If you’re reading this article, it’s probably not for entertainment value. And if you’re reading for entertainment, then you’re either a masochist or you’re actually interested in what I have to say. Could be both, I think. Whatever the reason, estate planning is an important topic, regardless of your position in life.
So what does it mean to have a plantation plan? The better question is: why does it matter? This is not an easy thing. It deals with death and death and future. Of course, no one wanted to think about this. But sadly, it’s the pink elephant in the room. And that’s not too bad, actually.
Generally, an inheritance plan is a set of instructions that explain how your property should be managed and distributed during your life and after death. Lawyers (really yours) are basically the conduit that puts your wishes on paper in the most sensible and influential way. OK, maybe not that simple, but it will give you some ideas. The estate plan should be a reflection of your life and vision. And don’t confuse the word “plantation” with a gated 8000 square foot villa with your initials at the entrance gate. Your property is everything you own in real estate and other assets.
At one point or another, most of us who own property think about what will happen to our property when we die. We thought things like, “Who’s going to get my 1984 Honda Civic?” That’s a legitimate concern. No one will want it, but the concern is no less legitimate. But what if you become disabled? And what happens when you get old and weak-minded? There may come a time when we will live our lives without sufficient mental and/or physical capacity to manage our own affairs. Look, we all know or know someone who started”lost the itemWe all remember thinking this or saying something like, “hey, is it me, or is Uncle Shlomo starting to lose him?”
Enter the plantation plan. An estate plan is concerned with managing your property and financial affairs. There are two main types of estate plans: one built around Will and the other around a Revocable Living Trust. Each has its pros and cons. But as long as you have some common sense about you, you can always make changes to the plan along the way. That’s why it’s important to have an inheritance plan now because you don’t know when you will become “Uncle Shlomo.”
WILL
A will is the most common document used to determine how an inheritance should be handled after death. The person or entity designated to receive your property under a Will is called a Beneficiary. The person whose property will be handed over by the Will is the Heir or Testatrix.
Like Trusts, Wills can set different instructions, such as who gets a certain property or who will be guardian of the minor child of the testator if neither parent is still alive. It can be used to revoke someone’s inheritance rights. Can regulate inheritance conditions, such as the condition that the heir first reaches the age of 25 years or graduates from college.
And then there’s the dreaded P word – PROBATE. There’s no way to avoid it. When a person dies and leaves property in a will, a will is the legal process used to end his legal and financial dealings. This is best described as a court-supervised process in which assets are collected, valued and distributed according to the final wishes of the Inheritance as stated in the Will.
The probate process is held in the High Court for the area where the testator resides. The executor (the person who manages the estate) is responsible for protecting the property of the deceased until all debts and taxes have been paid, and seeing that what is left is transferred to those who are entitled to it. Their jobs include creating an inventory of plantation assets, finding creditors, paying bills, filing tax returns, and managing estate assets. Finally, when this is all done, a petition is filed with the court requesting distribution to the Beneficiaries. The entire process can take months and sometimes years to complete.
As you can imagine, wills can also be very expensive. The Probate Code sets the maximum amount that attorneys and personal representatives (i.e. executor, administrator, etc.) can charge. Starting in 2011, the fee is 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 million, and half a percent of the next $15 million. In addition, probate referees are appointed to judge all non-cash items. This person usually takes one percent of the total valued assets. All of this can add up very quickly. While it’s safe to say that most of us probably won’t die with a $15 million estate, probate proceedings could easily reduce the size of the estate by tens of thousands of dollars.
And of course there are privacy concerns, or lack thereof. When a will is received for probate, it becomes a matter of public record, including details of your assets and who is in line to get them. Some may have valid reasons for pursuing probate matters, such as a beneficiary creditor seeking to collect. Other immoral types may want to know who to trick.
CANCELLABLE LIFE TRUST
Living Trusts are established with a document, usually a Declaration of Trust or Trust Agreement. It is basically a relationship where property (real or personal, tangible or intangible) is held by one party for the benefit of the other party. A Living Trust conventionally arises when property is transferred to a separate Trustee for the Beneficiary to own. However, it is not always necessary.
The person who creates the Living Trust is called the Settlor or Trustor (these are synonyms). The Settlor appoints a Trustee to manage the assets of the Trust. The Trusee holds the legal rights to the property for the benefit of another person, also known as the Beneficiary. Even though the Beneficiary has no legal title to the property, he or she is said to own the title. So you can imagine that the Trustee can’t do anything with the property that doesn’t benefit the Beneficiary, like sell some of it and pocket the money. It might be easier to think of a Trust as a Corporation. The Trustee is the CEO and the Beneficiaries are the shareholders. And it is not uncommon for the Trustee to be the Beneficiary as well, although it is recommended that the Co-Trustee be mentioned as well.
The Living Trust usually has to be accompanied by the Final Will and Covenant, also known as the “pouring will.” The will must state that property outside the Trust must be distributed to the Trustee of the Trust when the testator dies. As long as the property outside the Trust is worth less than $100,000, probate can be avoided. The benefit is that properties not previously placed in the Trust will be “poured” into it. Even if the property exceeds $100,000 and is subject to probate, it will eventually be distributed according to the deceased’s instructions instead of being distributed according to California law. It may also be a good idea to appoint the same person to be the Executor and Trustee, as he or she will be dealing with the same property.
WHAT DOES ALL OF THIS MEAN?
So what’s the point of all this bullshit? Well, it’s just easy to overlook the need for a proper estate plan. Living Trusts help protect you, your assets, and the people and/or entities you wish to leave assets behind while you are away.
A good reason to create a Living Trust is to keep your real estate plans private. Unlike wills and wills, a Living Trust is a personal contract between you (Settler) and the Trustee. No need to submit to the district. The only way it can become public is if a dispute arises and someone files a lawsuit, it is possible.
Another major benefit of the Living Trust is that it has the ability to protect you if you become disabled. The trust can determine how your disability should be determined, how you should be treated if you are deemed disabled, and who will be able to manage your property if you cannot. The Living Trust was written so that your Trustee can automatically jump into the driver’s seat if you are sick or incapacitated. This will put you and your property outside a court-supervised trust or conservatory. The more you can keep the courts out of your life and affairs, the better.
A Living Trust also allows you to dispose of your property the way you choose. For example, many families have children who have or have had some problems in life. This may range from a physical challenge to an addiction to partying in Las Vegas with prostitutes every weekend. Living Trusts can provide financial support to others without giving them direct control over the trust property.
Finally, the Living Trust makes it possible to avoid having to go through probate. How? It’s simple – the property is titled in the name of the Trust when you die. Your trust doesn’t come out just because you do. Only assets entitled to your name at the time of death are probate.