It is nice to own a second home that you can enjoy when you have vacation time, and memories are made when you spend quality time with your family and friends. From an estate planning perspective, you should understand some things about probate if you are in this position.
Probate can be succinctly defined as the legal process of estate administration. If you use a will to facilitate postmortem asset transfers, the hands-on administrator is the executor.
You name the executor when you draw up the will. This individual would not be able to act independently without supervision. The will would be admitted to probate, and the court would preside while the estate is being administered.
Creditors are notified during probate, and final debts are paid, including taxes. The executor will identify and inventory the assets and prepare them for distribution to the heirs. The preparation process can include appraisals and liquidation of property.
In many cases, a probate lawyer and a tax accountant will be engaged by the executor. Expenses that are incurred during probate invariably reduce the inheritances that will eventually be received by the heirs.
This is one negative, and probate will take eight months to a year to run its course even if there are no complications. Another probate reality that is less than ideal is the loss of privacy, because probate records are available to anyone that wants to access them.
If you are a California resident and you own real property in another state, ancillary probate may be necessary. This is an additional probate procedure that would take place in the state where the property is located.
One probate process is more than enough, so this is a situation that you should avoid.
Revocable Living Trust
A revocable living trust can be the ideal solution if you own property outside of the state of California. You would be the trustee while you are living, so you would never lose control of the assets that you convey into the trust.
When you are drawing up the trust, you would name a successor trustee to act as the administrator, and this is a role is similar to that of an executor. You can use someone that you know, and trust companies and the trust departments of banks provide trustee services.
After you pass away, the executor would administer the trust and distribute assets in accordance with the wishes that you recorded in the trust declaration. The probate court would not be involved, and this applies to the distribution of out-of-state property.
There are other benefits in addition to the probate avoidance factor. The trust would become irrevocable after you are gone, and the beneficiary’s creditors would have no access to the assets before they are distributed.
Some people would prefer to provide their heirs with limited incremental distributions over time. This is possible if you have a revocable living trust because you have the freedom to establish the distribution terms.
Many elders become unable to handle their own affairs eventually, and you can account for this when you have a living trust. The successor trustee or another individual or entity that you name could be empowered to step into the role in the event of your incapacity.
Attend a Free Webinar!
We are conducting a number of webinars over the coming weeks, and they are covering some compelling topics. There is no charge to attend the sessions, and they couldn’t be any more convenient, so this is a great opportunity to build on your knowledge.
You can see the dates if you visit our webinar schedule page. When you identify the session or sessions that you would like to attend, follow the registration instructions so we can reserve your spot.
Need Help Now?
If you are past the learning stage and ready to work with an attorney to develop your plan, we are here to help. You can schedule a consultation at our Los Angeles estate planning office if you call us at 310-337-7696, and you can use our contact form if you would rather send us a message.
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- Common Probate Mistakes and How to Avoid Making Them - January 19, 2023