Frequently Asked Questions
Get answers to all your questions regarding estate planning, trust administration and more!
Estate Planning FAQ
A Revocable Living Trust is an estate planning document that enables us to avoid probate court and override the state’s intestacy laws. In other words, this document allows for you to transfer your estate (money and/or property.) to your intended beneficiaries without the need for court intervention upon your death.
There are three main roles under a Revocable Living Trust:
1. The person who creates the trust is known as a “settlor”, “trustor” or “grantor”.
2. The person who makes the decisions regarding the trust assets is known as the
“trustee”. The trustee can be an individual or an entity and there can be more than one trustee
serving at the same time (co-trustees). The original/first serving trustee is usually the
settlor/trustor/grantor. Once the original trustee passes, a successor trustee is named to assist in the administration and winding down of the decedent’s estate.
3. The person or persons who receive the assets of the trust at the death of the trust
creator (settlor/grantor/ trustor) are known as beneficiaries. Beneficiaries are the individuals
who receive money or benefits from the revocable living trust after the settlor’s death. While the creator of the trust enjoys the benefits of his/her assets during their lifetime, a trust allows him/her to dispose of their assets to the named trust beneficiaries. Like a will, a revocable living trust can provide for the distribution of your assets upon your death. However, a living trust does much more than just that. A living trust allows the trustee to
continue to hold and manage the trust assets for the benefit of its beneficiaries, provides you with a instrument for managing your assets
A revocable living trust can protect your assets from Medi-Cal for those assets that are properly titled in the name of the trust. In June 27, 2016, Governor Brown signed legislation SB 833 which greatly reduced the scope of California’s Medi-Cal Estate Recovery against the estate of deceased Medi-Cal beneficiaries who died on or after January 1, 2017. This legislation limited Medi-Cal recovery to only those estate assets subject to California probate that were owned by the decedent at the time of their death. (See Change to Estate Recovery effective January 1, 2017 due to Legislation SB 833). https://www.dhcs.ca.gov/services/Documents/Changes_to_Estate_Recovery_effective_January_1.pdf
A Pour-over Will serves as a back-up for any property that might not have been properly
transferred to the Living Trust during the trust creator’s lifetime. A pour-over will “pours over”
property into a trust at the decedent’s death and is intended to guarantee that any assets that were
somehow not included in the trust become trust assets upon the decedent’s death. Property left
through the will must go through a probate court proceeding before it goes into the trust unless
the estate qualifies for a California Simplified Probate Procedure (link).
Not to be confused with a pour over will. A will is a legally enforceable document that states the how a testator would like their estate and affairs handled once they die. Once the testator dies, the will must go through probate, a
A Durable Power of Attorney is a legal document in which you (the “principal”) gives someone (“agent” / “attorney in fact”) the authority to manage all the affairs of the principal should the principal become unable to do so. This document does not have a set time period and it becomes effective immediately upon the incapacitation of the principal and expires at the principal’s death. The durable power of attorney was created to allow it to continue to be in effect after mental incompetency. The word “durable” means that the power of attorney continues to be effective after the principal becomes mentally incompetent. Being mentally incompetent means that the person lacks the mental ability to make informed decisions or is incapable of communicating those decisions. In addition to mental illness, this can also be due to disease, or an injury (such as one resulting in temporary unconsciousness or a coma). It may also be referred to as being mentally disabled or incapacitated. Moreover, a durable power of attorney can become effective as soon as it is properly signed, or it can become effective only if the principal becomes mentally incapacitated. In this situation, you would not only be creating a durable power of attorney but also a springing power of attorney (because it “springs” into effect upon the occurrence of a future event).
Advance health care directives, or living wills, inform physicians and family members about
your health care wishes when you cannot make medical decisions yourself. When experiencing
sudden incapacity, this document allows for you to name an individual (“agent”) to carry out
your preferences in medical treatment and interventions. This document provides guidance to your chosen agent in making medical decisions that are consistent with your wishes if you become incapacitated. While the most common purpose of this document is to advise physicians about your preferences for life-sustaining measures, an advance health care directive can also provide guidance in nutrition, hydration, resuscitation and organ donation. An illness and/or an injury can cause severe stress for everyone involved. It is not uncommon for arguments to surface among family members regarding the medical treatment that a loved one should receive. It is especially important to have an advance health care directive to enforce your health care wishes when arguments ensue. An advance health care directive may also avoid conservatorship altogether, or at a minimum, nominate the person of your choosing to serve as conservator and inform the court of your wishes in the event it becomes necessary.
A HIPAA Waiver is a legal document that allows an individual’s health information/records to
be released/disclosed to a third-party as required under the Health Insurance Portability and Accountability Act (HIPAA) of 1996
(https://www.cdc.gov/phlp/publications/topic/hipaa.html)
The HIPAA waiver of authorization allows the entities covered under the act (i.e. health care
providers, health plans, etc.) to provide information on a patient’s health to third parties authorized in your signed waiver. These third parties can include researchers, attorneys, other health care providers or family members, among others.
A guardianship nomination document establishes who you would like to care for your minor children in the event that you and the other parent pass away. In this document, you are able to specify the person or persons you would like the court to appoint as your children’s legal guardian(s).
There are two types of guardians:
1. Guardian of the Person
The guardian of the person is a non-parent who is allowed to make decisions about the care,
custody, control and education of a child. For instance, guardians of the person are
responsible for providing food, clothing, shelter as well as for meeting all the educational and
medical needs of the child. A guardian of the person essentially provides for the child’s
safety and nurtures them physically and emotionally.
2. Guardian of the Child’s Property/Estate
A guardian of the child’s property/estate is one who manages the income, money or any other
property the child owns and/or inherits.
While most individuals choose one legal guardian for both the person and the child’s
property/estate, that does not have to be the case.
NOTE: The guardianship nomination document comes into play only after both you and the other parent are deceased or incapacitated. It is important to keep in mind that your chosen/nominated person must still be approved by the court and that person must follow state law requirements when acting for your children. Although the courts have the last say in whom to appoint as the guardian(s) of your child(ren) (by considering several factors, including your child’s best interests), your nominations are given considerable weight during this process.
A living trust may be changed, modified, amended or revoked if the living trust is “revocable” and if the amendment, modification, change or revocation is done during the lifetime of the trust creator(s), settlor(s)/trustor(s)/grantor(s). However, keep in mind, that any changes, modifications, amendments or revocations may be dependent on the terms outline in the original trust.
For instance, if you drafted a revocable living trust with a spouse, and the trust includes a clause stating that at the death of the first spouse, the spouse cannot make any changes, then the spouse may not be able to modify the document.
NOTE: A revocable living trust becomes irrevocable at the death of the Trustor(s)/Grantor(s)/Settlor(s).
A living trust may be changed, modified, amended or revoked if the living trust is “revocable” and if the amendment, modification, change or revocation is done during the lifetime of the trust
creator(s), settlor(s)/trustor(s)/grantor(s). However, keep in mind, that any changes, modifications, amendments or revocations may be dependent on the terms outline in the original trust.
For instance, if you drafted a revocable living trust with a spouse, and the trust includes a clause stating that at the death of the first spouse, the spouse cannot make any changes, then the spouse may not be able to modify the document.
NOTE: A revocable living trust becomes irrevocable at the death of the
Trustor(S)/Grantor(s)/Settlor(s).
The answer is yes, you can modify your trust, so long as it is a revocable trust. In fact, to do so is the norm rather than the exception: most people who make a trust modify it multiple times over the course of their lives. But although modifying a trust is fairly simple, doing it right can be hard.
Probate and Trust Administration FAQ
While the court is not in charge of “supervising” the personal representative / administrator, the
representative/administrator cannot take certain steps in the administration of the estate without the Courts approval. the Court does requires that they ask the Court’s permission to sell real estate or business interests owned by the estate, among others.
The personal representative cannot do any of the following things without the Court’s
permission:
- Sell real estate and/or a business interest own by the estate
- Pay fees to themselves
- Pay fees to their attorney
- Make a preliminary distribution of property to beneficiaries (with a few exceptions), or
- close the estate.
Yes. In addition to your out-of-pocket expenses to manage and settle the estate, personal
representatives / administrators usually earn a statutory fee of the probate estate (See “What are the costs of Probate?”)
The court may lower or deny compensation as well as replace the Personal Representative /
Administrator with someone else. In addition, a Personal Representative / Administrator who
fails to perform their duties may also have to pay for damages caused to the estate.
A personal Representative / Administrator may be held liable for the following:
- Improperly managing the assets of the estate,
- Failing to collect claims and money due the estate,
- Overpaying and/or not paying creditors,
- Selling an asset without the authority to do so, or at an improper rate,
- Not filing tax returns on time
- Distributing property to the wrong beneficiaries, or
- Distributing property to beneficiaries before all creditors have been paid, etc.
The costs of probate are set by state law. These costs may include appraisal costs and costs for an insurance policy known as a “surety bond” as well as executor’s fees, court filing fees, certified copies fees, and legal and accounting fees. Probate costs are roughly between 4% to 7% of the total value of the estate, if not more. For instance, if someone contests a will then thousands of dollars can be spent litigating the matter. California law allows both a Personal Representative and the attorney for that Personal Representative to receive compensation (referred to as a “statutory fee”) for ordinary services, calculated at a percentage of the appraised value of the estate property.
The formula for calculating the fee (as to the each, the representative and the attorney) is as follows:
4% of the first one hundred thousand dollars ($100,000), plus
3% of the next one hundred thousand dollars ($100,000), plus
2% of the next eight hundred thousand dollars ($800,000), plus
1% of the next nine million dollars ($9,000,000), plus
½ of 1% of the next fifteen million dollars ($15,000,000).
For all amounts above twenty-five million dollars ($25,000,000), a reasonable amount to be determined by the court.
See Probate Code Section 10810 for more information.
Moreover, it is important to note that additional compensation (known as an “extraordinary fee”), may also be paid to the Personal Representative and/or attorney for that representative for “extraordinary services” in the amount determined by the court.
As such, the probate process can be quite costly.
See Probate Code Section 10811 for more information.
NOTE: Mortgages or other debt obligations are not considered in computing the fee base. Moreover, the fee based to calculate this statutory fee can also include income received during the administration process, plus gains over the appraised value on assets sold during administration. Thus, even if the estate has a $200,000 debt and the estate is only worth $300,000, the statutory fee is calculated out of the full $300,000.
No. Not all assets are subject to the authority of the probate court. Below are some examples of
assets that me not be subject to probate court:
- Assets below a certain amount may be transferred through a Small Estate Affidavit while some other assets may qualify to be transferred via a Spousal Property Petition. (See California’s “simplified procedures”) (LINK).
- IRA’s, Keoghs, and 401(k) accounts as well as life insurance benefits can be transferred automatically as long as the persons are named as beneficiaries.
- Bank accounts that are set up as pay-on-death accounts (PODs) or “trust” accounts
(“Totten Trust”) with a named beneficiary also pass to the beneficiary without probate. - Property held in Joint Tenancy may pass to the surviving joint tenant(s) without probate.
1. Joint Tenancy
Joint tenancy is a legal arrangement that allows two or more parties to jointly own an estate/property at once. When one of the parties dies, their property share automatically passes to the other parties without the need for probate. The joint tenancy is often established through the property’s deed.
2. Small Estate Affidavit
When an estate is worth less than $166,250, the executor can distribute the estate’s
property directly to the beneficiaries without going through probate. The process involves the submission of an affidavit prior to the beginning of probate and a 40-day waiting period after the decedent’s death to distribute the assets.
The affidavit should include the following information:
– The county where the deceased lived or where the property is locatedA description of the property
– An estimate of the property’s value
– Information about the beneficiary (person that will receive the property)
There are certain properties that are not included in the $166,250 limit:
– Real estate outside of California
– Joint tenancy property
– Property that goes to a surviving spouse
– Multiple-party accounts
– Payable-on-death accounts
– Property held in trust
When the real property is worth less than $55,425, the beneficiary can file an affidavit to
avoid probate and allow transfer of the property to them.This process involves a 6-month waiting period.
Rules for this procedure:
– Not for a joint tenancy property
– There is no current or past probate proceeding involving the property
3. Spousal / Domestic Partner Property Petition
A spousal property petition allows the transfer of property to a surviving spouse with a
single court hearing as opposed to a full probate proceeding. There is no estate value limit on a spousal property petition.
Rules for this procedure:
– The surviving spouse or conservator/representative of the surviving spouse’s estate can
file the petition
– An affidavit must be filed
– Service of notice of the hearing to other heirs of the deceased spouse or those who have
interest
4. Life Insurance / Retirement Benefits / Pensions, etc.
Life insurance policies usually allow beneficiaries to directly acquire their payouts
without going through the probate court.
A person with a retirement account such as a pension, IRA, 401(k), or 403(b) may be
able to directly pass the benefits directly to their beneficiaries without going through probate court.
California law states that a Personal Representative must complete probate within one year from the date of appointment, unless he/she files a federal estate tax. In this case, the
Personal Representative can have 18 months to complete probate. If probate has not been
completed by that time, the Personal Representative must file a status report with the court to explain what is still outstanding and how much time it will take to complete.
If the Personal Representative does not report to the court, the beneficiaries may ask the
court to order them to file an accounting or take other actions to close probate. The court may
then take the steps to remove the Personal Representative and appoint someone else.
NOTE: While matters must be completed within 12 or 18 months, there may be circumstances that can make the probate process last a lot longer. These circumstances may include a will contest (a claimed filed with the court that all or part of the will is invalid), inability to locate beneficiaries, a sizeable and complex estate, among others.
In circumstances where there is a Will, the individual who is named as the Executor will usually be the one who oversees the probate process and will be appointed to serve as the Personal Representative of the estate. This person will be responsible for managing the estate through the probate process, which may include but is not limited to, following the courts instructions, procedures and Rules of Court. Please note that an executor may not act as a Personal Representative until they are appointed by the court and formal Testamentary Letters are issued giving them the authority. If a Will does not exist, or no executor is named in the Will or the executor named in the Will does not want to serve as the executor, the probate court will appoint an individual to handle the probate process. This person will be known as the “administrator.” In these instances, the Court will usually choose the closest living relative, or a person who will inherit some portion of the decedent’s estate.
The Personal Representative / Administrator oversees the filing of the initial probate petition and is supposed to take every step necessary to settle the decedent’s estate. This will include
following court orders, paying debts, filing and paying taxes, arraigning for the inventorying and appraisal of the estate, distributing the estate to the heirs, and the hiring third-parties (attorneys, accountants, appraisers etc.) necessary to carry out certain duties, among others. (See Probate Checklist).
Trust Administration FAQ
If there are no complications, a standard trust administration can be closed within 6
months. Trusts that involve property distribution or liquidation can be more complicated and take up to a year or longer to settle.
A revocable living trust can protect your assets from Medi-Cal for those assets that are properly titled in the name of the trust. In June 27, 2016, Governor Brown signed legislation SB 833 which greatly reduced the scope of California’s Medi-Cal Estate Recovery against the estate of deceased Medi-Cal beneficiaries who died on or after January 1, 2017. This legislation limited Medi-Cal recovery to only those estate assets subject to California probate that were owned by the decedent at the time of their death. (See Change to Estate Recovery effective January 1,
2017 due to Legislation SB 833).
https://www.dhcs.ca.gov/services/Documents/Changes_to_Estate_Recovery_effective_January_1.pdf
Another issue that can impede the trust administration process is when the successor trustee has
also died and there are no other persons or entities nominated in the trust to serve as a successor
trustee. In these cases, it will be necessary to go to court to appoint a new successor trustee.
