Well, the answer depends on whether or not you have taken steps to write your wishes down in a will or trust, or do any other advanced planning. Many of us intend to one day set aside the time to get our affairs in order and have an estate plan drawn up to make sure that our assets will go to who we want when we die.
The problem is that many of us don’t make it a priority, and for various reasons: maybe you don’t think you have enough assets to make it worthwhile, or you expect your family to get along and sort it out for themselves, or because maybe you are healthy and young so there is no sense of urgency. The problem is you never know what might happen.
What do you think will happen? Well, if you die intestate (which simply means without a will or anything), then your assets will pass to heirs under the California Probate Code. If you are married or in a registered domestic partnership then your half of any community property will automatically pass to the survivor along with any separate property you own if you don’t have any children. So, where your assets go will depend on the nature of the property—community or separate, and who survives you.
If you die intestate with assets valued at more than $150,000, then someone will have to go to the probate court to get appointed to manage your affairs and to change title to your assets. And even if you have a will, it has to go through the probate court too! One of the few differences being that if you die intestate, then the court will appoint someone (not necessarily who you would have chosen), called an “administrator,” versus if you have a will, then it will be the person you appointed in your will, called the “executor.”
Someone will have to take steps to begin this process by filing a petition in the probate court. The cost of filing this petition is $395, and the process, which can be quite lengthy, is also expensive because it also involves administrator/executor fees as well as any attorney fees before your assets are distributed to your heirs. Again, if you die intestate then who inherits depends on the type of property left and who survives you. If you leave a valid will, then your assets will pass to those named under your will (assuming no one contests or challenges—if so the court will resolve any disputes).
So, a big chunk of your “stuff” may be spent on court costs, administrator/executor fees, and attorneys’ fees before it can be distributed to your family members. On top of that your estate may be subject to estate taxes, but this will depend on the year you die and the value of your estate. For people passing away in 2012, the first $5,120,000 will pass free of estate tax, but under the current law this will go down to $1,000,000 in 2013.
Many of you are probably wondering how can I avoid probate? A living trust can avoid probate not only after you pass away, but also during your lifetime should you become too ill or disabled and no longer able to manage your affairs. I’ve previously covered some of the benefits of having a living trust versus a will alone, view it Here. A living trust can also reduce estate tax consequences.
By taking steps now you can save your family a lot of time, money, and aggravation. And there are other factors you should consider as well. For instance, if you are a parent of minor children, you may want to designate who would be guardian over your children. For more information about appointing a guardian, see my previous blog entry Here. We’d be happy to answer any specific questions you may have during a complementary meeting to discuss your individual situation. So stop putting it off, take action now to get your affairs in order. Your family will thank you for it.