Services

Estate Planning & Administration

Tate Birnie and Brittany Birnie Greene can assist you in estate planning, probate, trust administration and related matters. If you need legal assistance in another area, we will try to refer you to a specialized attorney in your area.

We will help you prepare a comprehensive estate plan, including trusts, wills, powers of attorney and medical directives. We can also assist you in post-death matters including probate and trust administration.

WHAT IS A LIVING TRUST?

The purpose of this article is to give a very general overview of the purposes and benefits of a living trust and to briefly touch upon the alternatives. It is not meant to be a definitive statement about your personal situation and whether or not you need a living trust. However, most people mistakenly assume that only rich people need trusts. Any person who owns real property in California should probably have a living trust simply to avoid probate.

The main purpose of a living trust is to avoid probate. Probate is the legal process through which a court makes sure that after your death your assets are gathered, your debts paid, and your property distributed according to your will. If you don’t have a Will, the State of California has statutes providing for what is called “intestate succession”, which provides for the orderly distribution to your heirs.

There are set attorney and executor fees in a probate (a percentage of the gross value of the estate), and the main reason people wish to avoid probate is to save the attorney’s fees and costs.  For example, on a $350,000 estate, there would be $10,000 in attorney fees and $10,000 for the executor of your estate, plus court costs over and above these fees. Your heirs will be required to pay these expenses.

Another reason to avoid probate is the time delays involved in distributing the estate. Probate proceedings often take a year (and sometimes longer) to complete, during which time the estate is only distributed upon court approval.

A third reason is to avoid the paperwork and accounting involved in a probate. All probate proceedings are public and are subject to anyone reviewing the court’s file.

There are other methods of avoiding probate, the most common one being joint ownership of assets. The problem with joint ownership can be that you lose a measure of control by putting someone else on title to your property. You would have to get that person to sign any documents, etc., pertaining to the property. Also, the creditors of the person added to title become your creditors. In addition, no one has a crystal ball to look into the future. If the person you put on title with you in an effort to avoid probate either becomes disabled or dies, you could find that you are involved in a conservatorship or probate of their estate.

Another potential problem with joint ownership relates to income taxation of capital gains upon the subsequent sale of assets. In a true joint tenancy situation, the surviving joint tenant receives a basis adjustment for calculating capital gains on only one-half (1/2) of the asset transferred. This can result in substantial income tax on capital gains at a later date. This is an issue which needs to be looked at on a case-by-case basis.

A living trust becomes the most flexible alternative to the probate process. Essentially, in a living trust you are creating a legal document to transfer your property from your individual name to the name of your trust, over which you would have complete control as the trustee. Even though legally you no longer own the assets (they now belong to the trust), as a practical matter there has been no transfer of those assets as far as your control over them during your lifetime. It is not difficult to transfer assets into the trust. This can be done with the help of your bankers, attorney, or stockbroker. For example, in the trusts we prepare, transfer of title to real estate is done by our office.

Upon your death, your estate now has no assets (your trust has the assets) so there is nothing to probate. Your successor trustee steps in and transfers the assets out of the trust to your beneficiaries. There is no accounting, no additional paperwork—just the transfer documents. If you own real estate, the successor trustee records a verification of the trust, along with a copy of your death certificate, in order to transfer title to your beneficiaries.

With a living trust, durable power of attorney and advanced medical directive (see below) in place, you will have chosen the person or persons to handle your affairs and make decisions for you if the time comes when you are unable to do so yourself. The person you name as successor trustee would be able to take care of a number of practical issues which arise on your death, such as distributing personal property, disposing of unwanted personal property, collecting insurance, making sure bills are paid, filing a final income tax return, etc. These practical matters need to be done whether or not there is a probate.

By setting up the documents outlined above, you will have avoided the need to hire an attorney to file any paperwork or for court supervision of any of the processes. At the same time, you have not lost any control over any of your assets or decision making during your lifetime. The Advance Health Care Directive provides that no decision is made by another unless you are incapable of giving an informed consent to health care decisions. The trust would provide for you to be the trustee until you are either deceased or incapable of handling your own affairs.

Generally, when a person executes a living trust they also sign a “pour-over” Will for any assets you might have or later acquire which do not get put into the trust. Obviously, a key portion of setting up a living trust is to make sure that all your assets are transferred into the name of the trust and any future assets you acquire would also need to be taken in the name of the trust.

There are other issues to be considered. For instance, income tax and estate tax implications of a living trust versus other forms of ownership. The information we have given above does not in any way deal with any estate tax savings. A living trust, in and of itself, is not an estate tax savings tool. However, in 2017 the estate and gift tax exemption was increased to $10 million per person and that amount is adjusting each year to account for inflation.  This law will sunset on December 31, 2025. Starting January 1, 2026, the exemption will return to $5 million, adjusted for inflation. With inflation, this may land somewhere between $6 million and $7 million.  There are provisions that are included in a married couple living trust that can maximize the estate tax savings, if necessary. In addition, gifts to charitable organizations can reduce the estate tax owed for an estate over the exemption amount. Those issues and your particular circumstance would need to be discussed with an attorney to decide the best way to handle your overall estate planning.

DURABLE POWER OF ATTORNEY & MEDICAL DIRECTIVES

The other way the probate court most affects our lives is through conservatorships. This is a method by which someone is appointed to oversee your care and finances in the event you are disabled and unable to care for yourself. Conservatorships again require a number of filings, attorney’s fees and costs, periodic accountings made to the court, and assets are transferred only upon approval of the court.

The need for a conservatorship can be avoided through use of a document entitled Durable Power of Attorney. Essentially, you are appointing a person to have authority to do all the things you can do regarding your legal and financial affairs. In the event you become disabled that person would take over. This document, in conjunction with a living trust, would allow one or more persons to completely handle all your legal affairs and make the necessary legal and financial decisions in the event you are disabled.

A living trust and Durable Power of Attorney can therefore allow a family to avoid the use of the probate court, both during your life and upon your death.

We also include in our estate planning package a document called an Advance Health Care Directive, which deals primarily with health care and life support decisions. This is the only enforceable document which allows a person to make medical decisions on your behalf when you are unable to do so.