I have one of those pamphlets where I can take a will form and fill out the information I want, have it signed, witnessed and notarized and have a legal and binding will. However, the form says that if I want to leave my belongings to a non-relative, I would have to go to a lawyer and pay to have a "real" will done up. Why is this? Why can't I leave things to whomever I want without having to pay an attorney?
Irene
Dear Irene,
You are probably dealing with a statutory form will. This is a will form found in California Probate Code section 6240. This form was drafted by the California legislature and its language was drafted under certain assumptions based on what the legislature believes most people want. That's why the statutory form will includes provisions for leaving assets to spouses, registered domestic partners, and descendents. If it suits your needs, you can read the instructions, fill out the form, sign it before two witnesses, and wind up with a valid will.
But the statutory form will cannot possibly cover all of the bases. There are too many variables for a single form to be a one-size-fits-all estate plan. For example, the statutory form will allows you to leave assets to your minor children in custodial accounts under the Uniform Transfers to Minors Act. There's nothing wrong with that, but if you leave minor children a sizable inheritance, they really need the protection of a trust.
There are other form documents you can buy, as well as computer programs with which you can create wills and even revocable trusts. You can even create a valid holographic will by writing your wishes in your own hand. All you need to do is to take a blank sheet of paper and write something like "This is my last will and testament. After my death I leave my estate to Bob". Sign it and date it and you'll have a valid will.
But would this will do what you want? You can create your own estate planning documents, but only at a risk. Without the advice of an estate planning attorney, you cannot really be sure that the documents you create will work the way you want them to. Legal language is complex, and sometimes doesn't mean what you think it means. Also, other provisions found in a will or trust can have an effect on the language you draft about how your assets are distributed after your death. Without an experienced eye reading the documents you create, you cannot really be sure what it does.
You should understand that estate planning lawyers do more than fill out forms. There are potential problems with your estate plan that you may not even be aware of, and a book or computer program cannot learn enough about you and your desires to ask you the right questions and help you create a will or revocable trust that would accomplish your goals.
Len & Rosie
Dear Len & Rosie,
My wife of seven months was recently diagnosed with stage four Pancreatic Cancer. We were planning on setting up a trust, but now things need to be accelerated. We have a home, a vacation home, autos in each of our names, retirement accts. etc. We need to know where and how to get started. We are both almost 50, self employed and have not yet merged our finances
Will
Dear Will,
What you need to do depends on your wife's life expectancy, the overall value of her assets, and the manner in which your wife wants to leave her assets after her death. If your wife dies without an estate plan, you will likely inherit either one-half or one-third of her separate property assets by intestate succession (the law about who gets what when someone dies without a will). Her children or other surviving relatives will inherit the rest.
Naturally, your wife may not want that. You and she have a short term marriage. She may not want to leave so much to you, especially if she has children from a prior relationship. Or she may have no close relatives and would rather have her husband inherit everything.
Your wife should see an estate planning attorney as soon as possible. If her situation is critical, her attorney should drop everything and get a will or trust signed within a couple of days. You should understand that this is likely to cost more than ordinary estate planning. The attorney may have to work reschedule other clients and work extra hours in order to get the job done.
Your wife should also contact her life insurance companies and the custodians of her retirement accounts. She cannot change the beneficiaries of these assets with a will or a trust - she must sign and submit the beneficiary designation forms provided by these companies in order to update her beneficiaries.
The critical thing to do is to get an estate plan in place that will respect your wife's wishes. Don't worry so much if your wife gets a will instead of a trust. Anything passing to you can avoid probate with a spousal property petition, and the manner in which your wife's assets shall be distributed after her death is more important than avoiding probate. She should sign a will as soon as possible, and if time and her health permit, she can create a trust to avoid probate later.
Len & Rosie
Dear Len & Rosie,
My mom owns a home and wants it to go to me when she passes on. She is 77 years old and healthy, and I am her only child. The deed to her home is in both of our names as joint tenants. Is this ok, or should we quit deed into just my name or make a trust? Is her home protected form probate with just the deed?
Pete
Dear Pete,
Holding title to your home in joint tenancy with your children is a form of "poor man's estate planning". Upon your mother's death, the home will avoid probate, assuming that she dies before you do. However, there are some significant disadvantages to holding property in joint tenancy with children.
Today, your mother no longer owns her own home - she shares title with you. Your mother cannot sell her own home or borrow against it unless you agree to sign the papers with her. This probably isn't a problem in your case, but in many families, the children may not be so cooperative. Her home is also exposed to the claims of your creditors. If someone were to sue you and get a judgment against you, this judgement, when recorded, will create a lien on your mother's home. She could have to fight to save her home from your creditors.
There are estate planning considerations as well. If you were to die before your mother, title to the home would revert to her and would be subject to probate on your mother's death. If you have children of your own, they may inherit your mother's estate through probate before they are mature and responsible enough to be entrusted with the money. Most young people do not understand how difficult it is to get money until they've had to live on their own for a few years. They tend to treat an early inheritance as a windfall. Imagine how fast an irresponsible 18-year-old can spend several hundred thousand dollars.
Another risk is capital gains tax. If your mother owns the entire home upon her death, it will get a new cost basis equal to the home's date of death value. This will allow you to sell the home after your mother's death, if you wish, and pay no capital gains tax. However, if your mother owns only half of the home on her death, only half will get a step-up in cost basis. Owning property in joint tenancy to avoid probate on the cheap could cost you much more in taxes then you'll save in probate fees.
You and your mother should consult with an estate planning attorney to make sure your mother's estate plan will do what she wants while providing the most protection for both her, you, and the rest of your family.
Len & Rosie
Dear Len & Rosie,
Is it possible to change a revocable trust without an attorney? I have one brother and one sister. About twenty years ago my mother setup a trust with an attorney. My sister, brother and myself were named as the beneficiaries. Over the last five years my mother and sister have stopped
speaking and now my mother wants to cut her out of the trust. But she does not want to pay any more for an attorney.
Brian
Dear Brian,
It is possible to draft your own trust amendment, and we'll even tell you how to do it, even though it's a bad idea. Your mother will have to read her trust carefully, and find the provision within her trust that allows her to make amendments. It probably says something like "The settlor may amend the trust with a written instrument delivered to the trustee."
Then, your mother should type out a document that makes reference to the specific provisions of the trust that she's changing. So, if the dispositive provision of her trust is in Article Four, section 3, then the amendment should say something like "The settlor Amends Article Four, section 3, by deleting it and replacing it with the following provision...". Then, she should include her new provision related to who gets what when she dies. The amendment should state that she is specifically making no provision for her daughter. She should sign the amendment before a Notary Public to make it official.
But this is a very bad idea, for two reasons. First, it's easy to make a mistake while drafting your own legal documents. Your mother hasn't been to law school, she does not have an understanding of how legal documents are drafted and how the language found in wills and trusts is interpreted.
More importantly, you, not mom, will probably wind up drafting this trust amendment. After all, you wrote this letter, not her. Under the amendment you draft, you will wind up getting part of your sister's share. And since you probably already help your mother with her finances, you meet the three elements necessary to make a case for "undue influence". After your mother's death, your sister could sue to toss out the amendment, and the burden of proof will be on you, not her, to show that this is really what your mother wanted. And if you and your brother are the only witnesses, you won't have a very good case.
Your mother will receive two significant benefits if she hires an estate planning attorney to amend her trust. First, she will have some assurance that the document will be drafted properly, and actually does what she wants it to do. Also, the attorney and his staff will be available as impartial witnesses as to your mother's desires if your sister tries to challenge the trust after your mother's death. Your mother should consult with an attorney to review and update her trust.
Len & Rosie
Dear Len & Rosie,
My parents are in their 60's and are thinking about making a revocable trust. They want to leave their house to all three of the children, but they do not want us to sell the home after they both die. Is there a way they can make it so the house can't be sold after their deaths? My mother wants to be sure we always have a place to live if something should ever go wrong with our homes.
Jan
Dear Jan,
Your parents can do this. They can create a revocable trust that would be able to maintain control of their home. Instead of simply distributing their home equally among their children with all of their other assets, your parents' trust can continue on after their deaths. The trust can include almost any restrictions they want with respect to how their home will be maintained after their deaths.
But if they do this, there will be complications. First, if their home is held in trust, that means the trust has to pay for the expenses and upkeep of the home. Unless the home is rented out, there will be no trust income available to pay these expenses. That means your parents will have to either leave sufficient assets in the trust to pay the continuing expenses of the home, or make their children pay these expenses.
A second complication is capital gains tax. When your parents pass away, the home will receive a stepped-up cost basis. This means that when the property is eventually sold, the amount of capital gains tax and California income tax due will be based on the increase in the value of the property since the surviving spouse's date of death. If the home is held in trust until all three children die, it will have undoubtedly increased in value and there will be a significant amount of tax due upon its sale.
Finally, your parents may want to use a little common sense. Sometimes the job of an estate planning attorney is to tell the client, "This is a bad idea." If all three of their children are already buying homes, keeping their own home in trust as an emergency backup home is probably a bad idea. It may force the children to become landlords when they may not want to, and if one of the children does winds up living in the home, the other two children may never actually benefit from a large portion of their inheritance. Unless there's some overriding reason why this is necessary, it's usually a better idea to distribute the home outright among the children and let them decide what to do with it.
Len & Rosie
Dear Len & Rosie,
I was hoping I could get your advice in regards to my 70 year-old mother who does not have a formal will or trust. She obtained a quit-claim deed form that we completed and had notarized. I have the original with me. The deed gives the home to me, and I will record it upon her passing. I know my mothers wishes and will abide by them. After her death, I will sell her home and split the money with my five siblings. Her only other asset is a bank account with $20,000, which is also in her name and my name. When my mother dies, what kind of situation am I in for with regards to her house and no will. Is the quit claim deed sufficient?
Maria
Dear Maria,
Your hanging on to the quitclaim deed to record after your mother's death is what's referred to as a "death escrow." It's a bad idea, and will probably cost you more money than what you may save in probate fees.
Every kind of appreciating asset, such as a home, other real property, or stock, has a cost basis, which is initially its purchase price. When the asset is sold, capital gains tax is due on the increase in the value of the asset from its date of purchase. But when someone dies, everything he or she owns gets a "step-up" in cost basis that increases the cost basis of each asset from its purchase price to its date of death value.
The cost basis of your mother's home is either its purchase price, or it's value on the date of her husband's death, assuming that they owned the property together as community property. If your mother owns the home on her death, it will get another step-up in cost basis, and the home can be sold by her heirs with no capital gains tax due, except on any increase in its value after your mother's date of death. However, your mother's quitclaim deed gives you the home outright. Which means it won't get a step-up in cost basis on her death. You may have to pay a considerable amount of capital gains tax when you sell the family home.
There are other problems with a death escrow as well. For example, you could die first, and there could be a fight between your mother and the heirs of your own estate. There will also be gift tax consequences to you when you sell the home and distribute the proceeds among the family. Death escrows are usually a very bad idea, and are a poor alternative to creating a trust to avoid probate. Your mother should meet with a trusts and estates attorney to create an estate plan suited to her needs.
Len & Rosie
Dear Len & Rosie,
I am a physician in solo practice, making approximately $200,000 per year. I am married with two children, ages 6 and 2. My wife works part time and makes about $50,000. We have assets worth $200,000, mostly in retirement accounts. We have about $300,000 in equity in a home, and I have $2,000,000 in life insurance. Do I need a fancy trust?
Kevin
Dear Kevin,
You and your wife definitely need estate planning now. If both of you were to die young, a guardian would be appointed to raise your children and manage their inheritance, until each of your children reach 18 years of age. The last thing you want is for your 18-year-old son to be presented with a check for a million bucks, before he's mature enough to be responsible with that kind of money.
It is therefore very important, that your estate plan take your children into account. Your wills or trust should contain a "sprinkling trust" in which a trustee of your choice will administer your children's inheritance, pay their expenses, and provide for their education until they grow up.
You and your wife can have wills or a trust. On one hand, it's not very likely that both you and your wife will die young, and wills are cheaper than a trust. On the other hand, both of you are going to die someday, and the cost of probate could staggering. If you die before your wife, and then she dies with $2,500,000 in assets (your home, investments, and all that insurance money), the probate attorney will earn a statutory fee of $38,000, and the executor of the estate will get the same amount. That's nearly $80,000 in administrative costs if you and your wife die without a trust to avoid probate.
It is usually much cheaper, easier, and faster to administer a trust than it is to administer an estate in probate. Eventually, you and your wife are likely to make a trust. You can create one now, and keep it up-to-date as your children grow up. Or you can play the odds, make wills now, and wait until you are older to create a trust. What the two of you should do now is to sit down with a trusts and estates attorney to discuss these issues and devise an estate plan most suited for your needs.
Len & Rosie
Dear Len & Rosie,
My mother recently moved to California from Florida. In her very simple will, I am named as her executor and the Florida attorney who drew up the will is named as the alternate executor. My mother would like to make my brothers her alternate executors instead. Can I simply retype her will with my brothers so named and let her sign it and get it notarized? My husband suggests that perhaps a California will requires some different verbiage than a Florida will.
Joyce
Dear Joyce,
Your mother should property make either a new will, or alternatively a codicil, prepared by an attorney. Trust, estate, and probate law varies from state to state. The witnessing requirements of a will signed in Florida are not necessarily the same as a will signed in California. Your mother's old will is still valid under California law, because California recognizes the validity of wills that were properly executed under the laws of other states.
However, if you retype your mother's will with the changes she wants, she must execute it under California law, not Florida law. That means no matter what the old will says, your mother's signature must be witnessed by two adults who are not inheriting any of your mother's assets upon her death.
Also, your mother's will was drafted under Florida law. If she dies with her present will, the court would interpret it under Florida law if there was a question as to the meaning of a provision in the will. But retyping the will and signing it here in California would cause the terms of the will to be interpreted under California law. While unlikely, this could make a difference in what the will means.
Finally, since your mother now lives in California, she should update her entire estate plan anyway. She should have a new advance health care directive, and a durable general power of attorney drafted under California law, in case she becomes incapacitated. And she should also consider creating a revocable trust, if her estate is worth more than $100,000 and would therefore be subject to probate upon her death.
For all these reasons, you probably should not try to do this yourself. If your mother's legal documents are prepared by an estate planning attorney, your family will have good reason to believe your mother's assets will be distributed the way she wants, and that you'll be in a good position to provide for her care should she need it.
Len & Rosie
Dear Len & Rosie,
I am 63 and am going into surgery in November, and I think I had better get things in order, just in case. My only living son is in prison for drugs for at least the next 15 years. He will be about 50 when he gets out. I also have two grandchildren from my daughter who passed away two years ago. My concern is that when my son gets out of prison, he will need help till he gets a job, which I assume will be very tough because of his criminal record, so I want to leave him my home when I die. I am worried that if he goes back on drugs, his inheritance will be lost with him.
What do people do in this case? Have him tested periodically? Dole out the money? Just give it to him and pray for the best? What do you suggest? I also want to leave something for my granddaughters.
Frances
Dear Frances,
You have to be very careful about leaving assets to your son upon your death, and not just because he may use this money as an opportunity to fall back into his drug habit. There may be some court-ordered restitution that he is required to pay, and people who become addicted to drugs tend to have creditor problems as well. Unless it is years down the road and your son has completely straightened himself out, you should not give him anything outright upon your death.
Instead, your estate plan should create an irrevocable trust for your son's benefit after your death. Someone you trust can be the trustee in charge of your son's inheritance. The trust can give the trustee a great deal of discretion as to how much money should go to your son each month. For example, the trustee could spend money on your son, paying his rent and health insurance instead of giving him the money in the hope that he'll be responsible and pay his own bills. If you want, the trust can even prohibit the trustee from spending anything on your son if he is still addicted to drugs.
Your grandchildren should not get their shares outright either, unless they are responsible adults. Until children or grandchildren spend a few years out on their own, paying their own way through life, they tend to think of an inheritance as a windfall. Instead of investing the money wisely, it's just as likely they'll blow it all on an expensive car. Your grandchildren's shares shares can be held in a different kind of trust, a "Sprinkling Trust", in which the trustee will spend money on them for their education, health, and support until they grow old enough to be responsible with the money.
You should consult with an estate planning attorney to discuss these issues and create a will or revocable trust that will help protect your son and grandchildren from themselves.
Len & Rosie
Dear Len & Rosie,
My father-in-law says he does not have a will. One or two years ago he wrote out a document naming one of his sons as "executor of my estate to distribute my estate as he sees fit upon my death." The document does not say its a will. It was notarized, but there were no witnesses. Could this be deemed valid in place of a will? Is there any action that can be taken now to protect all his children? My father-in-law now has mild dementia.
Margaret
Dear Margaret,
There are two types of wills that are valid in California, witnessed or "attested" wills, and handwritten or "holographic" wills. If your father-in-law wrote out the document in his own hand, then it may be valid as a holographic will. If someone else wrote it out, or if it was typed, then the will is definitely invalid because an attested will requires two witnesses. Forget the notary. In California, wills are not required to be notarized, and if they are, the notary acknowledgment has no legal effect.
If the will is a valid will, then the son named as executor can submit the will to probate after his father's death. But he may not be able to distribute the estate "as he sees fit." The will can be interpreted as creating an invalid trust, because it directs the son to distribute the estate but does not really specify who is supposed to get it. On the other hand, the son could argue that it all goes to him, and if he wants to keep it for himself, then so be it. If there is an argument over how the estate should be distributed, then the whole family may wind up in court, and the lawyers may wind up with more than anyone else.
How do you get out of this mess? Your father-in-law should see a an estate planning attorney and make a new will that clearly spells out his wishes. It probably does not matter that he is in the early stages of dementia. The mental capacity to make a will is a fairly low bar to step over. He can make a valid will if he more or less understands what he owns, who his family members are, and who he wants to inherit his estate after his death.
While he's at it, he should also give a trusted family member a power of attorney and an advance health care directive to make it easier for his family to take care of him
