Estate Planning Essentials for California Property Owner

Key Takeaways from Importance of Estate Planning:

• Ensures assets are passed down according to your wishes.
• Avoids the lengthy and costly probate process, especially crucial for California property owners.
1. Living Trust vs. Probate:
• Living Trust: Helps avoid probate. Ensures real estate is included in the trust.
• Probate: Necessary if there's no living trust, requiring court involvement. Nearly $50,000 in fees for a $1 million home can be expected.
2. Roles and Responsibilities:
• Executor: Named in a will, responsible for managing the estate.
• Personal Representative: If someone dies intestate (without a will), the court appoints a representative.
• Executors need court-issued letters to act and notify all beneficiaries of probate proceedings.
3. Best Practices for Property in Probate:
• Engage an attorney promptly to manage the process and fees effectively.
• Executors should seek full authority to sell property with court approval, streamlining the process.
4. Trusts Simplify the Process:
• Trusts have a fiduciary duty to all beneficiaries, ensuring property is sold at fair market value.
• Scenarios like transferring property after a parent's death require an affidavit of death and a successor trust deed.
5. Legal and Financial Considerations:
• Life estates can't encumber property; pre-arranged beneficiary consents can facilitate sales.
• An attorney can help obtain an appraisal instead of a Comparative Market Analysis (CMA), as the IRS requires appraisals for capital gains purposes.
• Estates valued over $13.6 million are subject to estate taxes under Prop 19.
6. Property Appraisal and Tax Implications:
• "Date of death evaluation" appraisals are crucial for capital gains tax calculations.
• The first $250,000 gain is excluded under the 121 exclusion.
• Reassessments occur when property is transferred to an irrevocable trust, affecting tax bases.
7. Debt and Estate Settlement:
• Credit card debt and other obligations are settled from the estate, not by beneficiaries.
• Insolvent estates allow beneficiaries to walk away from debts.
• Notifying creditors promptly initiates the statute of limitations, protecting the estate.

Summary: Proper estate planning, particularly through the use of living trusts, can save significant time, money, and stress for your beneficiaries. Ensuring your real estate is included in a trust and seeking professional legal and financial advice can help navigate the complexities of estate management and probate.