1. Assessing and Documenting Your Plan. Everyone has an estate plan, whether you have created it or not. If you don't create your own estate plan the state will do it for you. If you haven't documented your wishes property passes at death based on intestacy. You may not be happy with the plan the state has for you or the cost to have your assets transferred (see #2 below). A common misconception is that if you are married all of your property will automatically pass to your spouse. This is not so. In California if you have any separate property (in most cases property acquired prior to marriage, by gift or inheritance) that separate property will not go 100% to your spouse. In a married couple separate property is split between your spouse and your children or other heirs. The division is based on the number of children, or other heirs, you have. For example if you have one child the property is split 50/50 but if you have 2 or more children it is split to your spouse and the remaining 1/3 to your spose and to your children.
2. Not figuring out the most advantageous plan. If property passes based on intestacy or a will the process that the property passes through is called probate. Probate has three main disadvantages. It is costly, it is time consuming and it is public. In California if your property is valued at $150,000 or more, if you don't have a trust, and instead have a will or nothing, your family must open probate with the county court before property can be distributed. Most probate cases take approximately 8 months to a year to distribute property, although it can take even longer. The process is public and anyone can pull the court paperwork. Additionally probate is costly. The cost of probate under California statutory code is based on the gross value of the property in the estate (not the net) which means outstanding balances on your largest assets aren't taken into consideration. In contrast, a revocable trust can alleviate probate process. There is no public record of who receives what in a trust and the process can be streamlined. In most probate situations that we see the estate spends tens of thousands more in the probate process versus creating and maintaining a revocable trust.
3. Improperly documenting your wishes. Do it yourself wills and trusts set individuals and families up for disaster. Whenever I see a hand drafted will, or a do it yourself (google search/fill in the blank) document I know that almost invariably there are quite a few issues and sorting those issues out will cost a great deal of money. Whether it is a question of the true intent of the deceased's wishes (many wills seem like they make sense to the drafter but when the family, attorney or court go to interpret there are conflicting provisions and ambiguity), gifting large sums of money to minor children or failing to consider tax savings I have yet to see a hand drafted will that didn't have major issues. When there are questions those questions are resolved in a courtroom which costs the estate a great sum of money.
Everyone has an estate plan but it is up to you to make it what you want and have it done in manner that allows your family to follow your wishes.
This article should not be construed as legal advice. If you have questions about which is best for you contact an attorney that can assist you to make that decision.
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