Trusts, Wills and Estates: A Guide for New Inheritors - Werner Law Firm
New Heirs' Guide to Trusts, Wills & Estates Administration - Werner Law Firm

New Heirs’ Guide to Trusts, Wills and Estates

Losing a loved one can be incredibly difficult to process, no matter how long a person might have seen it coming. You cannot prepare yourself for the pain and grief of having someone you care about disappear from this world. However, that pain can be compounded with the confusion felt from the aftermath of a person’s death.

Dealing with estates, wills and trusts can be confusing for someone in the position of inheriting a large sum from an estate, especially soon after the tragedy, but preparing yourself properly can help you get through the entire ordeal smoothly and come out the other end making the most of what you were given, as intended by your late benefactor.

You might either be unprepared or looking to preempt the possible confusion that can arise in such a situation. In either case, here is everything you might need to know getting started on the matters of inheritance and estate planning in California.

What Is in an Estate Plan?

If you own anything considered property in some shape or form – from a home to a used scooter – you have an estate. Your estate is the entirety of your financial value as a person, amassed over decades, packaged to be distributed after you pass away.

When you die, your estate is an entity. Distributing your estate in a way that minimizes cost and maximizes value is called estate planning, and some plans can take years after you pass away to fully complete. For some, their estate can grow after death. Artists, for example, can earn royalties which can go towards a trust set up for their estate after they pass away.

Estates are not just distributed towards relatives but can become tradeable – a famous example is Elvis Presley’s estate, which has become a corporate entity built out of a portion of his original estate. Elvis’ surviving beneficiary, his daughter, only retains 15% ownership of the company.

For most people, their estate will be everything they own at the point of their death, distributed as they wish, based on certain estate planning documents. Without such documents, an estate is distributed based on any given state’s intestate laws.

If you are a resident of California, your estate will be distributed to your next of kin and your spouse, after going through the probate court. Most people simply prepare a last will and testament before passing away, which allows them to name their beneficiaries and make certain requests, as well as suggest an executor of the will and pass on guardianship of any minor children.

Wills must also generally go through probate court. Other estate planning tools bypass probate. These include trusts, payable-upon-death clauses, and other cases where the value or ownership of an account or property is automatically passed on to designated beneficiaries.

What Is Probate?

Probate is a legal process by which a court determines the legitimacy of your will, and the contents of your estate. As a matter of public record, going through probate will make your possessions public. The probate process in California takes anywhere generally from 9 to 18 months, depending on the size of the estate, creditor claims, and family disputes over the legitimacy of the will.

After settling on the legitimacy of the will, the court will appoint an executor to take stock of the decedent’s estate, and see to it that it is properly distributed, and that any claims filed against the estate are settled. If you have been assigned as executor of your parent or relative’s estate, then your duties are generally as follows:

      • File the will.
      • Notify creditors (such as banks and credit card companies).
      • Receive incoming funds and manage ongoing financial obligations.
      • Take inventory, and file inventory of the estate, alongside a total estate valuation.
      • Manage and preserve the properties until they are passed on (or sold).
      • Deal with any complications and represent the estate legally and financially.

The exact length of probate depends on the size of the estate, but estates under a total value of $150,000 are subject to a small estates probate, or accelerated probate process, in the state of California.

California Inheritance Laws for Wills, Trusts and Estates

In California, federal estate taxes apply, as in the rest of the country. However, California does not have a state estate tax – neither does it charge an inheritance tax. This means you don’t have to pay to receive your share of the estate, and the estate only has to pay taxes on its total value once, unless it is below the lifetime exemption.

Wills vs. Trusts

Estate planning tools are a dime a dozen, but only a handful may be useful to you and your specific set of circumstances. Like any other complex financial matter, it all depends on a list of relevant factors, and anyone considering estate planning should hire a professional. For the percentage of Americans who do consider estate planning, most either choose between a will or living trust.

      • Wills are documents that describe the final will of the decedent before they passed away. It allows them to determine where their belongings should go. A living will, on the other hand, represents the medical will of a person, allowing them to veto or agree to certain invasive procedures and treatments if they are incapacitated and unable to make a choice.
      • Trusts can come in many shapes and forms, but most are either revocable or irrevocable living trusts. These are built through a trust document and go into effect while the grantor (creator of the trust) is still alive. A trust is essentially an entity that holds certain properties in trust under the control of the grantor and subsequent trustee, and to be passed on to designated beneficiaries when certain conditions are met (the passing away of the grantor). All trusts allow you to bypass probate, but only an irrevocable living trust offers asset protection. A revocable living trust allows you to expand and amend said trust, while maintaining control of its contents.

When to Start Mapping and Planning Your Future

Too many see estate planning as something for the later stages in life. This is a mistake. Many Americans pass away without a will or any estate planning, despite it oftentimes being cost-effective, and despite having an estate to pass on, no matter how modest. The most glaring examples of poor planning include celebrities who pass away leaving behind enormous estates with absolutely no estate plan.

If you own something worth bequeathing, then it is time to consider what options you have for estate planning. A will may be premature if you have just started a family, but there are many other options at hand to help you prepare yourself financially – not just for estate planning purposes, but for tax purposes and more. By now, you should know how your inheritance is determined and passed onto you, and how to pass what you will build onto your children.

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