Protect Your Home With a Trust

Trusts are important for any homeowner, not just the wealthy.

FIRST, WHAT IS A TRUST?

A trust is a fiduciary arrangement in which a grantor transfers their own property to a third party, or trustee(s), to hold for the benefit of another, the beneficiaries.

Trusts may be revocable or irrevocable, and may be in effect during life or testamentary, to take effect when the grantor is deceased.

WHY PUT REAL ESTATE INTO A TRUST?

1. Avoid probate. This is a big one. When a California property owner dies, most assets not held in Trust must be administered and distributed under court supervision as designated in the decedent's Last Will and Testament. If no will exists, State law governs the administration and distribution. Unfortunately, this process causes delays and can eat up a large portion of the estate.

The costs associated with probate are based on the total value of the asset, not the net value after liabilities. For example, if you own a home worth $1,000,000 but owe $950,000 on your mortgage, the value for probate costs is still $1,000,000. In that case, probate would cost $21,000 in statutory fees, plus court costs and fees. As you can see, probate can be very expensive.

Probate will take between six months and two years to complete. During that time, the asset is held up and has not been distributed to your heirs.

2. Avoid reassessment for tax purposes. Usually, a change in ownership causes the property to be reassessed for property taxes, unless a parent/child or other exclusion applies. Transferring the home to a beneficiary through a revocable trust does not cause reassessment. This means that your beneficiary won’t get stuck with higher property tax payments, even if the home has appreciated in value over the years.

3. Ensure your wishes are honored. With a trust, you have full control over exactly what happens to your property when you pass.

4. Protect your property if you are incapacitated. With a trust, you are able to designate someone to handle your financial affairs, allowing you protection should you become incapacitated.

5. Possible savings on estate taxes. Finally, a trust can help you to save, or avoid, Estate Taxes. For more details on how, contact Elizabeth A. Tresp, Attorney at Law today.

ARE THERE DISADVANTAGES?

The only possible disadvantage is the potential inconvenience imposed by some financial institutions. If you ever need to refinance or sell your home, your financial institution may require the additional step of having you transfer the property out of trust and back to you personally in order to sell it. If you are refinancing, some banks may require you to transfer the property back to you personally for the refinance, and then you can transfer it back into the trust. But doing so is very simple and quick.

A New Year's Resolution Your Family Will Appreciate

Dust off that Will and Trust you had drawn up years ago. Where is it now, anyway? In a desk? Safe deposit box? 

When was the last time you looked at it? Changes happen over time. Changes to your family, changes to your assets, and changes to the laws.

For 2015, resolve to have your documents reviewed. Perhaps they're fine, perhaps they just need a minor tweak to make them current. Either way, we are here to help. Now is the time for a review, so contact us today.

If you don't have an Estate Plan, now is the time. Contact us and, based on your needs, we will put together an Estate Plan suited to your specific situation, generally including:

• Pour-over Will

• Revocable Living Trust

• Advance Health Care Directive

• Durable Power of Attorney

Estate Plans are Critical for Singles

If you are single, and do not have a valid Will or Trust, your lifetime of accumulations go where the state says they go. Each state sets standard formulas for distribution when a person dies without a Will or Trust, or “intestate”. That means a single person’s estate may be distributed to distant relatives, potentially against the decedent’s wishes, or if there are no relatives, then to the state. Would you want the result of your life’s work to end up in the hands of the state?

The Wall Street Journal recently published an article on this topic, warning, “it can be especially important for single people to work with estate-planning professionals.”

I encourage you to read the Wall Street Journal article, linked below. If you are single, or if you know a single person who does not have an Estate Plan, contact me today for a free consultation. In the New Year, resolve to set aside an hour to discuss with me how to secure your legacy.  

A general Estate Plan will usually include:

• Pour-over Will

• Revocable Living Trust

• Advance Health Care Directive

• Durable Power of Attorney

http://www.wsj.com/articles/estate-planning-essentials-for-single-people-1417917773

National Estate Planning Awareness Week 2014

Did you know that over 120 million Americans do not have an up-to-date estate plan? 

In 2008, Congress adopted this week, October 20-26, as National Estate Planning Awareness Week. This week is the perfect opportunity to set aside time to plan for your family's future by creating or updating your estate plan. 

To learn more about estate planning, visit the Estate Planning section of our website for more information. Contact Elizabeth today to learn how easy creating or updating your estate plan can be.

Governor Vetoes Bill to Update Probate Code to Protect Pets

On September 19, 2014, California Governor Jerry Brown vetoed AB 1520, a bill introduced by Assemblyman Mike Gatto and passed 72-0 in the California State Assembly. This bill gained notoriety for being the first “crowd-sourced” bill, written by Gatto’s constituents on a wiki. What was the topic of the bill? Updating the probate code to help protect our pets.

Currently, California Probate Code § 15212 allows for the creation of a trust to care for your pets. If you are a pet lover, like I am, ensuring the welfare of your pets after you are gone is critical. What AB 1520 would have done, essentially, is allow the court to appoint a “guardian ad litem” for any pet, for whom a trust has been established, if the court determined that the pet was not adequately represented.

Here is the text describing the bill, as provided by the Legislative Counsel’s Digest:

AB 1520, Gatto. Guardians ad litem: animals.

Existing law establishes requirements for the establishment and termination of a trust for the care of an animal.

Existing law authorizes a court to appoint a guardian ad litem at any stage of a proceeding under the Probate Code to represent the interest of specified persons, if the court determines that representation of the interest otherwise would be inadequate.

This bill would authorize a court to appoint a guardian ad litem to represent the interest of an animal for which a trust has been established if the court determines that representation of the interest otherwise would be inadequate.

I would be devastated at the thought of my dogs, Macaroni and Lucy, not getting the care they need should anything happen to me. I’m sure you feel the same about your furry loved ones!

The good news is that AB 1520 would only have expanded the protections offered by the probate code. To ensure that your beloved pets are cared for as you wish, you should designate a guardian for them in a will or set up a trust to provide for their care.

Contact Elizabeth A. Tresp, Attorney at Law. She is a pet lover with the skills and experience in Estate Planning, Probate, and Tax law to ensure that all of your loved ones, including the furriest among them, are well cared for.

Tax Bills on the Way for Many Covered California Enrollees Who Fail to Keep up with IRS Reporting Requirements

If you obtained health insurance offered through an Affordable Care Act (“ACA”) exchange, such as Covered California, did you know that you are required to report changes in income and other life changes to the IRS throughout the year? Hundreds of thousands of Americans will find out the hard way, with a tax bill from the IRS.

Don’t get caught in that unfortunate situation. If you obtained health insurance through Covered California, you likely received a “premium tax credit” to offset the cost of insurance, based on the estimated income you provided. However, if the actual income reported on your tax return next year is different than the estimated income you reported, the IRS may require you to pay back that tax credit. For many, that could be a large unexpected tax bill.

Staying informed of intricacies of the tax code is difficult, but getting caught off guard by the IRS is even worse. If you run into problems with the IRS or Franchise Tax Board, contact Tresp Law, APC today. 

The Probate Process Explained

The passing of a loved one is a difficult time, and the need to settle their estate can only make matters worse. Without a Trust in place, the estate will have to go through probate.

Probate is a costly, emotionally taxing, and complicated process. Numerous, complex laws govern the probate process in California. Elizabeth A. Tresp and team, will guide you through the probate process with care, compassion, and confidence.

With Tresp Law’s guidance, you will avoid the pitfalls that can lead to significant and costly errors.

THE PROBATE PROCESS

When a California property owner dies, most assets not held in Trust must be administered and disposed of under court supervision as governed by the decedent's Last Will and Testament. If there is no will, State law governs the administration and distribution. Unfortunately, this process causes delays and can eat up a large portion of the estate.

If at all possible, probate should be avoided. The probate process can take at least six months, or even up to several years. There are many different approaches under California probate law that can allow someone to avoid probate. For example, if a trust is in place, assets governed by the trust are administered and dispositioned in accordance with the trust, avoiding probate.

There will be cases when probate cannot be avoided. If that is your circumstance, then the process must be started in order to transfer ownership of the decedent’s property to the beneficiaries.

OUR PROBATE SERVICES

Tresp Law, APC will administer the decedent’s estate, identify and distribute assets to the beneficiaries, and can provide services for other issues that may require the attention of a probate court, including the following:

·       Petitions for probate

·       Trust administration

·       Probate litigation

·       Conservatorships

·       Guardianships

·       Lost Wills

·       Will contests

·       The removal of executors and trustees

·       Post-mortem tax planning 

Tresp Law, APC also represents clients in probate cases involving real estate, stocks, bonds, and other investment forms. If your probate case involves a tax controversy matter, such as unpaid income taxes owed by the decedent or estate taxes, Elizabeth A. Tresp, Attorney at Law, is an accomplished tax law specialist, with a Master of Laws in Taxation from the University of San Diego. She is the right attorney to guide you through the entire process.

HOW DOES THE COURT MANAGE THE PROBATE PROCESS?

1.     In the will, a person nominated as the Personal Representative will file a petition with the Superior Court asking to be appointed as Personal Representative.

2.     If no will exists, persons may petition to become Personal Representative in a prioritized list that is governed by the Probate Code.

3.     The will also is filed with the petition, and notices are sent to heirs and/or relatives, informing them of the date of the hearing.

4.     Even if the will is uncontested, and there are no objections to the petition, the hearing will still take place, to resolve any problems that may have arisen. In some cases, this may mean that the will is determined invalid, or perhaps someone other than the original petitioner is chosen to administer the estate. Most of the time, however, there is no objection and the petition is granted.

5.     Next, the Personal Representative will inventory the estate's assets, locate creditors, pay bills, file tax returns, and manage the estate assets.

6.     Upon completion of all Personal Representative’s duties, another petition is filed with the court requesting the distribution of the estate to the beneficiaries. If the petition is granted, the assets are distributed to the beneficiaries and final tax returns are filed.

WHAT ARE THE COSTS OF PROBATE?

California probate lawyers charge statutory fees, as governed by California Probate Code §10810. This code sets the amount, but higher fees can be ordered in more complicated cases. Probate is generally more expensive than setting up a California Trust.

The Probate Code sets the fees that can be charged by a probate attorney as follows:

·       4% of the first $100,000 of the estate;

·       3% of the next $100,000;

·       2% of the next $800,000;

·       1% of the next $9,000,000;

·       and 1/2 percent of the next $15,000,000.

·       Estates larger than $25,000,000 are subject to a court-determined fee for the amount that is greater than $25,000,000

Unlike a trust, any will may be subject to probate in California.

HOW IS THE VALUE OF THE ESTATE DETERMINED?

Generally, the estate is determined by performing an inventory. Debts are excluded when determining attorney's fees. For example, if a house in the estate is appraised at $2,000,000 but has a mortgage of $1,200,000, it will still be valued as a $2,000,000 asset for the purpose of calculating attorney's fees.

HOW IS THE ESTATE APPRAISED?

Probate referees, appointed by the State Controller, appraise estates. Probate referees determine fair market value for the assets. That fair market value includes mortgages and other debts, which can result in an appraisal of the property that is higher than the equity that the deceased owned in the property. Probate referees are paid a fee based on 0.1% of the appraised assets.

The fee charged to file a probate petition is $320, but may be higher in some counties due to surcharges. On top of the statutory fees, the county also charges appraisal fees, publication costs, and other miscellaneous fees. A typical estate might incur $1,000 to $3,000 in court costs and other mandated fees.

WHAT ARE THE ADVANTAGES OF PROBATE?

A judge controls the proceedings and can resolve disputes between heirs or disputes that may arise between heirs and the Personal Representative. Any creditors notified of the probate are required to submit their claims against the estate within a four-month period. The Personal Representative is generally required to prepare an accounting and report of their activities.

WHAT ARE THE DISADVANTAGES OF PROBATE?

Higher cost. The cost of administration of a living trust for a similar estate is usually much lower.

Slower resolution. Moving an estate through probate will take longer than administering a trust.

If you are domiciled in the State of California or own California real estate, or if you are an heir to an estate subject to administration in California, contact Tresp Law, APC right away. Elizabeth and her team can guide you through the probate process and help you resolve tax issues that may that come up in probate.

When To Know You Need an Estate Plan

Who needs an Estate Plan? Everyone.

When do you need an Estate Plan? Now.

You may not think you have an estate, but almost everyone does. Your estate consists of your car, financial accounts, life insurances, personal belongings, home, and interest in a business. Your estate is literally everything you own. You want to control where and when your assets go when you pass. Of course, if you don’t have a plan, the state has a plan for you. But you probably won’t like it. 

The hard truth is, we don’t know if or when we, or our loved ones, will become incapacitated or when we will pass away. You need to plan for the eventualities. What do they say about insurance? You don’t need it until you need it? The same theory applies to an Estate Plan.

Imagine this scenario: You and your spouse leave your two-year-old with the babysitter for a beloved and much needed date night. While driving to your favorite restaurant, you chat about what to order, and how nice it is to get out of the house. As you round the corner, out of nowhere a vehicle plows into the passenger side of the car. What happens now? Do you both survive the crash? If not, do you have a living trust or will designating a legal guardian for your child? What happens to your home? Who is the beneficiary of your life insurance? What about all of your digital information? Does anyone know how to access your accounts, what accounts you have, and manage finances for your little one?

If you survive, do you have the mental and physical capacity to do all of the above yourself? If not, what will happen?

Don’t panic. We all put things off. Instead, get motivated to do something about it and prepare. If not for yourself, for everyone you love.

Let’s start with the basic four part Estate Plan:

1.    Revocable Living Trust

2.    Pour-over Will

3.    Healthcare Directive

4.    Durable Power of Attorney to handle financial affairs. 

Estate plans vary greatly depending on each person’s financial and personal situation, but this plan is the right place to start.