount, $1,000,000 in 2002, which is exempt from estate taxes.
Basic tax planning for a living trust works like this. If a husband and wife have an estate worth more than their combined exemption amounts, $2,500,000 for example, on the death of the first spouse, the estate would be divided into two trusts. An "A" trust for the surviving spouse, and a "B," or bypass trust, for the deceased spouse. The B trust is irrevocable and is funded with enough of the estate to take advantage of the deceased spouse's exemption amount. In our example, this would be $1,000,0000. The balance, $1,500,000, would pass to the surviving spouse. If the size of the surviving spouse's estate remained at $1,500,000, the remaining exemption would leave a taxable estate of only $500,000.

If the first deceased spouse's estate had passed directly to the surviving spouse, and the surviving spouse's estate remained at the full $2,500,000, then $1,500,000 would be subject to taxes. A carefully drafted "A-B" trust can dramatically reduce estate taxes. If you believe you need legal assistance or resources in the listed area, please submit a Request for Assistance by clicking here. Request Assistance

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©2007 The Law Offices of Dean R. Broyles, A.P.C.

NOT LEGAL ADVICE: This website is purely a public resource of general information which is intended, but not promised or guaranteed, to be correct, complete, and up-to-date. This website is not intended be a source of advertising, solicitation, or legal advice, and the reader should not consider this information alone to constitute the formation of an attorney-client relationship, should not rely on information provided herein, and should always seek the advice of competent counsel in the reader's state.