Inheritance and Probate Topics (December, 2005)
Article for THE LEGAL CORNER: ANSWERS TO COMMONLY ASKED QUESTIONS REGARDING
THE LAW.
Will my beneficiaries' inheritance be taxed
as long as my estate is worth less than $1.5 million?
Actually, the portion of your estate left to your spouse or a charity is usually
not subject to estate tax at all. Under present law the portion of your estate
left to anyone else, including your children and grandchildren, will be taxed
only if your assets are worth $2 million dollars or more if you die in 2006,
2007, or 2008, $3.5 million if you die in the year 2009 and there is no estate
tax at all if you die in the year 2010. The future is less certain. The law
by which the estate tax exemption was raised to $1 million, then $1.5 million
and now $2 million has a sunset provision in it which provides that law will
disappear and the old estate tax exemption amounts that predated that law will
become effective, absent congressional action. Your attorney should be updating
you when these changes take effect.
Is a probate avoided upon my death as long as I have a Will?
Unless your property is held in joint tenancy with another person, this presumption
is untrue. A probate proceeding is required whether you have a Will or not and
is typically only avoided by the preparation of a Living Trust.
Is it possible to minimize or eliminate my inheritance tax by simply gifting
away assets prior to my death ?
While it is technically possible to minimize or even eliminate estate tax obligations
by gifting assets, be aware that any gifts in excess of $11,000 per recipient/per
donor/per year, are subject to a gift tax and, as a practical matter, are recaptured/placed
back into your estate for estate tax purposes.
Are the only real benefits of a Living Trust the
children/beneficiaries after a death occurs ?
This common presumption omits discussion of a significant lifetime benefit provided
by a properly drafted Living Trust - the opportunity to make sure that your
affairs are not managed, in the event of your incapacity, through a Court supervised
process known as a Conservatorship. Provisions to provide for your care if you
become incapacitated, by individuals you select (without Court supervision)
should be included in your Living Trust Estate Plan.
Is the cost of a Court probate proceeding
usually worth it?
Most of my clients are surprised to find that probate fees are fixed by law
and subject to Court approval and, further that they are fixed as a percentage
of the appraised value of assets in your estate. If you, like most residents
of Southern California, have an estate which has significantly increased in
value due to the appreciation of property you own, then probate attorney’s
fees upon your death, in the absence of a properly prepared Living Trust Estate
Plan, will be significantly greater than they were just several years ago as
the assets in your estate have increased significantly in value.
The information contained herein is general information about the law only.
The law is subject to change. If you have a specific legal question and want
your question(s) answered, consult with an experienced attorney.