|Katherine:||Hello, everyone, and thank you so much for joining us here today on “This Needs To Be Said.” We’ve talked about estate planning before and it’s been a really long time, so we have a friend that’s going to join us today. Attorney Anna is going to share with us the good, the bad, and the ugly about probate. So at this time, I want to welcome her into the conversation for “This Needs To Be Said.” Please have your pen and paper out. Class is in session.|
|Anna S.:||And let me also add a nugget: even if you think you own nothing or have nothing to leave to anyone, I want you to pay attention because those are the times we get ourselves in a lot of trouble, because we don’t know how to structure, organize, or prepare for the time when our families will have to fight over our things. I hate to say it that way, but it happens. People want to fight over your things, whatever that may be, a pair of shoes or lots of money.|
|Katherine:||Attorney Anna, thank you so much for joining us on today. And I want you to tell the audience your whole name because I thought I was going to have this right by the time we got on air and I do not have it right. I don’t want to mess up our new friendship with messing up your last name.|
|Anna S.:||No problem.|
|Anna S.:||Thanks, Katherine, for having me. My full name is Anna Serrambana and I’m with Surf City Lawyers.|
|Katherine:||All right. All right. And welcome. Thank you for coming and sharing your expertise with us as an attorney and expert in this field. So today we’re going to talk about probate. Just break it down in regular people’s terms for us. What is that and who needs to be worried about it?|
|Anna S.:||Absolutely. So, probate is a court process where the court supervises the distribution of a decedent’s assets or what they own and make sure that all the creditors are paid. People who are subject to probate are anyone in California with a gross estate over $150,000, so therefore they don’t take into consideration that, even though your home is worth a half a million dollars, that you have a $450,000 mortgage. They just look at the gross value. The only way to avoid probate is either to have a revocable trust, which I highly recommend, or if you own property by joint tenancy. Other than that, everything is going to have to go through the probate process. Like I said, it’s the court process. It takes, in California right now, at least a year to see that through, and so therefore nobody’s going to be getting any of the assets, any of the money, for an entire year.|
|Katherine:||Quick question: Is this something that we see, and this is a curious question of my own, is this something that we hear celebrities experiencing a lot, their things being held up in court?|
|Anna S.:||Absolutely. We hear it all the time. One of the most famous cases is Michael Jackson. Even though he did have a revocable trust, a lot of his assets weren’t put into his trust, and therefore they’re subject to the probate process. So that’s one of the negative sides to probate is it’s very, very public. Your will gets filed with the court system, anybody can pull a copy of it down, it costs a lot of money. The probate process has an initial filing fee right now in California of $465. You have to publish notice in a major newspaper which costs approximately $900, and then you’re paying the executor or the administrator their fees. You’re also possibly paying an attorney their fees. So usual probate in California even on a $500,000 home with no other assets, you’re looking at about $25,000-$30,000 in costs.|
|Katherine:||I’m going to say wow. Now, while that sounds like a lot of money, I’m feeling like you’re getting ready to tell me something, Anna, that’s going to say that is actually a savings next to what you would, I guess, put your family through after you’re gone. I’m guessing, because I don’t know, this isn’t my expertise, but I’m kind of feeling like that’s what you’re saying. Am I right?|
|Anna S.:||Well you are correct. There are ways to get around the probate process. I can’t imagine, maybe other than somebody who passed away with a lot of creditors, creditors love the probate process, but your family, your loved ones, the beneficiaries of your estate, they don’t want to have to wait a year or more to get their assets, to get the money, they don’t want to have to pay all those high fees, and things like that that the probate court is going to subject you to. So the best way to avoid probate and avoid this lengthy process would be to do a revocable trust, which I mentioned earlier. It’s a great way of avoiding probate, it’s private, it’s not public, and the cost associated with creating an estate plan or a revocable trust is a fraction of what the probate fees and costs are going to be.
Depending on the attorney that you use for your revocable trust, it could average between $1500 and $6000, but when you take into consideration the expense of probate, the delay of probate and the time it takes, and frankly, the person who’s going to step up and be the administrator of the estate through probate is going to have to put in a lot of their own time as well. So the negatives in time, effort, money, for probate, you can eliminate all that by doing a revocable trust, which is just a savings all around.
|Katherine:||Awesome, now, I’d said in the beginning that you’re going to tell us the good, the bad and the ugly of probate and I believe we’ve dived right into that. So break it down for us and say, “Okay, this part is the good, this part is the ugly” and just how to prepare for something like this. One day we’ll all have lots of assets that we need to manage. That’s what I hope and I wish for everyone, you have good stuff that you get to enjoy in this life.
What do we need to be aware of?
|Anna S.:||So, I kind of already mentioned the negative side to probate. That’s the easy part to talk about because I handle estate planning so I preach this to my clients all the time. The positive side to probate is that you’re being supervised by the court so there is no opportunity to mismanage the estate. There is no opportunity for anybody to steal money. Because when you are acting as an administrator or an executor of an estate in the probate process the court is supervising you. You are normally required to get a bond which is basically insurance, to make sure that you’re acting in a fiduciary capacity, which basically means in the best interest of the estate.
There’s so many layers of protection through the probate process that that’s a benefit to people going through the probate process. Also if there’s going to be any conflict or arguments between the different beneficiaries or heirs of the estate then the probate court is there to handle that, whereas opposed to a revocable trust, the trustee is basically left to handle any conflicts that arise, and then ultimately, maybe, the court will get involved later. But with the probate process the court’s already got their fingers in it, managing it, making sure everything is going smoothly, so that is the good side to probate.
|Katherine:||All right. We did go over the negative. And I was just thinking about when you choose the person that’s going to be the executor of your estate, as you were saying, are there some things I need to think about? How do I just choose a person? Can it just be my sister? Can it be my best friend? Who should I choose to be that person?|
|Anna S.:||That is a great question, and I get asked that frequently by my clients. What I tell my clients is that you should select somebody, first of all, that you trust. Trust implicitly, trust with money, they’re good with money, they don’t have their own money problems, because you don’t want anybody to be tempted to mismanage or mishandle anything, any part of your estate, because you want every penny possible to go to your relatives and loved ones. So you should pick someone you trust, someone good with money, someone who doesn’t have their own money problems, and then ultimately when you choose someone, choose somebody that you don’t think is going to have a conflict with the beneficiaries or the heirs.
So if you have three children, sometimes people want to select the oldest child, but siblings have a tendency to argue or disagree so sometimes naming one out of three children isn’t going to be the best choice. You’re going to maybe want to name somebody outside of that circle, maybe a friend, a friend who’s an accountant, or even one of your sisters, assuming she’s not going to receive anything from the estate. And then that way you can ensure that she’s going to act in the best interest of the estate.
|Katherine:||That is good to know. A while ago I had an attorney to come on and talk to us about people who think they don’t have anything to leave anyone. And while we are talking about a substantial amount, $500,000 homes or assets in total, do you recommend or do you not recommend people to have one if they are making not so much money?|
|Anna S.:||Absolutely. First and foremost, if you have minor children you should definitely have a will in place because inside the will you can put guardianship provisions in there. Basically naming who’s going to take care of your children if you are not able to, and then who can handle the children’s money if you are not able to. Things that often also get overlooked when people say “I don’t have anything,” well, that may be true today … but what if in a week a relative dies, a loved one dies, leaves you money, and then at least you would have something in place already, where you don’t have to worry about planning for that newfound money that you just inherited.
Or alternatively, some people have life insurance and they’re not thinking about what’s going to happen to that life insurance money. I have a three- and a five-year-old, not me personally, but you could say “I have a three- and a five-year-old,” and they’re not allowed to inherit or receive life insurance money. But if you have an estate-planning vehicle set up then that vehicle can take over and take possession of the life insurance money for the children and someone can manage it until they’re able to receive it.
|Katherine:||Now, I have a super interesting question. What about our lottery winners? Has nothing to do … because when you said there, you said “What about next week when you get this newfound money?” And instantly in my head it popped “lottery winners.” Should we be calling you, Anna?|
|Anna S.:||Oh, absolutely. But the type of estate planning that’ll be done for lottery winners is a lot different than most estate plans in California for the average person, and there’s going to be a lot more to it because you have to take a look at what the estate tax is right now. Right now any estate over, if you’re single, $11,000,000, if you’re married it’s $22,000,000, so lottery winners that receive that amount or more need to start looking at different types of estate planning so they can decrease their estate tax liability. But yes, absolutely, it would be beneficial for anybody to have a trust in place or a will in place if that’s the direction they choose to go. At least then you’re covered for a little bit until the lottery winner can actually go and get a specialized plan from their attorney.|
|Katherine:||Anna, I want you to let the “This Needs To Be Said” audience know how to get in touch with you outside of this interview but before that, it sounds like we need to be doing some research and having some conversations with yourself about things that could possibly happen, how to be ready, because I know for myself, it takes me a little while to process things, so if I wait until I get the money or we’re in the situation, it’s like not having an escape plan during a fire. It’s just bad. What are a couple of tips, maybe one or two, on getting ready? You’re not there yet but we might be and it could happen. How do we prepare?|
|Anna S.:||Absolutely. So one of the best things that I tell potential clients when they’re in that type of situation is, start to think about the decisions that you would make when you’re ready to do your estate plan, when you’re ready to do your trust or your will. I have a very lengthy client intake form that starts asking some of the questions that some people don’t think about. For example, who’s going to take care of the kids’ money and should that person be different than the person that’s taking care of my children on a day-to-day basis? And especially with couples, these are big decisions that you may think you agree on now but until you start delving into these issues with your spouse or your loved one, you’re not going to know the answers for sure. So I tell potential clients to start working on this because this could be a month-long conversation with your loved one where want to agree, you want to make the best decision possible and you may also want to reach out to the people you’re choosing to be the executor or the guardian of your children because that’s a big responsibility and you want to make sure that that person is okay with your decision to make them the guardian or the executor or the trustee. So that’s my number one tip.|
|Katherine:||Awesome. And I’m taking notes of it right now and I hope the audience is doing so as well. Please let people know how to get in touch with you, Anna, outside of “This Needs to be Said.”|
|Anna S.:||Absolutely. So, like I said, the firm’s name is Surf City Lawyers. Our address is 5882 Bolsa Avenue, Suite 130, Huntington Beach, 92649. You can give us a call at 714-533-9211 or feel free to visit our website at surfcitylawyers.com.|
|Katherine:||Anna, thank you so much and until the next time that we speak again, have a super day.|
|Anna S.:||Great, thank you for having me.|