Some basic estate planning

My husband will inherit upon his mother’s death close to $1 million. We are not anticipating her death or looking forward to it, but wonder if we should have a trust set up. We currently have no will or trust.

Some basic estate planning

Dear Len & Rosie, My husband and I are retired. We have three adult children and seven grandchildren. We still have a mortgage on our home and have no major assets other than our home. My husband will inherit upon his mother’s death close to $1 million. We are not anticipating her death or looking forward to it, but wonder if we should have a trust set up. We currently have no will or trust.

Betty

Dear Betty,

At the very least, you and your husband ought to create durable general powers of attorney and advance health care directives. These are basic estate planning documents that everyone ought to have, both the rich and the poor. The importance of these documents are simple. Without them, your family members or loved ones may not be able to make financial and medical decisions on your behalf if either of you should become incapacitated someday. Without them, you could wind up in a conservatorship where a court appointed conservator would have to provide the court with a public accounting of your finances every other year. We have a free advance health care directive form available for you and the readers of this column at www.lentillem.com.

Then you and your husband ought to think about who should inherit your assets upon your deaths, and the manner in which they would do so. There are three basic options. The first is do nothing. The surviving spouse would likely inherit everything if you hold all of your assets in joint tenancy, including your husband’s inheritance once he gets it.

Then upon the surviving spouse’s death, your children will inherit everything equally, with the share of a deceased child passing to his or her surviving descendents.

Or you may make wills. This is much better than intestate succession, especially because the default inheritance laws provide that a minor beneficiary’s inheritance shall pass outright to him or her when the minor turns 18. Can you imagine what an 18 year old would do with several hundred thousand dollars?

What you should create is a revocable trust. You can do anything with a will that you can do with a trust. The only fundamental difference is that a trust avoids the costs and time delays of administering the assets of the surviving spouse in probate. The probate fee provided to an attorney, by law, for a $1.5 million estate is $28,000, and the executor of your estate would be entitled to the same amount. And that's not counting “extraordinary” fees awarded by the court in probate for doing “special” work such as selling your home — work that happens in most probate estates. Probate will also take at least nine months on average, if you’re lucky.

We are not saying that a trust would magically transfer everything to your family after you both pass on. The successor trustee of a trust has do to more or less all of the same work as the executor of a probate  estate and should retain the services of an attorney to make sure the job is done right.

Len & Rosie

Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, 996-4505, or www.lentillem.com. Len also answers legal questions each weekday, noon-12:45 p.m., and Sundays, 4-7 p.m., on KGO Radio 810 AM.

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