Estate planning: are you prepared?

A person’s death creates many problems emotionally and financially.

Emotionally, a family and friends have lost a loved one and are

suffering from pain that only time can heal. Financially, many people

fail to plan for their demise and leave their heirs with the daunting

task of “cleaning up the mess” left by the deceased. However, with

proper planning during life, a person can avoid “leaving a mess” for

heirs to clean up.

When a person dies, one of three scenarios usually exists.

The first scenario is that the deceased died without a will. This

scenario is called intestacy. The court appoints an administrator for

the estate. The administrator distributes the estate according to

California law. Unfortunately, with intestacy, the deceased has no

say in who receives his or her assets.

In the second scenario, the deceased created only a will. A will

usually appoints an executor and tells the executor what people are

to receive his or her assets. The executor then distributes the

estate by the terms of the will.

Many problems exist with these first two scenarios. For example,

neither intestacy nor a will avoid conservatorship or reduce taxes.

However, the most costly and time consuming problem with a will or

intestacy is a court process called probate. In probate, the court

oversees the payment of debts and the distribution of assets. By

California law, most estates with a gross value of over $100,000 must

go through probate.

Probate costs average six to 10% of the gross value of your

estate. Therefore, probate fees on a $500,000 house with a $300,000

mortgage will be calculated on the $500,000 gross value.

Additionally, the average California probate lasts 11 months.

However, these 11 months can easily turn into years if any problems

occur during the probate process. With probate, the bottom line is

that your heirs usually must wait at least a year and pay tens of

thousands dollars to receive their inheritance.

In the third scenario, a person created a revocable, living trust.

A living trust avoids probate and other problems associated with a

will or intestacy. A living trust allows your beneficiaries to

receive their inheritance quickly and cost effectively. With a trust,

you maintain every right and privilege over your property that you

had before the trust.

Almost every person who is married, has minor children or has an

estate with a gross value over $100,000 should get a living trust

along with a pour-over will and durable powers of attorney for

healthcare and finance. These four documents, properly prepared, are

almost guaranteed to save you tens of thousands of dollars, minimum.

A proper estate plan will avoid probate; eliminate court

conservatorship; bypass estate, property and capital gain taxes; and

protect against long-term care costs. Since proper estate planning

can save large sums of money, always consult an attorney whose

practice focuses on estate planning. In addition to preparing

documents that take advantage of the current laws, the attorney will

advise you on all the steps necessary to protect your estate.

Article submitted by Robert Somers, Attorney at Law, The Law

Offices of John E. Trommald with nearby locations at 2101 Business

Center Drive, Irvine and 13912 Seal Beach Blvd., Seal Beach.

Additional offices are located in Los Angeles and Encino. For more

information, call the toll free number at (866) 667-7622. Visit the

Web site at www.TotalTrustPlan.com.