Tuesday, March 10, 2009

Will A Trust Help Avoid Probate And Unnecessary Taxes?

How Do I Avoid Having My Estate Tied Up In Probate Court?

In addressing the basics of estate planning and trusts, one question that many in California want to know (especially since homes here can easily have value of $1 million or more) is: How Do I Avoid Having My Estate Tied Up In Probate Court? This can be one of the numerous advantages of having a properly drafted trust with a pour-over will.

The reason for this is that there is still another facet of the law which applies to those who die without a trust. Some assets pass by contract when the person who owns the asset dies. For example, a retirement plan such as a 401k account has a designated beneficiary as such those assets pass to the designated beneficiary. But many assets, including real property, do not automatically pass to anyone. Thus, California has a special Probate Court which exists to sort out who owns what, including, as you might expect, disputes over who owns what.

There is nothing especially remarkable about Probate Court other than the cost and time it takes to open and close an estate. It now takes more than one year to close even a basic estate, and many acts require Probate Court approval, which in turn requires an appearance in front of the judge. In addition, all documents filed with Probate Court are public documents and fully accessible by the public. Finally, the California state budget crisis has imposed large fees to help cover the cost of the Probate Court, fees which are completely avoided with an executed and funded trust document.

A properly drafted Trust can avoid both the application of California’s default provisions and unnecessary trips to Probate Court. Not only does this keep the estate administration private, but it results in much less delay.

Can A Trust Help Avoid Paying Unnecessary Taxes?
In determining whether to create a trust, there are also transfer tax considerations. Gifts are not income to the person receiving the gift, but transfer taxes are imposed on lifetime gifts and gifts made at death above certain amounts. There is an exception which allows a person to make unlimited gifts to a spouse, and there is another exception which allows a person to make annual gifts to anyone as long as the value of such gift does not exceed a set amount per year ($13,000 in 2009). We advise our clients as to which of these taxes apply to them, and what steps they can take to minimize such taxes.

Posted by Henry (Hank) Moravec, III, a partner at Moravec, Varga and Mooney. Hank Moravec focuses his practice on Estate Planning, Trust and Probate Administration, Beneficiary and Trustee Representation, Tax Law, and Nonprofit Law. Any questions or comments regarding this post or your own situation should be directed to: hm@moravecslaw.com or (626) 793-3210.

Posted by Henry J. Moravec, III. Henry (Hank) Moravec is a partner at Moravecs, A Professional Law Corporation. He has over 20 years' experience as a dedicated, passionate and hard working Los Angeles probate attorneys and is available should you need legal advice regarding your own or your family's situation. You can e-mail Hank Moravec at hm@moravecslaw.com or call him at (626) 793-3210 to request a consultation.

The firm website is http://www.moravecslaw.com/. The firm is located at 2233 Huntington Drive, Suite 17, San Marino, California 91108, and there is ample free parking.

The office is located in San Marino, California, a suburb of Los Angeles in the San Gabriel area located 20 minutes from downtown Los Angeles. The firm represents clients throughout California and its attorneys appears in probate court throughout Southern California. 

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