Estate Planning Essentials for California Property Owner

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Key Takeaways from Importance of Estate Planning:

    • Ensures assets are passed down according to your wishes.
    • Avoids the lengthy and costly probate process, especially crucial for California property owners.
  1. Living Trust vs. Probate:
    • Living Trust: Helps avoid probate. Ensures real estate is included in the trust.
    • Probate: Necessary if there's no living trust, requiring court involvement. Nearly $50,000 in fees for a $1 million home can be expected.
  2. Roles and Responsibilities:
    • Executor: Named in a will, responsible for managing the estate.
    • Personal Representative: If someone dies intestate (without a will), the court appoints a representative.
    • Executors need court-issued letters to act and notify all beneficiaries of probate proceedings.
  3. Best Practices for Property in Probate:
    • Engage an attorney promptly to manage the process and fees effectively.
    • Executors should seek full authority to sell property with court approval, streamlining the process.
  4. Trusts Simplify the Process:
    • Trusts have a fiduciary duty to all beneficiaries, ensuring property is sold at fair market value.
    • Scenarios like transferring property after a parent's death require an affidavit of death and a successor trust deed.
  5. Legal and Financial Considerations:
    • Life estates can't encumber property; pre-arranged beneficiary consents can facilitate sales.
    • An attorney can help obtain an appraisal instead of a Comparative Market Analysis (CMA), as the IRS requires appraisals for capital gains purposes.
    • Estates valued over $13.6 million are subject to estate taxes under Prop 19.
  6. Property Appraisal and Tax Implications:
    • "Date of death evaluation" appraisals are crucial for capital gains tax calculations.
    • The first $250,000 gain is excluded under the 121 exclusion.
    • Reassessments occur when property is transferred to an irrevocable trust, affecting tax bases.
  7. Debt and Estate Settlement:
    • Credit card debt and other obligations are settled from the estate, not by beneficiaries.
    • Insolvent estates allow beneficiaries to walk away from debts.
    • Notifying creditors promptly initiates the statute of limitations, protecting the estate.

Summary: Proper estate planning, particularly through the use of living trusts, can save significant time, money, and stress for your beneficiaries. Ensuring your real estate is included in a trust and seeking professional legal and financial advice can help navigate the complexities of estate management and probate.


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