Estate Planning FAQ's

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How can Panagopoulos Embry P.C. help with my estate planning needs?

Thank you for your time. I am Dimitri Panagopoulos LL.M. with Panagopoulos Embry P.C., my firm was founded in 2010, after I retired from a 15 year successful career as private investigator, investigating crimes, fraud, and elder abuse. My estate planning experience and practice however, began in Arizona in 2007, while winding down my investigation practice, as I served as an intern for a busy estate planning practitioner. Since that time I have achieved advanced legal studies beyond a regular law degree which concentrated on estate planning and estate succession planning- graduating with highest honors. I have counseled several hundred estate planning clients with estates ranging from $10,000 to $5 Million.

My firm provides a range of services including: advice & consultation, strategic planning for estate succession, asset risk mitigation, drafting memoranda such as Powers of Attorney, Wills, Trusts, and structuring business entities and management agreements, and when necessary, we litigate matters on our client’s behalf. Please feel free to email any questions you may have that are not addressed here, or elsewhere on this website.

Where to begin with estate planning?

Basic estate planning begins with you examining the content of your estate, the nature and dynamics of your family, and your goals and objectives regarding those matters. Every client is unique. I have yet to find in my years of practice, and hundreds of clients any two that were identical. This is in part, because I understand that clients are unique, and in part from my investigative intuition to look beyond the boiler plate basics, and really delve into the details. Regardless, once we have made this initial examination, through an Initial Conference, we can then begin charting out your basic estate plan.

By “charting out”, I actually mean writing out a plan outline. What we do for our clients, is after the initial estate planning consultation, we draft out a “client memorandum”. This memorandum serves a number of purposes. First and foremost it keeps the client reminded of the dynamics of their plan based on the sum of those matters discussed during the Initial conference. There are many occasions where the client will have a number of options to deliberate on regarding how to best achieve their estate planning goals, before engaging the firm to begin drafting documents. The Client Memorandum gives the client a tangible reminder of those options during their deliberations that they can refer to when speaking with loved ones, or other advisors such as a CPA, or Financial Advisor.

The memorandum also serves as a guide post when the client, as many often do, and for a variety of reasons, implements their estate plan in phases. The memorandum is a tool to help the client and the attorney recall the purpose and objectives of each phase as they relate to that client.

While estate plans often change as clients’ lives change, the client memorandum is there to help the client to temper their impulses to make sudden changes without diligent deliberation. Finally, after the client passes, the memorandum is an effective tool for giving the heirs some context to the overall plan.

How is an estate plan carried out?

Once a client has deliberated on their plan and they are ready to document their plan, we utilize various written documents and employ various legal concepts to create the legal framework that requires the client’s plan to be carried out precisely as the client intends.

The documents and concepts involve a wide variety of combinations depending on the client’s purpose, desire, and budget; however they often include:
Power of Attorney documents for Asset Management,
Power of Attorney documents for Healthcare, & Advanced Medical Directives, ( sometimes referred to as living wills )
Last Wills,
Trusts,

Some clients who have businesses in their estates may need to plan for succession and management of those businesses, including investment or rental real estate. Depending on the specific dynamics, the client may find that an organized entity is an appropriate route. Depending on the entity there are various documents that accompany the establishment of the entity.

One of the most common errors I see in estate planning implementation, is that consumers while in the pursuit of a bargain, will “have documents drawn up” using online doc prep companies, or document sellers, paralegals etc, but they fail to actually execute the documents, or they have not transferred assets into trust, or they have failed to follow any of the legal formalities that are critical to the integrity of the plan.

The next most common error I see is that too often the “documents” are delivered to the client without sufficient education for the client on the importance of communicating with the management succession, and when appropriate the heirs so as to avoid costly conflicts after death.

Other mistakes include, using business entities to hold property with no business purpose; and mistakenly using a “sprinkling” method of naming several minority partners/members/shareholders etc., to give the illusion that more than one person “owns” the entity. Courts are wise to these shams and have come down harshly on the offenders. Please see my articles available on my profile page addressing these matters.

Perhaps most importantly, effectively carrying out an estate plan includes regular advice and consultation with legal counsel to discuss, analyze, and accommodate changes that occur within the client’s estate. My firm provides complimentary annual estate planning conference for our clients.

Why should you engage in estate planning?

 Aside from the obvious answer that you should have a plan in place so that your estate is managed in the manner you intend, and not as a court may determine, or in a manner that leaves you life’s earnings vulnerable to the debts and indiscretions of heirs; there are a number of reasons that are not so obvious.

Probate Avoidance

Probate is a judicial process to settle the final affairs of a decedent. The process could take months or years, and can become very expensive with attorney fees being based on a total percentage of the value of the estate, and an equal fee due to the personal representative.

The following chart is indicative of the current fees the attorney and the executor may charge in a probate situation. You can find this schedule for attorneys fees at Probate Code Section 10810 and for executors is found at Probate Code Section 10800 and is a somewhat complicated formula. For ease of approximation, a simplified formula can be used. It works for probate estates with a value between $100,000 and $1 million. It is 2% of the probate estate value + $3000. That sum would be the statutory fee for the attorney and the executor would receive an identical sum.

 

PROBATE ESTATE VALUES  TOTAL ATTORNEY AND EXECUTOR FEES
 $100,000  $8,000
 200,000  14,000
 300,000  18,000
 400,000  22,000
 500,000  26,000
 600,000  30,000
 700,000  34,000
 800,000  38,000
 900,000  42,000
 1,000,000  46,000
 2,000,000  66,000
 3,000,000  86,000
 4,000,000  106,000
 5,000,000  126,000

*The Attorney receives one-half of this sum, and the executor receives the other half. However, often extraordinary fees are allowed which could make this total even higher!

By planning your estate properly, through the use of trusts and other legal devices you can avoid probate altogether, secure that your life’s earnings are used as you intend, e.g. for your family’s education, travel, cultural experiences, or income supplementation.

Income supplementation

Many clients have minor children, dependent children or spouses, who depend on their income, and in the course of good planning, can implement a plan that provides for the replacement of that income, or at least supplements the dependent’s income as they adjust and move into the job market.

Minor Children

Minor children are especially important to plan for because while you may generally nominate whomever you desire to care for your children, the means by which they will be cared for is an entirely different discussion. Estates left directly to minors are generally controlled by the court until the minor reaches the age of majority. The net effect is that your child may not be able to access those funds if needed, or enjoy any discretionary use of that money until they have reached majority age.

However, through a well drafted trust agreement, you can keep the management of that estate out of the hands of the court, and depending on the circumstances and your desires, managed apart from whomever physically raises your child should both parents pass together. Depending on the amount of assets in your estate, you may want to limit your child’s care giver’s access to funds in order to prevent financial abuse, or comingling of your child’s funds and the caregiver’s funds.

Tax Considerations

The gift and estate tax is a pawn in the political process, thus it changes regularly at the whim of congress. For most clients, under the current law in 2011-2012, they will not have to spend too much time worrying about the amount of the lifetime gift exemption/estate exemption which is currently $5,000,000 per spouse. However, for those that may have tax concerns, proper estate and gift planning can help you mitigate your tax exposure by lawful means.

Asset Protection

Asset protection is a complex topic that is relatively simple to boil down. The upshot is that you cannot defraud your creditors. Certain behavior is deemed indicative of fraud under the law. For example, In California, the “Badges of Fraud” do not create a mere presumption of fraud, but of greater significance are considered evidence of fraud. Badges of Fraud are indicators to a court and warning signals that a prudent person should be alert for in a transaction. The “Badges” include:

1. Where a transaction involves a transfer or obligation to an insider (as in similarity of interest, recipient is officer, creditor, agent or relative of the Debtor)
2. Transactions where the Debtor retains possession or control of the asset after the transfer;
3. Indications that the transfer or obligation was undisclosed or otherwise concealed (smoke and mirrors);
4. Where the Debtor was sued or was threatened with suit before the transaction occurred;
5. Whether the transfer was of substantially all of the Debtor’s assets;
6. Whether the Debtor has absconded;
7. Whether the Debtor had removed or concealed assets;
8. Whether the value of the consideration received by the debtor was not reasonably equivalent to the value of the of the asset transferred or the amount of the obligation incurred;
9. Whether the debtor was insolvent or became insolvent shortly after the transaction was made;
10. Whether the transaction occurred shortly before or after a substantial debt was incurred; and
11. Whether the Debtor has transferred the essential assets of the business to a lienor who had transferred the assets to an insider of the Debtor.

Regardless of what any “asset protection” specialist on the Internet suggests, shielding your assets from existing debt is not realistic from a lawful point of view. However, you can proactively plan so that if and when unexpected crises emerge, your estate is structured so that the net effect is that your lifestyle and source of income remain intact. There are lawful risk mitigation techniques and strategies that can be implemented so that certain assets of particular importance such as your home, or your investment property, can be properly held and managed so that if misfortune happens, those assets are not vulnerable. Lawful asset protection planning requires the assistance of skilled and experienced legal counsel. Taking any action deemed “asset protection planning”, that is not carefully and ethically carried out in strict accordance with the law, could lead to both civil and criminal penalties for the client and the person providing erroneous guidance.

Anonymity

Anonymity Planning is a second cousin to asset protection, and must also be carried out carefully, however, it is still another reason engage in estate planning. In this modern environment where identity theft is so widespread, planning in a way that provides for some level of anonymity is becoming more and more mainstream, and not something reserved for celebrities.

There are public records researchers who scour the public records looking for public information to sell to marketers, and scam artist. By using proper planning techniques, clients can pursue their dreams of wealth and prosperity, while keeping the content of their portfolios private.

What is probate?

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Where to begin with estate planning?

Probate is a judicial process to settle the final affairs of a decedent, including the distribution of assets left by a deceased person’s will. Assets are anything a person owns with value, such as real and personal property and cash, for instance. The process could take months or years, and can become very expensive with attorney fees being based on a total percentage of the value of the estate, and an equal fee due to the personal representative.

When is probate needed?

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Where to begin with estate planning?

Probate is not always necessary. If the deceased person owned bank accounts or property with another person, the surviving co-owner often will then own that property automatically. If a person dies leaving very few assets, such as personal belongings or household goods, these items can be distributed among the rightful beneficiaries without the supervision of the court.

Sometimes probate is needed to:

  • Clear title to land, stocks and bonds, or large bank or savings and loan accounts that were held in the name of the deceased person only, and put the title to these assets in the names of the rightful beneficiaries.
  • Collect debts owed to the deceased person.
  • Settle a dispute between people who claim they are entitled to assets of the deceased person.
  • Resolve any disputes about the validity of the deceased person’s will.
What happens during the probate process?

The will is “proved” and delivered to the court. The deceased person’s will can be proved by a declaration made under oath by the witnesses to the will. If such an affidavit is unavailable, the personal presence of the witnesses will be required in court to testify that at the time the will was signed, the deceased person was of sound mind and knew what he or she was doing.

A personal representative is selected. A personal representative is someone who handles the deceased person’s affairs. A will generally names a personal representative who, if willing to serve and otherwise qualified, will be approved by the court. If a person dies without a will, the court will select the personal representative, usually the spouse, an adult child or another close relative. If none of those people are available or willing to be the personal representative, the court may choose a bank, trust company or lawyer.
A notice to creditors is published in a local newspaper. This public notice to creditors tells the creditors that they have four months to bring any claim against the estate for debts the deceased person owes them. The personal representative also gives written notice to all known and possible creditors.
The heirs and people named in the will are notified of the probate proceeding.

Assets are identified and an inventory is prepared and filed with the court. The personal representative works to identify and value the deceased person’s assets. Depending upon the type of assets and the kind of records left by the deceased person, this step can be quite straightforward — or more difficult and time consuming.
Debts are paid. The personal representative ensures that creditors are paid. Creditors must be repaid from the estate before the remaining estate assets can be distributed to the rightful beneficiaries.

The personal representative prepares state and/or federal tax returns and any inheritance, gift and estate tax returns and pays any taxes due.
The personal representative prepares and submits an account to the people named in the will, the heirs of the deceased person and the court.
The account shows all money paid out from the estate and all money collected by the estate. It also contains a narrative explaining the important actions taken in connection with the probate of the estate.
After court approval of the account and payment of all unpaid probate expenses, the deceased person’s assets are distributed to the people and entities (such as charities or trusts) named in the will or, if the person died without a will, to the heirs of the deceased person.

What is a “small estates” proceeding?

California allows an abbreviated procedure for handling small estates that would otherwise require a full probate. If an estate fits in this category, the cost and time for distributing the estate assets may be greatly reduced. Under California Small Estates Law
Probate Code Section 13100, starting in 2012, estates of decedents that do not exceed $150,000 do not need to be probated in California. An affidavit or declaration signed under penalty of perjury at least 40 days after the death can be used to collect the assets for the beneficiaries or heirs of the estate. No documents are required to be filed with the Superior Court if the small estates law (California Probate Code Sections 13100 to 13116) is used.
What assets are included in the $150,000 limit? Bank accounts, brokerage accounts, stock, bonds, mutual funds, other investments, real property valued at up to $50,000, and similar assets that the decedent owned in his or her name only, except for the following:
1. Joint tenancy assets.
2. Trust assets.
3. IRAs, 401K accounts, and similar pension accounts.
4. Life insurance.
5. Death benefits.
6. Registered vehicles.
7. Pay from service with the armed forces.
8. Salary from any source not paid before date of death up to $15,000.
9. Pay on death (POD) accounts.
10. Accounts with a named beneficiary.
When is the value of the assets determined? At the date of death, even if the affidavit or declaration is signed years later.
When can the small estates law be used? When at least 40 days have elapsed since the date of death. The affidavit or declaration cannot be signed before the 40-day period ends. The new limit of $150,000 applies to all estates, regardless when the decedent died, provided the affidavit was signed after Jan. 1, 2012.
Who can use the small estates law? Beneficiaries and heirs of the estate, trustees of the decedent’s trust, and fiduciaries, among others.
What has to be done to collect the assets? An affidavit or declaration must be signed under penalty of perjury. The affidavit or declaration must include the information described in California Probate Code section 13101. The affidavit or declaration is then given to the institution that holds the assets, and the assets are transferred to the person who signed the affidavit or declaration. Creditors of the decedent are paid from the assets, and the remaining assets are transferred to the beneficiaries or heirs.
When should the small estates law not be used? This law should not be used for estates with substantial indebtedness that might exceed the value of the assets. Estates that are insolvent or close to insolvency should be probated instead to take advantage of Probate Code provisions that determine which creditors will be paid from the estate, and how much. Probate should also be used in situations in which the beneficiaries or heirs do not agree on how the assets should be distributed.
Real property. Although Probate Code section 13200 allows real property valued up to $50,000 to be transferred with a small estates affidavit, title companies might be reluctant to accept the affidavit when determining whether to issue title insurance. A probate might be necessary to avoid this problem.

How long does probate take?

Probate can be started immediately after death and takes a minimum of six to nine months, but could last for years if the estate includes property that takes a while to sell, or if there are complicated tax or other matters. A small estates proceeding can’t be filed until 30 days after death and generally takes four to six months.

What are the costs involved?

Under California law, a personal representative is entitled to a fixed percentage of the value of the total estate, as is the attorney who represents the personal representative.  Extra costs may be approved by the court for the personal representative and the lawyer, if the estate is complicated. Other costs include court filing fees, legal notices published in the local newspaper and any other necessary expenses.

The following chart is indicative of the current fees the attorney and the executor may charge in a probate situation. You can find this schedule for attorneys fees at Probate Code Section 10810 and for executors is found at Probate Code Section 10800 and is a somewhat complicated formula. For ease of approximation, a simplified formula can be used. It works for probate estates with a value between $100,000 and $1 million. It is 2% of the probate estate value + $3000. That sum would be the statutory fee for the attorney and the executor would receive an identical sum.

PROBATE ESTATE VALUES

 TOTAL ATTORNEY AND EXECUTOR FEES

 $100,000

 $8,000

 200,000

 14,000

 300,000

 18,000

 400,000

 22,000

 500,000

 26,000

 600,000

 30,000

 700,000

 34,000

 800,000

 38,000

 900,000

 42,000

 1,000,000

 46,000

 2,000,000

 66,000

 3,000,000

 86,000

 4,000,000

 106,000

 5,000,000

 126,000

*The Attorney receives one-half of this sum, and the executor receives the other half. However, often extraordinary fees are allowed which could make this total even higher!

Does probate mean more taxes?

 No. Probate does not affect taxes that must be paid. These amounts are based on the total assets that you own at the time of your death. There are federal estate taxes as well as possible Federal and State income taxes that may be due. These amounts change frequently as Congress and our state legislature determine the amounts. The specific tax obligations of an estate are unique to each estate, and an attorney should be consulted. Panagopoulos Embry P.C., provides this kind of legal counseling and representation.

Do I need a lawyer?

In my opinion YES! Probate in California involves a good deal of paperwork that must be filed in a timely manner. To achieve the results you want, probate should be handled with an understanding of the legal principles involved. A probate lawyer can help you to understand those legal principles and avoid the many potential tax traps and other problems that might arise.

Equally important, a lawyer can help you prepare and file the legal documents and prepare you for hearings in court. Panagopoulos Embry P.C., is pleased to provide clients with representation on such matters.