Category: Estate Planning

Who Inherits if No Trust or Will?

If a person dies in California without a Trust or Will, then Probate Code Sections 6400-6455, intestate succession, dictates the succession disposition.

The attached Chart of Consanguinity details the various scenarios whereby the offspring of a predeceased direct bloodline relative can inherit by “right of representation.”

For example, the parents have two children, and one of the children predeceased, leaving two grandchildren. Under the California Probate Code, the two grandchildren are entitled to receive in equal shares the 50% of the pre-deceased parent child. The surviving grandchildren inherit 25% each.

In a situation where a single person has no direct bloodline and has an extended family with many cousins, who have offspring, the benefits of having a Trust or Will explicitly stating who will receive, will prevent the cost and burden of a Probate Administration leaving it to distant relatives that the decedent may not have known existed.

Court Probate of Intestate Administration for a deceased without a Trust or Will, can result in large Heir Search Vendor costs. This can be prevented by having a valid written Estate Plan, a Trust or a Will.

Disclaimer

Why You Need a Trust – Self – Sufficiency

One of the main purposes of setting up a Trust is self-sufficiency, meaning I and my loved ones are able to handle our own affairs, and do not need to rely upon a government organization or agency.

The way we do this is by putting it in “writing”, in a legal and regulatory manner, that will be accepted by the financial and governmental organizations.

With the present Covid-19 virus, it is more clear than ever that our government is overwhelmed and lacks the resources to take care of all those who need it. Courts are shut down or have significantly delayed and reduced services.

Thus the “Planning” in Estate Planning is the most important aspect. Preparing in advance for a probable and certain event is a no-brainer. We will all die. Real life experience tells us that more “goes wrong” than right, and that hoping for wining the lottery ticket is a fool’s errand.

If you have time and capability now, why wait for the stressful and frustrating emergency to materialize, requiring an “immediate resolution”, only to find that you must rely on the governmental system and “get in line” of a large backlog of others.

When you set up a Trust you designate a successor Trustee who will wind down your affairs upon death. It is advisable to transfer or relate as many assets (e.g. real estate, financial accounts, life insurance) to the Trust allowing for a complete bypass of the Probate Court process.

Disclaimer

New IRA Stretch Limits

Pursuant to the new SECURE act recently passed by the senate and signed into law by the president, any IRA, whether Traditional or Roth, must be depleted within 10 years from the original owners date of date.

This is a simplification and limitation from the prior rules which allowed tax-deferred withdrawals depending on the age of the of the beneficiary pursuant to an IRS life expectancy table.

The new 10 year limit would apply to anyone except an exempted group, such as a surviving spouse.

For more details you can visit Investopedia on Stretch IRAs.

Disclaimer