When I ask why so many people have never created their own estate plan, they say it is because they "don't have enough assets to worry about." That is why the probate court exists - to "take care" of most Californians. I say "take care" of because once you've been to the probate court, you'll never want to go again. So, most California residents are ignorant of the consequences of having no estate planning documents in place.
Financial Incapacity. Unfortunately, the probate court supervises your assets (however small) for the rest of your life in the event that you lose capacity to take care of them yourself. This means that someone who cares about you will have to go to court every year to explain to a judge how your assets are being spent and invested, all for the public to see. This person pays an attorney and an accountant to accompany him/her every year so the judge is convinced that he/she is not embezzling your assets, however small. This person is guilty until proven innocent if anything is missing. Your assets will soon become even smaller at this rate. If you are over the age of 18, this process is called a conservatorship. All of this can be easily avoided by having a quality Durable Power of Attorney for Financial Management in place.
Minor Children. If you have children under the age of 18, and they inherit assets upon the death of a parent, their assets would be part of the probate process but called a guardianship. The same attorneys, accountants and conservators get paid to "take care" of their money until their 18th birthday, at which time, the entire amount is distributed to them. How many parents would normally give their 18 year old child a large amount of money? How much less so if you are not here to help them make wise decisions.
Healthcare Decisions. If you cannot make your own health decisions, and you don't have an Advance Healthcare Directive in place, then someone will have to open a conservatorship with the probate court (same procedure as above) in order to have authority to talk to your health care professionals. Imagine a true story where an 18 year old daughter went to senior prom and ended up in the emergency room. Her parents went to visit her there but the doctor couldn't provide any information until they obtained a court order from the probate judge (conservatorship). It usually takes several weeks to obtain court orders.
After Death. If you don't write your own will, California will write one for you. The state has already created a system to decide who will be in charge of your estate, your body and receive your assets upon your death. If you have separate property (not community property), you might be surprised to find out who stands to inherit it from you - it's not always your spouse. This probate process takes about one year if all goes well, requires a lawyer to be hired at a percentage of the gross value of your estate, requires the administrator to hire the court's appraiser, pay the court's fees and an accountant is usually involved. For example, it would cost about $15,000 to pay the probate costs of a $200,000 estate. It costs about $50,000 for a $1,000,000 estate and goes up from there. When calculating the estate value, do not deduct any debts, mortgages or expenses.
Non-US Citizen spouses. There can be huge tax consequences if you have more than $1 million and your spouse is a non-US Citizen. You would want to investigate a QDOT trust to defer the taxes until such time as your spouse can become a US citizen.
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