Once an estate plan has been created, an ongoing review needs to take place at least every 2-5 years. This allows your documents to stay up-to-date with your current needs and goals. An outdated plan is often worse than no plan at all!
Once you have a plan, you need a trusted advisor who can implement the plan, and act in your best interests for:
- Trust Administration
- Trust Transfer Petitions
- Small Estate Affidavits
- A-B Trust Division (Bypass Trusts)
Probate is the legal process that distributes personal assets after someone dies. If there is a Will that describes specific assets, intended beneficiaries, and an executor who will make decisions on behalf of the deceased person, the job of the executor is to carry out the instructions contained in the Will. The executor is responsible for paying debts and distributing assets according to instructions detailed in the Will. Probate fees are set by law and can include fees for:
- Probate Referee
Court filing, fees, and certified documents
Both the Executor and Attorney can request additional compensation for what they consider “extraordinary services.”
The Law Office of Lynn A. Dean has the experience to step into this complex situation and guide the executor through the process to protect the estate’s value for the benefit of all beneficiaries. This includes working with the executor to resolve any issues quickly, helping to control probate costs.
Trust administration is the process that takes place after one or both of the Settlors has passed away. This process will take place outside of a court, and is usually done with a team approach between the attorney and the successor trustee. In some cases, it is also useful to work with the client’s tax and financial advisors so that everyone is working with the same goals and understanding.
If the trust was created by a married couple, a formal trust administration at the first death may not be needed. It is still a good idea to meet with the attorney and go over the terms of the trust. The Will of the deceased spouse must be lodged with the court in the county in which the deceased spouse was living. The estate planning documents should be reviewed to determine whether any distributions were to be made upon the first death.
If the married couple created what is commonly known as an A-B Trust, a portion of the trust becomes irrevocable at the first death. The surviving spouse or the trustee is required to send out a form called “Notice to Heirs and Beneficiaries.” This must be done within 60 days of the other spouse’s death. The surviving spouse may have to change the tax identification number that has been used with banking and investment accounts. The surviving spouse is also required to provide notice to the California Department of Health Care Services if the deceased spouse was receiving benefits from Medi-Cal. This is all part of trust administration, and is typically done by the attorney, with assistance from the client.
When the estate size exceeds the current estate tax exemption, the client and the attorney will need to determine how to divide the trust assets into the A and B Trusts. Documents will be prepared to establish the values of the assets at date of death, and show how the trusts have been apportioned. The assets will need to be re-titled into the two new trusts to protect assets from estate tax at the second death.
When a single Settlor dies or at the death of a surviving spouse, the process of trust administration consists of identifying assets of the estate, and following instructions contained in the trust for distribution. The “Notice to Heirs and Beneficiaries” must be sent, and the trustee may need to send a notice to the California Department of Health Care Services.
Depending on the size of the estate, the successor trustee may need the assistance of a financial planner to manage the assets, because trust administration may take a period of several months. With the real estate market in its current condition, it may take a year or more to sell real property in the estate. During that time period the remaining assets must be protected. With the assistance of the tax advisor and the attorney, the trust administration will conclude once all of the assets have been liquidated, and distributed according to the terms of the trust and will. When trust administration has concluded, a final tax return for the trust must be filed.
This is a general description of the trust administration process. Each estate is unique and may require more work than is listed above. This narrative is designed to give you a sense of trust administration complexities, and why working with a law firm that specializes in trust administration is important. It also explains why settling an estate after a person dies takes time.
Trust Transfer Petitions
In some cases, the deceased Settlor(s) may have forgotten to transfer assets into the name of their trust. If the trust has been drafted to include a list of assets intended to be in the trust, or if the Settlor(s) signed a general transfer document indicating they intended for all assets to be held by their trust, the attorney may be able to file a petition and have the court confirm the assets as part of the trust. This process, if successful, will avoid the need to probate assets that were never transferred to the trust by the Settlor.
Two important things should be noted:
- There are certain assets that cannot be titled in the name of the trust. These assets are IRAs, 401K accounts, 403B accounts, 457 accounts, and other retirement accounts. These accounts will pass through their beneficiary designations. If there was no beneficiary designated, or the beneficiary is deceased, these assets may need to pass through a probate process.
- After a client leaves the office, we do not know what assets they have bought and sold. A periodic review of your assets and how they are held will help to avoid the need for a probate after your death. This is one of the most common problems in the field of estate planning. The best estate planning comes from an ongoing partnership between the client and their attorney. This ensures the client knows what to do after the estate planning documents have been created.
Small Estate Affidavits
When real and personal property is less than $150,000.00, probate can be avoided by having successors sign an affidavit claiming sole rights to the assets, and certifying that no other proceedings are currently underway or planned. This needs to occur after 40 days have elapsed from the date of death of the deceased, as supported by the death certificate.
A-B Trust Division (Bypass Trusts)
Used with large estates, a Bypass Trust creates two separate trusts from the original family trust. This type of trust is used to avoid estate taxes when the surviving spouse dies, and the estate is distributed to the named beneficiaries, which are usually the children.
Spousal Property Petitions
When a spouse dies with no Trust or Will in place, a surviving spouse or domestic partner can have all assets that were held solely by the deceased spouse transferred to them through a Spousal Property Petition. This generally takes less time and expense than going through a full probate. If there is a Will that provides for other beneficiaries, a probate may be required to transfer those assets.