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1. NO ESTATE PLANNING
However, even if you have at least $100,000 in assets, you should have an estate plan set up during your lifetime; preferably a trust based estate. If you don't, then you expose yourself, your loved ones and your hard-earned assets to unnecessary probate and/or avoidable death taxes. Take time to carefully think through, implement and then update your estate plan. You and your loved ones will be glad you did.
2. FAILURE TO PLAN FOR YOUR INCAPACITY
The law requires every adult make their own personal, health care and financial decisions. However, if you have not legally appointed an agent (someone you have given the authority to make certain decisions for you) in advance of your incapacity, then a probate judge, who may not know or care about you or your wishes, will appoint one for you. This process may invade your privacy by making your personal and financial circumstances a matter of public record.
However, with a comprehensive estate plan that includes a Durable Power of Attorney for financial decisions and a Health Care Directive for medical decisions, you will be able to plan for any potential incapacity on your own terms.
3. FAILURE TO SELECT GUARDIANS (BACK-UP PARENTS) FOR YOUR MINOR CHILDREN
However, these same parents typically fail to legally appoint guardians (back-up parents) for their minor children in the event both parents die. Who would you appoint as guardians to take your place and rear your minor children to adulthood? What special instructions would you give the guardians regarding their upbringing?
In order to ensure that your children are taken care of by someone you trust, it is vital that you legally appoint the guardians in your Last Will and Testament in advance of tragedy.
4. NO INHERITANCE PROTECTION
One of the greatest tax myths is that life insurance death benefits are tax-free. While a lump sum payment of the death benefit may be income tax-free when received by the beneficiary, the entire value of the death benefit is part of the policy owner's estate for estate tax purposes. This is true if the policy owner held any incidents of ownership (e.g. access to any cash value or even the authority to change beneficiaries) at the time of their death or transferred ownership of the policy within three years of their death.
You may structure your life insurance to avoid estate taxes and still fulfill your objectives through a properly structured and coordinated estate plan. Otherwise, you unintentionally may have made the
6. NOT PLANNING FOR PROBATE AVOIDANCE FOR MULTI-STATE REAL ESTATE
Real estate is subject to probate in the state in which it is located. Accordingly, if you own real estate outside your home state, then such real estate may go through probate in that state before being transferred to your loved ones.
Probate, whether in your home state and/or in another state may be avoided if you make appropriate legal plans in advance such as setting up a living trust and transferring your property into the trust.
7. NO INCOME or ESTATE TAX PLANNING FOR RETIREMENT PLANS
Without careful coordination between one's financial plan and one's estate plan, over 50% of a married couple's retirement money may go to the
8. NO BUSINESS SUCCESSION PLANNING
Statistically, only 30% of family businesses survive from the founding generation to the next. The success rate thereafter is even worse. Like individuals, business owners fail to make plans, have the wrong plan or even an outdated plan for the eventual transfer of their business. A comprehensive estate plan should incorporate planning for the business succession, especially when it is the major family asset.
For example, if some children are active in the business and others are not, how do you treat everyone equally (or at least fairly) when you are no longer alive? Or, if the business is to be sold to other shareholders, key employees or a third-party purchaser, how do you structure the sale to protect your loved ones when you are gone? Will there be sufficient cash liquidity in your estate to pay any death taxes due or will illiquid assets be sold to raise the cash needed? Effective business and estate planning will help resolve these questions and transfer your legacy on your terms.
9. NO LIFETIME GIVING PLAN
One overlooked and therefore underutilized opportunity under the tax code is the annual gift exclusion. This allows you to give up to $13,000, in 2009, to as many individuals as you desire without incurring gift taxes on the transfers. For estates already subject to potential federal estate taxes at rates over 40% this technique not only removes the gifted asset's value from the donor's estate valuation, but also any future appreciation on the asset.
CONCLUSION
We have just reviewed some fatal estate-planning mistakes that can destroy your plans for yourself, your loved ones and your hard-earned assets. If you are interested in designing and implementing your estate plan, please contact Attorney Tom Nemat at the Law Firm of Tom Nemat by phone (949) 375-5541 or by email at tnemat@nematlaw.com.
HOW MUCH DOES PROBATE
COST
IN CALIFORNIA?
California Probate Code section 10810 sets the maximum statutory fees that attorneys can charge for a probate. Higher fees can be ordered by a court for more complicated cases. The fees are four percent of the first $100,000 of the estate, three percent of the next $100,000, two percent of the next $800,000, one percent of the next $9,000,000, and one-half percent of the next $15,000,000. For estates larger than $25,000,000, the court will determine the fee for the amount that is greater than $25,000,000.
The fees listed below are the California statutory fees used to compensate attorneys and executors in probate cases for various sizes of estates. If both the attorney and the executor receive a fee, the amount paid will be double that shown below. The value of the estate is determined, in general, by the inventory for the estate. (If an accounting of the estate has been waived, the total value of the estate for attorney's fees purposes is the inventory, plus gains on sales, minus losses on sales.) Debts are not included in determining attorney's fees, and if a house is appraised at $1,000,000, for example, and it has a mortgage of $800,000, it is still considered a $1,000,000 asset for the purpose of calculating attorney's fees.
|
Estate Value
|
Statutory Fee |
|---|---|
| $100,000 | $4,000 |
| $200,000 | $7,000 |
| $300,000 | $9,000 |
| $400,000 | $11,000 |
| $500,000 | $13,000 |
| $600,000 | $15,000 |
| $700,000 | $17,000 |
| $800,000 | $19,000 |
| $900,000 | $21,000 |
| $1,000,000 | $23,000 |
| $1,500,000 | $28,000 |
| $2,000,000 | $33,000 |
| $3,000,000 | $43,000 |
| $4,000,000 | $53,000 |
| $5,000,000 | $63,000 |
| $6,000,000 | $73,000 |
| $7,000,000 | $83,000 |
| $8,000,000 | $93,000 |
| $9,000,000 | $103,000 |
| $10,000,000 | $113,000 |
| $15,000,000 | $138,000 |
| $20,000,000 | $163,000 |
The fee charged to file a probate petition is $355, but may be slightly higher in some counties due to surcharges. Filing fees were substantially higher until a state appellate court ruled in early 2008 that the fees were unconstitutional because they violated Proposition 6, passed in 1982 to eliminate the state inheritance tax.
In probates that are complicated by lawsuits or tax problems, the attorney and executor can ask the judge to approve fees that are higher than those set by state law.
In addition to the statutory fees, there are costs for appraisal fees, publication costs, and miscellaneous fees charged by the county. A typical estate might incur an additional $1,000 to $3,000 in court costs and other required fees.
ADVANTAGES OF PROBATE:
The proceedings are controlled by a judge, who can decide disputes between heirs or between the heirs and the executor. Creditors are required to submit their claims against the estate within a four-month period, provided they have been notified of the probate. The executor is required, in most cases, to prepare an accounting and report of the executor's activities.
DISADVANTAGES OF PROBATE:
1. Probate costs too much.
The cost is usually much higher than would be required
for the administration of a living trust for an estate valued at the same
amount.
2. Probate takes too long.
It usually takes longer to probate an estate than to administer a trust. Probate generally takes between 1 to 2 years. During the process the family must relive the death of their loved one with each new letter and each meeting with the executor. If the process can be made shorter then the family will be able to come to closure more quickly.
3. Probate is NOT private.
The courts are public and so are most court records. Most people like to keep their financial matters private during their lives and even after
their deaths. Accordingly, for such individuals, it makes sense to keep the estate
distribution process private. This can be done by staying out of probate court by having a living trust and properly funding it with your assets.
AVOIDING PROBATE:
Many estates do not need to be probated. If you would like to avoid probate, please contact Attorney Tom Nemat at the Law Firm of Tom Nemat to discuss your estate planning options. Tom may be reached at (949) 375-5541 or tnemat@nematlaw.com.
Update in Progress...
Update in Progress...
The following links are to articles from Forbes and CNN Money on the topics of entrepreneurship, small-business, corporations, and personal finance which may be of interest to you.
Forbes: Entrepreneurs
Forbes: Personal Finance
Feb 07, 2012 10:03PM
New Zealand: Economic Paradise
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Valentine's Day.....What If ????
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Federal Court Strikes California Ban On Same-Sex Marriage
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CNN Money: Personal Finance
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University of Charleston: How we cut tuition by 22%
After seeing enrollment decline for the first time in a decade, the University of Charleston, in West Virginia, slashed tuition by 22% for the upcoming school year hoping to entice more students.
Feb 07, 2012 10:30AM
Investing for retirement when you're just starting out
My granddaughter has asked me how to invest the money she'll contribute to her employer's retirement savings plan at her first job. I suggested she either go with a 2050 target-retirement fund or divide her money as follows: 40% in an S&P 500 index fund, 40% in a small-cap index fund and 20% in an international stock index fund. Do you think she should go with the first option, the second or do something else? -- Don G.
Feb 07, 2012 09:40AM
Get more from a second doctor's opinion
If you're like most people, you're inclined to trust your doctor's advice.
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The Romney kids' $100 million trust fund
Mitt Romney's five sons -- Matt, Tagg, Craig, Ben and Josh -- are sitting pretty with a trust fund worth $100 million.
© 2012 Cable News Network LP, LLLP.
Law Firm of Tom Nemat
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Tel: (949) 375-5541
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