Husband and wife NOT as joint tenants and some options

INTRODUCTION

I was presented a really interesting hypothetical recently. I thought it would make for a good blog post as there are a lot of intricate turns. It gets into issues of how to hold title, how to distribute assets between husbands and wives, and how small estate options work after death.

HYPOTHETICAL

In this case Harold and Wendy owned a property worth $125,000. More interestingly they actually owned 10% of a property worth about $1.25m.  Why is this more interesting? The loan on the property is about the same. H and W are now deceased and the rest of the owners on the property want to sell it to get out from under it. H committed suicide after committing fraud on a number of real estate deals.  W, was innocent in the transactions, and died a short time later penny-less. The title is held “Harold Doe and Wendy Doe husband and wife.”  It does not specify joint tenants or rights of survivorship. The rest of the owners need to clear title that is held in H and W’s names.

THE PROBLEM

I think the biggest problem here is getting the property transferred from H to W. That is, transferring from W is easy. The total is less than $150,000 so that can easily be accomplished by a probate code 13150 petition to succession of real property. That’s the easy part. Getting the property into W’s name is the hard part. Why was it not held as “joint tenants” or as “community property with the rights of survivorship” I do not know. Maybe the Realtor or title company are at fault. However, it is what it is now.

THE OPTIONS

The options I see for getting the property out of H’s name are as follows:

1) Disclaimer: If this had been done within 9 months of his death a disclaimer would have been a simple and inexpensive way to clear title to H’s 1/2 of the 10%. However, it’s been longer than 9 months so that won’t work here.

2) Spousal Property Petition: This is usually my go-to option if an asset is not held in joint tenancy or with rights of survivorship after one spouse dies. However, in this case they had a will which poured over to a trust. You can not use a SPP when there is a will pouring to a trust. So that option is off the table. If there was not a pour over will I would use this procedure as it avoids the need for an appraisal of H’s interest in the property.

3) Under $50,000 Affidavit: Yes, husband’s 1/2 is worth about $62,500 but maybe we could convince the Probate Referee to accept conventional discount valuation analysis and value his interest at $50,000 or less!? The only problem is we would need to get someone appointed as at least special administrator of W’s estate to carry out this procedure. That adds cost.

4) Under $150,000 Succession: If the Probate Referee doesn’t buy the discount valuation analysis then this would be the next best option. More expensive than the under $50,000 affidavit but this would be necessary if the Probate Referee doesn’t agree that the value of H’s interest is less than $50,000.

THE OTHER HALF OF THE PROBLEM

Once out of H’s name what’s best for W? I believe in the end it may be best to do a full probate for W. This would enable her estate to sign the under $50,000 affidavit or under $150,000 succession. It also will, overall, create the simplest solution.

CONCLUSION

Probate is generally to be avoided when it can. Costs are less and the case is resolved quicker when a full probate is avoided. However, in this case I believe doing a full probate for W, even though it’s not required, may be the more efficient way to transfer the asset and allow the partners to sell the property.

 

 

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Lack of trust funding and the small probate estate

INTRODUCTION

It seems a day does not go by without speaking to a potential new client regarding their parent’s trust not being properly funded. There are different reasons this happened but the end result is they need to hire an attorney. This blog post focuses on the interplay of the small probate estate and funding a trust post-mortem.

HOW IT HAPPENS

A trust does not get funded for so many reasons. The most common are:

1) Client did trust themselves (or with on-line service or forms) and didn’t get assets into the trust;

2) Client hired a paralegal or inexperienced attorney and they didn’t properly take care of trust funding;

3) An asset was acquired after the trust was established;

4) The asset was an oddball thing that even a good attorney might miss.

IT SEEMS TO OBVIOUS

After death the lack of trust funding always seems so obvious. Of course, you have 20-20 hindsight and you can actually see the asset is NOT IN THE TRUST. However, it’s much harder during life. The most common problem is probably that clients, when they set their trust up, see the asset listed on a schedule of assets and thus assume that means the trust is funded. This is simply not the case. You have to take active steps to “fund” the trust.

WHY SMALL ESTATE

Why does this article focus on small estates?  Quite simply put the vast majority of trust funding omissions can be corrected by a procedure other than a full probate.  The most common choices are:

1) A Heggstad petition (probate code 850);

2) An Affidavit re: real property worth less than $50,000 (probate code 13200);

3) A Succession to real property petition for real property worth less than $150,000 (probate code 13150);

Using one of these three options can clear the vast majority of assets to a trust. NONE of these are full probates.  That’s a totally different thing.

YOUR CASE

If you want to see which options might work for YOUR CASE let us know. We can generally offer a free analysis to make sure your case is done as efficiently and economically as possible.

Small Estates Law in California

In 2012, the law in the state of California changed regarding small estates. Currently, California Probate Code §13100-§13116, the Small Estates Law, says that if the value of the decedent’s estate at the time of death is less than $150,000.00, the estate does not have to go through probate. An affidavit is signed which is then used to distribute the estate to the rightful heirs. The affidavit has to be signed at least 40 days after the death of the decedent. If the estate is administered under the typical probate provisions, there are no documents needed for filing with the Superior Court.

The $150,000.00 limit on the value of the estate includes the following assets: Brokerage accounts, mutual funds, bank accounts, stocks, bonds, and real property not to exceed a value of $50,000. Other assets similar to the ones previously listed are also included in the $150,000.00 fair market value of the estate. The assets have to be owned by the decedent and titled in his or her name. However, the following assets are NOT included in the determination of the estate’s value:

  1. Property (real or personal) held in joint tenancy.
  2. Assets that are held in trust.
  3. Pension accounts, including IRAs and 401(k)s.
  4. Life insurance benefits.
  5. Death benefits.
  6. Vehicles registered in the decedent’s name.
  7. Pay from military service.
  8. Up to $15,000.00 in salary not paid prior to the decedent.
  9. Pay on death (POD) accounts.
  10. Accounts that name a third party beneficiary.

The value of the estate is determined as of the date of the decedent’s death. The day that the affidavit is signed is irrelevant.

The small estates law only kicks in after the affidavit has been signed. The affidavit cannot be signed before a 40-day time period has elapsed since the decedent’s death. All affidavits signed after January 1, 2012 trigger the $150,000.00 limit for the small estates law. The key here is the day that the affidavit was signed, and not the date that the decedent died.

One question that many people have regarding the California small estates law is: “How are the estate’s assets collected?” The required affidavit has to include all of the information in California Probate Code § 13101. After the affidavit is signed, it is given to the person or financial institution that is holding the estate’s assets. The assets are then transferred into the custody of the one who signed the affidavit. After the creditors are paid, the remainder of the estate is distributed to the heirs.

Deciding whether to go the Small Estates route or whether to endure probate can be a difficult decision and one that should be made by consulting someone with knowledge of the subject. California estate-planning attorney John Palley at Meissner, Joseph & Palley, Inc., is a Certified Specialist in Estate Planning, Trust, and Probate Law. His office will be happy to assist you with any of your estate planning needs. Call today at 1-888-920-5983.

 

Know thy probate options

I met with a new client today whose husband died recently. She said she went to a local attorney, who was very nice, and told her she would have to do a full probate to get the house out of her husband’s name and into her name.  The grieving widow, luckily, decided to do a little more research before hiring that attorney.

The problem is that this attorney didn’t know all the options or… worse.  Let’s just assume he didn’t know all the options. The problem is a lot of attorneys say they are “probate attorneys” because they have done a probate before. This does not make one a true probate attorney.  Doing one or two or even 20 probates does not make one an expert.

If you are looking to hire an attorney find someone that:

1) is a CERTIFIED SPECIALIST IN ESTATE PLANNING TRUST AND PROBATE LAW;

2) only knows about probate, trust and estate law on their website;

3) has been practicing for many years.

If you find anybody else you are shortchanging yourself.

In this case the client came to me and suggested that from her research a spousal property petition might be a more efficient way to go. In fact, normally that’s our go-to petition when one spouse dies. However, in this case they had a short term marriage and thus the house being in the deceased husband’s name (alone) will make a spousal property petition, or SPP, very difficult.

She told me the house was probably worth about $190,000.   I asked if there was any chance it would appraise for $150,000. She said YES!  So we are going to try to get it appraised for under $150,000 so that we can file a petition to determine succession to real property worth less than $150,000. In this case the decedent’s only child is in full agreement and thus the under $150k probate should work.

The options such as an SPP or an under $150k probate pay the attorney less than a full probate.  Sadly there are starving attorneys out there who make recommendations with their pocket book in mind before your well being.  Make sure you work with a California probate attorney who cares about his clients and wants to do the best thing for THE CLIENT!

I hope to work with you!  -John

Payment Options For Small Estate Probate Cases

In a full, or normal, California probate case the attorney fees are set by statute. It’s set in stone what one will pay and, absent extraordinary circumstances, the fee can not be more than that.  Also, the attorney fee should not be paid before the Court order.  Money for costs most certainly can be requested up front by the attorney but not the attorney fees.

What about a small estate? That is a petition to transfer real estate worth less than $150,000. What then?  All attorneys do this differently.  We try to be as flexible as possible.   Most clients who hire us to pursue a small estate want to hire us on a FLAT FEE BASIS.  That is, they want to know up front exactly what it’s going to cost them. They want certainty.  This makes sense.

Thus, for a typical small estate probate we will offer a FLAT FEE which INCLUDES all the Court costs.  You write a check, we deposit it in our law firm’s attorney-client trust account, we do the work, and then we remove the money from our trust account. That’s how the majority of our small estate clients pay.  Flat fee and up front.

However, not everybody has money sitting in the bank to hire a good attorney to complete their small estate.  We know this, we understand this and we want to help you!  We thus, in some cases, will offer you the ability to pay a flat fee at the close of escrow. That is, we will front the Court costs, file all the documents, and then get paid after the house sells… or at some other future date.

Contact John Palley, our lead probate attorney, to discuss these options for your case.

Flat Fee Probate Court Attorneys

Ethics are important to us and thus our hourly fee time is carefully noted in our time keeper program. However, some clients just do not like hourly fee arrangements. They want to know exactly how much they are going to spend.  We have heard the request many times and now we can offer FLAT FEE PAYMENT OPTIONS in most California probate Court matters.

Flat fee payment options are available for most all probate court work including:

- Under $150,000 probates

- Spousal property petitions

- Trust petitions

- Heggstad petitions

- and the list goes on.

If you have the need to file in a California probate court and want a FLAT FEE that you know about BEFORE the work starts let us know!

 

Options with $140,000 in assets

“My mom died with $140,000 in assets so I want to do a small estate.”

“I want to avoid a full probate because I have heard how horrible it can be.”

“What do we have to do to qualify to be a small estate?”

“Do we have to do a small estate if we have less than $150,000 in assets?”

These are some of the many common statements I hear regarding the California probate process.  The state legislature’s recent change in the probate limits from $100,000 to $150,000 has given clients greater to ability to qualify as a small estate.  However, just because it’s cheaper and takes less time does not mean it’s better for everybody.

The fact is that a small estate only clears title to assets. A small estate, or “succession,” does not deal with creditors, liabilities and taxes among other things.

A full probate is different in that it deals with clearing title to assets AND clearing up liability, creditor and tax issues.

In short with a full probate you can stand in the decedent’s shoes to transact business on his or her behalf.  With a mini probate you are only getting a Court order dealing with specific assets you tell the Court about.

A mini probate is not right for all cases!

Look beyond the attorney fees, Court costs and time involved.  Make sure your attorney tells you all the details that make one better or worse than the other for YOU!

Each case is UNIQUE!

Let’s talk about your estate!

-John

Clearing Title To Timeshares

I am contacted frequently by people who need to clear title to a timeshare after death. Typically the timeshare is in mom and/or dad’s name but mom and dad are now deceased. The timeshares are often with Marriott, Wyndham, Starwood, and many other such timeshare companies. They are in often in places like San Diego, Lake Tahoe and Newport Beach. That is, California timeshares!

I offer a special service to clients when a timeshare is the only asset that needs to be cleared after death. That is, when everything else is properly in a trust typically. I will prepare and take care of the small estate paperwork to clear title via California Probate Code 13200.  With the new law the timeshare can be worth up to $50,000!

Also, if mom and/or dad are still alive let’s get the timeshare put into a living trust NOW to avoid the hassle after death.

Failure to have a title in a trust can create a lot of problems after death. In fact, in some cases the timeshare is just a liability after death. However, failure to clear title can create an on-going liability for a deceased person’s estate.

The key is plan ahead for your timeshare and all other assets!

Contact me with questions.  -John

Avoiding Probate in California

I hear people all the time talking about avoiding probate and avoiding attorney fees.  Let’s be clear probate is no walk in the park. However, it’s not the end of the world.  Additionally, I understand people do not want to pay an attorney unnecessary amounts of money.  The problem is a lot of people are so focused on avoiding probate and avoiding attorney fees that they just create more problems after their death. Let’s go through some of the big ones.

First and foremost people create taxes for their loved ones.  They avoid probate AND avoid attorney fees by creating a “joint tenancy” deed and all they do is create a capital gains tax for their loved ones when their loved ones go to sell the house. Is that really what they meant to do?  Maybe a trust would have been $1,500 but the capital gains tax could be tens of thousands of dollars.  Thus a lot of people are better off, and leaving their loved ones better off, by creating a trust which will avoid probate AND avoid capital gains tax!

Paperwork, paperwork, paperwork.  I have a case right now where a young man died without a will or trust.  He had about $75,000 in assets spread out all over the place.  Among the issues we have had to clean up for him: 2 automobiles that needed to have title cleared through the California DMV transfer without probate forms, a last paycheck, a 401k that had no named beneficiary, an IRA with no named beneficiary, 3 or 4 small bank accounts, and an assortment of personal property that needed to be divided up. Luckily his surviving family, a loving brother and sister, are very nice and are not fighting.

People die out of order.  There are two things you can count on in life right?  Death and taxes as they say!  However, you can NOT predict the order of death!  I have had several cases where people created joint tenancies, or even gave assets outright to their adult child, and then that seemingly healthy adult child died… before mom or dad.  Then the parent was doing a probate for their child. Don’t let that happen to you.

I could go on but the point is review your proposed estate plan with a qualified California estate and probate attorney. Let them tell you if your plan is as good as you think it is.

-John

Small Estate Hypothetical

With the updated California probate code 13100 a person can now pass up to $150,000 after death without entering into a full probate.  Today’s blog post is a hypothetical case to give you an example of how this code section works and what may be the benefits between a full probate and a small estate.

Let’s say you have assets of $120,000 at death and are debating between clearing title by full probate or utilizing the small estate measures of probate code 13100, et seq.  Let’s say there are bank, or financial accounts (including life insurance), at 6 different institutions.  Let’s say there is a car.  Let’s say there is a will.  Let’s say there is a named executor in the will and 5 beneficiaries named in the will.  Let’s say the decedent owned no real estate at death.

A full probate would cost you about $4,600 in attorney fees and $1,500 in Court costs.  Avoiding a full probate should mean avoiding all the Court costs so that $1,500 is saved. Attorney fees will vary but let’s say $2,000 as an estimate for a competent California probate attorney to handle this.  At first blush it must be better to avoid probate, right!?  Nobody wants to go through probate, right!?  It’s always better to not pay an attorney if you can help it, right!?  Well, MAYBE. Let’s explore….

If we avoid a formal probate (let’s call that a “mini” probate) we would do California small estate affidavits and other documents as necessary. Some financial institutions require affidavits of domicile to be signed by everybody receiving assets.  Some assets, like life insurance or annuities, may require completing beneficiary claim forms.  Items like cars and mobile homes usually have forms through the regulatory agency to complete.  In California all of this can be done 40 days after death.  All the people entitled to received assets would need to sign the documents. Then the attorney would send the small estate affidavits in to try and get the money distributed. Based on past experience out of 6 financial institutions odds are that two will require an affidavit of domicile to be signed and notarized. In some cases we just do that form ahead of time to head that requirement off. Others may have their own form they want completed which they will mail to the attorney’s office typically.

All told, at a reasonable hourly rate, you might expect to spend about $2,000 in attorney fees. In addition there will be several hundred in notary fees to get all the small estate affidavits and other documents notarized by all the beneficiaries.

If all goes according to plan all the monies should be received within 4-6 weeks after submitting the forms to the financial institutions.  Again, that can not be started until 40 days after death.  Thus, with any luck you are totally done within 3 months of death.

However, what if you are owed money?  That is, what if the decedent owed you money or you paid for the funeral?  Or what if you paid some of the decedent’s bills after death? You are entitled to reimbursement in a normal probate but this is a mini probate which has no structure and no supervision. In that case the other beneficiaries will need to agree to give you money to reimburse you.

What if the decedent had creditors? That becomes more complicated. Pursuant to the California probate code you are liable for the decedent’s debts and expenses up to the extent you receive assets. So you could end up being proportionally liable for debts and expenses if you are an easier target than the other beneficiaries.

Also, you are not entitled to an Executor’s fee when doing  a mini probate even though you will spend a lot of time on the case.  As with other claims it could be that the other people inheriting will choose to pay you an Executor’s fee but that’s between you and them!

Ok, ok, what if you go for it and do the dreaded… full probate!?  Again, at first blush people say avoiding probate is always best. Avoiding attorney fees is always best. Avoiding Court costs is always best. However, it truly is not always best.

When there is real estate to sell a full probate is generally better as then you have a centralized person to sell the real estate without needing the consent of others. In this hypothetical case there is no real estate so that’s not an issue. However, it can be simpler in a full probate. Let me explain why.

In a full probate you will get “Letters Testamentary” issued to you.  Most every financial institution knows what they are, will honor them, and will distribute the asset to the estate. Once at the estate level you, as the Executor, will have control.  When doing mini probates all small estate affidavits are different and with the recent change in California law, from $100,000 to $150,000, there could be even more confusion possible.  However, Letters are Letters and they are honored everywhere!  Thus, a full probate will likely make it easier to gain control of all assets.

Reimbursing you for funeral, cremation, expenses you paid and the Executor’s fee happens at the estate level. It’s very clear cut. There is a procedure in place, forms to fill out, and the money is reimbursed.  In particular that Executor’s fee, in a small probate like this, would be $4,600. That’s $4,600 you likely wouldn’t get in the mini probate so it’s a nice benefit for you.

Dealing with creditors can be easier at the probate level.  If you do a mini probate all you can really do is tell a creditor there is no probate.  Some creditors will accept this answer and go away. Others will push the issue and may even try to open probate to get paid the money they are owed. With a full probate there are standard forms to fill out to put creditors on notice, for creditors to file claims, for claims to be accepted or rejected, and are dealt with in the probate.  Again, as above, these claims would be paid off the top with all beneficiaries sharing equally.  There is much more finality here as the creditors claim period will expire and be done when the probate ends.  With the mini probate there is potential for liability up to one year after death and maybe even longer in some limited cases.

A full probate code take 7 months and does cost more money. However, it is a more concrete process and offers more finality than a mini probate does.

If you want to run the numbers for you mini probate let me know and we can talk about it.

Go to ‘Who needs a Full Probate” to know more about Probate Code 13100. To contact the Probate Attorney, click here

-John