Estate Planning Overview

I am a do-it-yourselfer. I love working around my house: Painting, building, and even stuccoing. But there are exceptions, like plumbing. I hate plumbing.

One thing I have learned about my handyman hobby is that I should expect to buy twice the building materials that I should need to complete the project. Experience tells me that I will use all of those materials. My habit is to try to build the first time, fail, and then to try it again. Almost invariably, I will end up building or fixing up the same thing at least twice — once or twice for practice, and then “for real.”

Some who would never consider fixing a garage door or stuccoing a wall would unthinkingly prepare a will or trust using many materials found in bookstores. Bookstores abound with quick-fix be-your-own-lawyer books and CDs, featuring forms and fill-the-blank forms and programs for wills, trusts, and powers of attorney for healthcare decisions. Some of these materials are even stated specific, offering different provisions for residents of different states.

Some of these do-it-yourself materials are fine, and may even be useful. If correctly used, many of these forms might work for a do-it-yourself. But suppose your case is different? Suppose you fail to properly use the form?

One thing I have noticed about building materials is that the old rule of thumb generally applies: you get what you pay for. The same is true in estate planning. But it is also true that legal documents such as wills and trusts oftentimes do not “speak” until the author is deceased or incapacitated. Because of this fact, in the case of estate plans, the handyman analogy of buying double the building materials breaks down. If a wall is improperly built, it can be torn down and redone. But if a will is improperly drafted, or if it fails to state the intent of the author, there is often no opportunity for a second try. Rather, in many cases, when the author of the will or trust is incapacitated or deceased, the planning “solution” either fails or has completely unexpected and unwanted consequences.

estate-planning-guardianStill, to be a good consumer of legal services, self-education is essential in communicating needs to an estate planning professional. Thomas McKenzie, Attorney at Law helps with estate issues. The following is an overview of some of the major estate planning topics that should be applicable in most states.

As a youngster, I recall seeing a thick blue booklet in my family’s bookshelf written by Norman F. Dacy, entitled How to Avoid Probate. The book is a classic and helped to spawn the move within estate planning field away from wills, and toward “living” or “inter Vivos” trusts (which is Latin for “during life”).

Some now associate the word “probate” with the twin evils of expense and delay. Many conclude that probate is “bad,” but may not have any idea why this is so, or even what exactly probate is. Simply stated, “probate” is a court-supervised method of transferring property and compensating creditors after death. In California, for instance, there are two main methods of communicating one’s wishes for the disposition of a court-supervised probate proceeding. The first is through a properly witnessed and executed will. The second method is through a “holographic,” or handwritten will (although, not all states offer a holographic will). To be valid, both types of wills have specific requirements, the details of which are beyond this article.

One myth many have is that a person’s assets will always go “to the state” if he or she dies without a will. This is false. The “intestacy” statutes provide for specific property dispositions in the absence of a will — however, these dispositions may not reach the desired result. For instance, in California should a wife with two adult children by her husband die, the husband would by definition already own one-half (1/2) of the community interest of the entire estate. Under the intestacy statutes, the husband would also receive one-half (1/2) of the wife’s community share [California Probate Code §6401(a)] (now, giving him a grand total three-fourths’ (3/4ths) share of the total estate of both) and the two adult children would split the remaining one-half (1/2) of their mother’s assets. [California Probate Code §6402(a)]. However, this may not be the best: If the children are stingy and well-off adults, the wife might have wanted her entire estate to go to her surviving husband.

Another myth is that probate estates always go on endlessly, and are always horrendously expensive. While estates can be time consuming and expensive, most can be handled in months, depending on the complexity of the estate, the number of creditors, and other factors such as the tranquillity of family relationships. On the other hand, there is certainly truth to the criticism that probate estates can be lengthy affairs: Personally, I am familiar with a probate estate which has been pending since 1991 — about 16 years. Also, probate estates can take additional time if there are complicating circumstances like (for example) the heirs are difficult to locate or if there are disputes among family members.

Concerning the issue of expense, in California, the ordinary attorneys and personal representative fees are determined by statute and are set out specifically in the Probate Code [California Probate Code §§10800]. Extraordinary expenses may sometimes be charged, but the court must permit the added expense. Sometimes expenses may be saved if the personal representative waives his or her fee. If the executor or administrator is a family member, rather than an institution or professional, fees are often waived to save expense.

In the final analysis, trusts are usually more expensive than wills to prepare, but wills administered through a court-supervised probate is usually more expensive and time-consuming than administering a trust. However, at least in California, there is another possible alternative: An expedited procedure for small estates (i.e., estates under $100,000, excluding exempted property) [California Probate Code §13100], which does not require opening and administering a probate estate. Therefore, in some cases opening a probate may not even be necessary.