Probate: A Tragic Consequence of the Pandemic

COVID is proving to be a very cunning adversary. Experts continue to learn about and respect COVID’s nuances because it’s still the one in control. While the disease is most dangerous for the elderly and those with preexisting conditions, it transcends demographics. It’s affecting those who are healthy, athletic, young and strong.

Probate has emerged as an unfortunate consequence of COVID

Tragically, thousands of people, including our health care workers, are dying from this disease every single day. Many never created a Will or Living Trust. Their families, still reeling from the shock of a tragic death, are now having to deal with Probate. They’re tackling the challenges of administering an estate during a pandemic when everything is infinitely more difficult.

California Document Preparers guides our clients through the entire Probate process

While Probate can seem overwhelming, it is actually a very methodical process. Best of all, we guide you through the entire process, and we prepare the legal documents.

As part of Probate, the Court appoints a personal representative, or Administrator, to settle the estate, so we work directly with that Administrator throughout the Probate process. The administrator is responsible for:

• Collecting all of the decedent’s property
• Paying all of the estate’s debts, claims and taxes
• Collecting all rights to income, dividends, etc.
• Settling all disputes
• Distributing or transferring the remaining property to the heirs

Access to the decedent’s accounts to determine the financial landscape 

The Administrator may meet with the financial advisor, insurance agent, accountant, etc. to acquire estate information. Gaining access to all of the decedent’s records–bank statements, savings accounts and income tax returns–will help determine the financial landscape. The Administrator is in charge of valuing and and selling assets, as necessary, to settle the estate’s debts or expenses.

During Probate, the deceased’s estate becomes a separate tax entity, so the Administrator must obtain a federal identification number and open a bank account in the name of the estate, from which to pay creditors. It is also necessary to file the estate’s tax return and a final individual tax return.

Distribution of remaining assets

Once all taxes and debts have been satisfied, the Court will then distribute any remaining assets according to state law. In California, the first priority is given to the deceased’s spouse, followed by the deceased’s children.

Working with California Document Preparers

The safety and wellbeing of our own team and our clients are important to us. For many of our clients, we are working completely virtually using ZOOM and phones. We’ve instituted stringent sanitation procedures in our offices, so our clients can feel comfortable about meeting with us. Everyone is wearing masks and gloves; hand sanitizers are distributed throughout the space. We limit the number of people in the office so that we can maintain proper social distancing.

For most of our services, we charge one flat fee. We’re helpful, compassionate and affordable. Schedule an appointment today at one of our three Bay Area offices in Dublin, Walnut Creek or Oakland.

We service the entire East Bay and North Bay areas

Berkeley, El Cerrito, Richmond, Pinole, Alameda, San Leandro, Castro Valley Newark, San Lorenzo, Concord, Alamo, Danville, Lafayette, Orinda, Moraga, Pleasant Hill, Martinez, Pittsburg, Antioch, Brentwood, Oakley, Discovery Bay, Pleasanton, San Ramon, Livermore, Tracy and Fremont. Our clients also live in the Napa Valley, Benicia, Vallejo, Martinez, Fairfield.

Single, No Kids, No Sibs. Who Gets Their Assets?

Shelly and Doris were retired flight attendants who lived in Lafayette. They’d never met during their careers, but now that they were retired, they’d become great friends and loved to laugh and share stories over a glass of wine.

When Shelly went into the hospital for routine surgery and died from complications, it left Doris shocked and lost without her best friend. Shelly was only 64, and she’d left a handwritten Will but no Living Trust. Shelly had lost her sister and brother-in-law in a terrible skiing accident 15 years ago, but she was very close to their four children, especially her niece, Karen, and she’d named Karen the Executor in her Will. But without a Trust, the family would have to go through Probate.

Doris was shocked to learn that Shelley had more than $320,000 in a Fidelity account

Over the years, Shelly had made smart investments in Apple, Wells Fargo and Microsoft. The Fidelity account had no named beneficiaries, so it would have to go through Probate. As Executor, Karen would oversee the estate’s distribution among her designated family members.

Karen was a teacher who knew nothing about Probate, so she contacted a Probate attorney to help manage her aunt’s estate. After 18 months, when the court finally awarded the money to the family, the attorney charged nearly $10K for managing the Probate.

After this experience, Doris felt some urgency to create estate planning documents

Doris didn’t have kids or siblings. She had Social Security and a great pension, but she didn’t have family or close friends she could ask for help if she became incapacitated. Shelly’s niece Karen and her husband Kevin had moved in to Shelly’s condominium, and they’d become close, so she asked Karen for advice. Karen said she would be glad to be there for Doris, and Kevin agreed to be her backup.

Doris created a Living Trust with California Document Preparers

Doris came in to the Walnut Creek office to create her Living Trust. As part of her Living Trust package, she also created a Financial Power of Attorney, an Advance Healthcare Directive and a Will. Notary is included in the fee. Doris is leaving Karen and Kevin 20% of her estate; the balance will go to the church she has been attending for more than 20 years, Lafayette’s St. Elizabeth Seton Catholic Church.

During this health crisis, many are feeling an urgency to create Living Trusts 

Our Trust package includes a Will, Power of Attorney and an Advance Healthcare Directive and Incapacity Planning. We guide you through the process and prepare the legal documents. At California Document Preparers, for most of our services, we charge one flat fee. We’re helpful, compassionate and affordable. Schedule an appointment today at one of our three Bay Area offices in Dublin, Walnut Creek or Oakland. 

We service the entire East Bay and North Bay areas

Berkeley, El Cerrito, Richmond, Pinole, Alameda, San Leandro, Castro Valley Newark, San Lorenzo, Concord, Alamo, Danville, Lafayette, Orinda, Moraga, Pleasant Hill, Martinez, Pittsburg, Antioch, Brentwood, Oakley, Discovery Bay, Pleasanton, San Ramon, Livermore, Tracy, Hayward and Fremont. Our clients also live in the Napa Valley, Benicia, Vallejo, Martinez, Fairfield.

You, Your Trust and Taxes

We talk a lot about Living Trusts as an important part of estate planning. What we don’t talk about is a Trust and your taxes. But if you’re creating a Trust, thinking about transferring property, or naming a Successor Trustee, taxes are an important consideration. This is about your, your Trust and your taxes.

A Living Trust is typically a Revocable Trust, meaning that the person who’s creating it, the Grantor, may add or remove the Trust’s assets and beneficiaries at any time. The Grantor may even terminate or revoke the Trust at any time. Many people want to know about the tax implications of a Trust before they move forward with creating one.

The Trust is in the Grantor’s name and will be recorded in his taxes

Because the Trust is in the Grantor’s name, he remains entitled to receive the income and the principal of the Trust during his lifetime. As a result, the IRS still taxes the Grantor on the Trust’s income. Because this is still in the Grantor’s name, it uses his social security number to establish investments and bank accounts, so all of the Trust’s income is recorded on the Grantor’s tax return. It is not necessary to have a separate tax return for the Trust because everything is still in one person’s name—the Grantor’s.

Having a Trust means your heirs will avoid Probate

However, while the Grantor is taxed on the Trust income, the Trust’s assets are legally held by the Trust, which will survive the Grantor’s death. For this reason, the assets in the Trust do not need to go through the Probate process when the Grantor dies. This is one of the reasons we encourage everyone to create a Living Trust. You will be sparing your heirs the expense and the time-consuming process of going through Probate.

Special circumstances during Grantor’s life

If the Grantor becomes mentally incapacitated, the Successor Trustee designated in the Trust documents may choose to obtain a separate tax ID number for the Trust. This number is called a “Federal Tax ID Number”, an “Employer Identification Number”, or an “EIN”.

A Successor Trust may choose to obtain an EIN for the Trust in order to limit his own liability for the Trust’s income tax or to help fulfill his fiduciary duties. If the Trust is using an EIN, a separate tax return for the Trust will be required for each year. The Trust’s taxes will be filed on Form 1041 and would be filed by the same date as personal taxes. If it’s a simple estate, this may not be necessary. But even in straightforward situations, it often takes a year or more to settle the estate. There are cases where the Grantor is not incapacitated, and still may choose to establish an EIN for the Trust.

If the Grantor has complex personal taxes and would prefer not to report the income and losses of the Trust on his own tax return. He would still pay taxes on the income of the Trust but he would be paying those taxes under the Trusts EIN number.

In my own case, my parents lived into their 90s, and were active and healthy until the last year or so. We realized that there was some urgency in their signing their Trust, Powers of Attorney, Advance Healthcare Directives and Do Not Resuscitate Orders with their doctors while they still had testamentary capacity. They died within six months of each other, and my brother, the Successor Trustee, stepped up and managed their estate. It was very straightforward, but it still took more than a year to settle our parents’ estate. He established an EIN for the Trust and dealt with endless paperwork and bills that kept trickling in from Social Security, Medicare and miscellaneous providers.

Living Trust tax after Grantor’s death

After the Grantor’s death, the Trust remains in place and continues to hold legal ownership of all the Trust’s assets. If you’re the Successor Trustee, the Trust holds all of the assets that you inherit and you will be responsible for dividing among your family members, as per the Trust. The tax implications impact the outcome of both the Grantor and the beneficiaries.

• The Grantor’s final tax return is filed by the Trustee or Executor of the Grantor’s Estate, and it declares all the income earned by the Grantor through the Grantor’s death.
• However, any income earned by the Trust assets or principal after the date of the Grantor’s death is reported in a separate tax return for the Trust.

After death, the Trust converts from a Revocable to an Irrevocable Trust

The requirement that the Trust files its own tax return is a result of the Trust changing from a Revocable Trust during the Grantor’s life to an Irrevocable Trust upon the Grantor’s death. This makes perfect sense because it was Revocable before death—meaning that the Grantor can revoke, or make changes to the assets and beneficiaries. After death, of course, the Grantor can no longer make changes. The result: The Trust must file its own tax return each year.

What about estate taxes?

Thanks to changes in the estate tax laws, only those estates worth more than $11.4 million will owe federal estate taxes. This leaves most of us out, yet here in the affluent Bay Area, this extends to an increasing number of people.

California Document Preparers assists our clients in the preparation of Living Trusts. Our Living Trust portfolio includes a Power of Attorney and Advance Healthcare Directive. Most of our clients are surprised at how easy it is. Schedule an appointment today by contacting us at one of our three Bay Area offices. Our dedicated team is helpful, compassionate and affordable.

You, Your Trust and Taxes

We talk a lot about Living Trusts as an important part of estate planning. What we don’t talk about is a Trust and your taxes. But if you’re creating a Trust, thinking about transferring property, or naming a Successor Trustee, taxes are an important consideration. This is about your, your Trust and your taxes.

A Living Trust is typically a Revocable Trust, meaning that the person who’s creating it, the Grantor, may add or remove the Trust’s assets and beneficiaries at any time. The Grantor may even terminate or revoke the Trust at any time. Many people want to know about the tax implications of a Trust before they move forward with creating one.

The Trust is in the Grantor’s name and will be recorded in his taxes

Because the Trust is in the Grantor’s name, he remains entitled to receive the income and the principal of the Trust during his lifetime. As a result, the IRS still taxes the Grantor on the Trust’s income. Because this is still in the Grantor’s name, it uses his social security number to establish investments and bank accounts, so all of the Trust’s income is recorded on the Grantor’s tax return. It is not necessary to have a separate tax return for the Trust because everything is still in one person’s name—the Grantor’s.

Having a Trust means your heirs will avoid Probate

However, while the Grantor is taxed on the Trust income, the Trust’s assets are legally held by the Trust, which will survive the Grantor’s death. For this reason, the assets in the Trust do not need to go through the Probate process when the Grantor dies. This is one of the reasons we encourage everyone to create a Living Trust. You will be sparing your heirs the expense and the time-consuming process of going through Probate.

Special circumstances during Grantor’s life

If the Grantor becomes mentally incapacitated, the Successor Trustee designated in the Trust documents may choose to obtain a separate tax ID number for the Trust. This number is called a “Federal Tax ID Number”, an “Employer Identification Number”, or an “EIN”.

A Successor Trust may choose to obtain an EIN for the Trust in order to limit his own liability for the Trust’s income tax or to help fulfill his fiduciary duties. If the Trust is using an EIN, a separate tax return for the Trust will be required for each year. The Trust’s taxes will be filed on Form 1041 and would be filed by the same date as personal taxes. If it’s a simple estate, this may not be necessary. But even in straightforward situations, it often takes a year or more to settle the estate. There are cases where the Grantor is not incapacitated, and still may choose to establish an EIN for the Trust.

If the Grantor has complex personal taxes and would prefer not to report the income and losses of the Trust on his own tax return. He would still pay taxes on the income of the Trust but he would be paying those taxes under the Trusts EIN number.

In my own case, my parents lived into their 90s, and were active and healthy until the last year or so. We realized that there was some urgency in their signing their Trust, Powers of Attorney, Advance Healthcare Directives and Do Not Resuscitate Orders with their doctors while they still had testamentary capacity. They died within six months of each other, and my brother, the Successor Trustee, stepped up and managed their estate. It was very straightforward, but it still took more than a year to settle our parents’ estate. He established an EIN for the Trust and dealt with endless paperwork and bills that kept trickling in from Social Security, Medicare and miscellaneous providers.

Living Trust tax after Grantor’s death

After the Grantor’s death, the Trust remains in place and continues to hold legal ownership of all the Trust’s assets. If you’re the Successor Trustee, the Trust holds all of the assets that you inherit and you will be responsible for dividing among your family members, as per the Trust. The tax implications impact the outcome of both the Grantor and the beneficiaries.

• The Grantor’s final tax return is filed by the Trustee or Executor of the Grantor’s Estate, and it declares all the income earned by the Grantor through the Grantor’s death.
• However, any income earned by the Trust assets or principal after the date of the Grantor’s death is reported in a separate tax return for the Trust.

After death, the Trust converts from a Revocable to an Irrevocable Trust

The requirement that the Trust files its own tax return is a result of the Trust changing from a Revocable Trust during the Grantor’s life to an Irrevocable Trust upon the Grantor’s death. This makes perfect sense because it was Revocable before death—meaning that the Grantor can revoke, or make changes to the assets and beneficiaries. After death, of course, the Grantor can no longer make changes. The result: The Trust must file its own tax return each year.

What about estate taxes?

Thanks to changes in the estate tax laws, only those estates worth more than $11.4 million will owe federal estate taxes. This leaves most of us out, yet here in the affluent Bay Area, this extends to an increasing number of people.

California Document Preparers assists our clients in the preparation of Living Trusts. Our Living Trust portfolio includes a Power of Attorney and Advance Healthcare Directive. Most of our clients are surprised at how easy it is. Schedule an appointment today by contacting us at one of our three Bay Area offices. Our dedicated team is helpful, compassionate and affordable.

Probate Executor? Tips for Defusing Volatile Family Dynamics

Sometimes death has a way of bringing out the worst in families. The death of a parent and the subsequent efforts to settle the estate can renew old rivalries among siblings. Ask those who grew up in dysfunctional families, and they’ll tell you that just because they’re older doesn’t mean that relationship problems disappear. The issues that divided that family 20 years ago likely still remain. Grudges and perceived inequities still can feel fresh. If there’s a significant amount of money to be divided among family members, things can quickly become hostile. If you’re the Probate Executor, here are some tips for defusing volatile family dynamics.

Inheritance fights are on the rise

A huge number of baby boomers have done nothing to prepare for retirement, and accumulated assets from their more frugal parents become a critical part of their retirement planning. When things go badly, people realize that they need their inheritances. A lot of people are living off the parental dole. As their parents near the end, these children grab as much as they can and are far less willing to share it with their siblings. An uneven economy, layoffs and shrunken retirement plans have hurt many.

Here are three common trigger points for family fights over inheritances:

1. Mom always liked you best

While nobody really wants to be an Executor, deep down inside we want to be asked, because we equate being named Executor as both a vote of confidence and a validation of our relationship with the person who died. It’s also an indicator of leadership and intelligence. Not being asked can create resentment toward the person who was asked. That resentment can create distrust of the process and constant questioning of the decisions that are made. If you have been named the Executor, you can minimize resentment by being sensitive to others’ feelings, staying approachable and encouraging collaboration.

2. Fair isn’t always equal

There’s often a gap between what beneficiaries expect to receive and what they actually get. One of the most common refrains is “Mom said she wanted me to have [fill in the blank] after she died.”

This becomes a slippery slope. If the Will doesn’t specify the distribution of an individual item, the item belongs to the estate. If there’s no Will, that item and everything else belongs to the estate. While some requests from family members may seem small enough, they present risks. If the Executor were to let Joanne take that one heirloom vase that wasn’t specifically bequeathed to her, everyone else will want to take something. They may decide to take one more item each. Then another. Before you know it, the estate becomes diminished.

3. Facing your judge and jury

Family members are stakeholders, and they can be harsh critics. Questions can escalate into accusations if they aren’t answered, or if the other beneficiaries don’t like the answers. Constant criticism can put tremendous pressure on Executors. Fear of conflict can be paralyzing, which is one of the reasons Probate can drag on for years.

Simple steps for keeping family members on board

An Executor may not be able to control a dysfunctional family. If you’re an Executor, what you can do is be transparent, document everything you’re doing and communicate early and often.

• Tell everyone the rules. Let family members know that there will be some collaboration. There are going to be decisions that you will have to make on your own. Just keep your siblings updated.
• Consider a Mediator. If you know that your family’s level of dysfunction could complicate Probate, consider bringing in a Mediator. A Mediator will remain neutral and work with your family to resolve disputes over inheritance. Having a third party can defuse volatile situations.
• Take care of yourself. Take care of yourself through this difficult and emotional process. Set boundaries about the time you’ll focus on Probate issues and keep up with the rest of your life. Many Executors also have demanding full-time jobs and families. It’s critical to find a balance.

California Document Preparers assists our clients with Probate. While Probate can seem overwhelming, it’s a methodical process and we assist you through each step for one fixed fee of $4,500. Schedule an appointment today by contacting us at one of our three Bay Area offices. Our dedicated team is helpful, compassionate and affordable.

Five Steps to Funding Your Living Trust

We encourage all of our clients to create a Living Trust so their families can avoid Probate. Unfortunately, there’s one critical step that sometimes gets left out of this equation and leaves families vulnerable to Probate. Simply having a Trust is not enough; Living Trusts need to be funded–your assets need to be moved into the Trust. Without this action, your family will likely be facing Probate. There are five steps to funding your Living Trust.

A Trust has five asset categories that can be funded:

1. Real property
2. Bank and brokerage accounts
3. Life insurance policies
4. Retirement accounts
5. Tangible personal assets

1. Real property—property that is fixed in place

Real property is a building or a piece of land, designated by a Deed. When a Trust is formed, the owner listed on the Deed must change the name from the name of the person to the name of the Trust. If James Smith owns a house, and the house is in his name, he must transfer the Deed into the Trust, and the “Living Trust of Jonathan Williams” becomes the new owner. This must then be registered with the county for the Trust to be funded. California Document Preparers prepares Trust Transfer Deeds for our clients who are funding their Trusts.

2. Bank and brokerage accounts

Creating multiparty bank accounts can seem like a convenient solution for those caring for ailing family members, but it can create family conflict. If that ailing family member dies, all of the money in that account defaults to the person whose name was also on the account. If, for example, there are other siblings who expected to inherit some of that money, it can result in family discord.

In most cases, you will want the funds to go to multiple persons or organizations. Putting the accounts in the name of the Trust will ensure that funds can be transferred easily to all parties specified by the documents of your Trust. For example, if you want your Procter & Gamble stocks to be divided equally among your three children, you will need to put them in the name of the Trust. Each bank and brokerage has a procedure for this and will be able to assist with transferring the account name to that of the Trust.

3. Life insurance

While you can state in your Trust that your life insurance policy will go to your oldest daughter Joan, it’s important to know that the beneficiary noted on the actual policy is the beneficiary of record—not the person named in the Trust. Joan will not inherit that policy if she’s not named on the policy. If divorce or death means a change to your beneficiary designation, it’s imperative that you make this change to the life insurance policy itself—not your Living Trust.

4. Retirement accounts

Retirement accounts, like life insurance policies, specify a designated beneficiary. For married couples, this is typically one’s spouse. Where retirement accounts can get problematic is in naming their alternate beneficiary. A Trust is often a very valid choice for this secondary designation. Having one’s retirement account go to the Trust, to be distributed according to Trust specifications, can be a safe way to avoid Probate and ensure that your assets are distributed according to your wishes.

5. Tangible personal assets

Tangible assets that need to be included in your Trust include valuable jewelry, artwork, furniture, cars, etc. These items can be placed in a Trust through a Deed of gift or a bill of sale. The Deed of gift or bill of sale is necessary to “fund” the Trust with these items. Items that are high in value will have to go through Probate if not properly placed in the Trust.

One more thing: Identifying the distribution of sentimental items

If there are items that have nominal monetary value but significant sentimental value, these should be identified in a Trust along with their respective recipients. When Robin Williams died and left much of his estate to his second wife, his children sued to get the memorabilia that they believed were rightfully theirs. The more detail you provide, the more seamless the process of settling your estate will be for your family.

A Living Trust is an important part of estate planning. Without it, your family will be facing Probate. A Trust also needs to be updated with important life events—births, deaths, important purchases of property and other assets. Schedule an appointment today by contacting us at one of our three Bay Area offices. Our dedicated team is helpful, compassionate and affordable.

CDP Video: Millennials Create Living Trust After Birth of Son, Charlie

While a large segment of our LivingTrust clientele tends to be older couples, we’re now seeing more Millennials and Gen-Xers creating Trusts. It starts with buying a home–scraping together a down payment and buying a Bay Area home is a sobering experience. But the big motivator is the birth of a child. As parents, our clients feel the need to provide a safety net for their children if something happens to them. Watch California Document Preparer’s Video: Millennials Create Living Trust After Birth of Son, Charlie!

CDP video on one young couple’s Living Trust

We recently made a video that highlights the Living Trust process for one of these representative young couples—they have good jobs, a bright future and a home in Oakland. With the birth of their son Charlie, they felt the need for financial planning. They began working with a financial adviser who recommended creating a Living Trust as part of the process, and he referred them to California Document Preparers’ Oakland office.

The Living Trust process

• Getting started. Our savvy younger clients like that they can begin the process online. We’re still available by phone and email with questions.
• The intake process. You will need to gather all of your financial documents, to include bank and brokerage account statements, mortgage information and other investment and financial data. Life insurance policies and retirement accounts are not included in Living Trusts.
• We prepare the legal documents.Once we have all of your financial information, we prepare the legal documents.
• Our Trust package includes a Power of Attorney and an Advance Healthcare Directive. You will want to be thinking about whom you will name to be your Agent as well as your backup. If there are children, you will want to identify a Guardian who will be responsible for raising your children until they turn 18.
• Finalizing your Trust. We call you when your Trust is ready to be signed and notarized.
• Funding your Trust. A Trust needs to be funded—all of your assets need to be moved into your Trust. We create a Trust Transfer Deed to move real property into your Trust.

Our deliverable is a bound Trust and a pdf file for your records

We recommend storing your Trust in a secure place. Share its location with a family member or someone you trust. If no one can find it, it doesn’t exist. A Trust needs to be updated with important life events—the birth of another child, new investments, etc. We keep a soft copy of your Trust and can help you with this as your family grows.

To be thinking about: Your growing list of digital assets

Our Living Trust package includes a section to identify important contacts, including healthcare providers, veterinarians, accountants, financial advisors, CPAs, etc. Try to be thinking about all those people with whom your family would need to be interacting if you were not available.

Start thinking about your online accounts

You’ll want to make a list of your digital assets and login information. This list will include computers, hard drives, flash drives, smartphones, tablets, files stored on the cloud and accounts with online retailers and healthcare providers. Social media sites, video gaming accounts, domain names, forums, your dropbox, websites and blogs you manage. You can consolidate this information in an excel file store it on a flash drive.

A note about banks and other financial institutions

Banks and financial technology companies tend to merge and constantly upgrade their technology. Because of that, beneficiary data might get lost. Keep a paper copy of all beneficiary data or store a digital copy of important documents on a password-protected flash drive.

A Living Trust is an important part of estate planning, and our Trust package includes a Power of Attorney and an Advance Healthcare Directive. Without a Trust, your family will need to go through Probate. Schedule an appointment today to get started on your Living Trust by contacting us at one of our three Bay Area offices. Our dedicated team is helpful, compassionate and affordable.