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Distribution of Assets

Distribution of assets

Estate planning attorney serving santa rosa & sonoma county

Gullotta Law Group

According to Lexis Nexis, more than 55 percent of adults in America do not have a will or trust in place. Among minorities, those numbers are even higher—about 74 percent of Hispanic adults do not have an estate plan, and about 68 percent of black adults do not have an estate plan. If there is no will or trust in place, the state of California will determine who will receive your assets, following the laws of California, known as intestate succession laws. Assets affected by intestate success laws are only those which would have passed through a will had one existed.

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That means only the assets that could have been included in a prepared will might be affected, one example is assets that are titled only in your name. If any of your property is included in a living trust, then that property will not be included in intestate succession. Life insurance proceeds are also separate from intestate succession, as a beneficiary is named on life insurance policies. Other items which are not included in intestate succession include any property owned in joint tenancy, IRA funds, payable-on-death bank accounts, IRAs or 401(k) retirement accounts or vehicles held in transfer-on-death registration. Whether or not you have a will, all of these assets will pass to the beneficiary or surviving co-owner.

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The remainder of your assets are distributed by the state of California as follows:

  • If you were married, any community property goes to your surviving spouse. Your separate property will then be distributed as follows:
    • If you have no children, parents, brothers, sisters, or children from a deceased brother or sister, your surviving spouse will be awarded all your sole and separate property.
    • If you have only one child, or children from a deceased child (grandchildren), then your surviving spouse will receive half of your sole and separate assets.
    • If you have parents, or brothers and sisters, but no children, your surviving spouse will receive half of your sole and separate property.
    • If you left more than one child, your surviving spouse will receive one-third of your sole and separate property, and your children will equally divide the remaining two-thirds.
    • If you left one child and one or more grandchildren from that child, your surviving spouse will receive one-third of your sole and separate property, and your child and grandchildren will receive the remainder.
    • If you have grandchildren from two or more deceased children, your surviving spouse will receive one-third of your sole and separate property, and the grandchildren will divide the remainder.
  • If you were not married at the time of your death, your estate will be distributed as follows:
    • Children from the same generation will take in equal shares of your estate.
    • If you have no children, grandchildren or great-grandchildren, your estate will go to your parents.
    • If you have no living parents and no children, your estate will be distributed to your siblings, or if your siblings are deceased, to your sibling’s children.
    • If you have no living parents and no siblings, your grandparents will inherit your estate.
    • If you have no living parents, no children and no living grandparents, then the “issue” of your grandparents (your aunts and uncles or cousins) will inherit your assets.
    • If you have no living parents, grandparents, siblings, aunts, uncles or cousins, then Probate Code provides your estate will be distributed to the “next of kin in equal degree,” which could include distant cousins, etc. and maybe people you haven’t even met!

What Are Assets?

Although this question might seem to have an obvious answer, there can be disputes regarding assets. Tangible assets are things you can physically touch, which have no title attached, such as furniture, antiques and jewelry. This type of assets are often sentimental items and typically have no material impact on the overall distribution of assets. If one of these tangible assets also happens to be worth a significant amount of money, the asset could be sold to satisfy outstanding debts. Real estate—whether homes, rental property, land or vacation homes—will be distributed according to how the property is titled and how it is bequeathed.

As with a tangible asset worth a significant amount of money, debts can force liquidation of property. Stocks, bonds and cash—and all other liquid assets—must be handled through a separate estate bank account, set up with the death certificate of the deceased, letters of testamentary from the court and an IRS EIN. Cash left in a bank account can be used to pay for debts, court filing fees or other estate-specific bills. Beneficiaries might be asked how they would like to receive their share of liquid assets, and, so long as the distribution is equitable, it does not matter how these liquid assets are divided.

Probate in the State of California

Whether you die without a will or with a will, probate will take place to determine which assets you had at the time of your death, and who those assets will be given to. Assets owned in joint tenancy with another person, assets held in a living trust and assets with a payable-on-death beneficiary are exempt from probate. Further, if the total value of the probate estate is small (less than $150,000), then inheritors are allowed to claim the assets through a streamlined “summary probate” process which includes a sworn “small estate” affidavit.

If probate is necessary, someone must start the process. If there is a will, then the named executor will step forward and start the probate process. If there is no will—or the named executor cannot fulfill his or her duties—then typically a family member will petition the court to be appointed administrator. The probate process typically lasts from NINE to 18 months. If a will is present, the will, along with a “Petition for Probate” will be filed with the probate court in the county where the deceased person resided. There is a filing fee which varies from county to county. Notice must be given to beneficiaries and creditors, and the will must be shown to be valid. The court will then issue Letters of Administration which will appoint the executor.

The executor of the estate must keep all assets safe during the probate process. This means any heirlooms must be properly safeguarded to prevent theft or damage, and real estate must be insured and maintained. Creditors in the state of California have four months to make a claim against the estate, although in most cases, no formal claims are made, rather the executor simply pays all of the deceased’s outstanding bills.

While in theory, you could handle a probate on your own without benefit of an attorney, in practice, having the necessary forms and knowing exactly what to do with them are two different things. For those who are not familiar with the California probate process, it can be easy to become overwhelmed. The right source of guidance for conducting a probate court proceeding is a knowledgeable California estate planning attorney from the Gullotta Law Group. Complications during a probate are common, including fights over inheritance, more debts than assets, an ongoing business, or uncertainty about who should be paid.

Revocable and Irrevocable Living Trusts

While there are many reasons to consider revocable and irrevocable living trusts, perhaps the two best reasons include no probate process and privacy. Probate is public, meaning anyone who desires the information regarding the will and the distribution of assets can obtain that information. A living trust keeps that information private, allows beneficiaries to receive their inheritance quicker, and, in some cases, can significantly reduce inheritance taxes. An irrevocable living trust is one which cannot be changed or altered, while a revocable living trust can be changed or canceled entirely. Assets held in a living trust pass much more quickly and with greater efficiency than assets which must go through formal probate in order to transfer titles. In fact, absent specific circumstances (a dispute among the trustees and beneficiaries) The California probate court is not involved in the administration of the trust.

Given the nature of a living trust, the trust must manage specific assets which have been transferred to the trust once it is established. Those assets might include real estate, stocks and bank accounts—which remain in your control, as you will name yourself the trustee of the living trust (in most cases). Upon your death or incapacitation, your successor trustee or co-trustee will carry out the trust instructions, either managing the assets for the named beneficiaries or distributing those assets to beneficiaries.

A beneficiary for a living trust can be a loved one, a friend, or even a religious or educational institution or other organization.  Because state laws related to California living trusts can change, according to new legislation, higher court rulings or ballot initiatives, having an experienced estate planning attorney from the Gullotta Law Group to decipher California living trust laws can be an invaluable asset. In fact, a knowledgeable estate planning attorney may be able to help you avoid unnecessary taxation at federal and state levels, thus lowering estate costs.

Distribution of Assets in California

Taking all the above into consideration, there are essentially four basic distribution methods for assets. 1. You can gift your assets prior to your death, 2. you can use a living trust to distribute the remainder of your estate following your death, 3. your assets can be distributed via the instructions in your will following your death, or 4. your assets can be distributed outside your will following your death (either your assets are all titled in joint tenancy or the state of California will determine how your assets will be distributed).

There are certain advantages and disadvantages to each method, although certainly the worst “method” would be to have no estate plan at all, leaving the state of California in charge of distributing your assets after your death. You have the options now, before you die or become incapacitated to make the decisions as to how you want your assets distributed, and who you want to leave your assets to—your beneficiaries.

Should your choice be to leave all your assets to your spouse, you could accomplish this through joint tenancy, where your surviving spouse would inherit all your property outside the will, avoiding probate after your death—but not avoiding probate following the death of the surviving spouse. There is also something known as an “I love you” will, which is a simple will which leaves all assets to the surviving spouse, or divides everything equally among your children if you have no surviving spouse.

If you have children from a prior marriage, and you want those children to inherit at least a part (or all) of your assets, you can accomplish this through a will, or, ideally, through a trust. Depending on the level of your assets, you might also consider a Qualified Terminable Interest Property Trust which is used to transfer assets to children from a prior marriage, while still providing support for a surviving spouse during his or her lifetime. In this situation, when the surviving spouse dies, all remaining assets in the QTIP trust revert to your children via a residuary trust.

Should you desire to leave assets to your parents, you definitely need a trust or will, and the same is true if you want to leave assets to your siblings. You might also want to consider the following. Suppose you die without a will, and have no surviving spouse, but do have two surviving children. Under California law, your estate will be divided equally between the two. But suppose one of the children is disabled, and requires lifelong care, while the other is a successful heart surgeon—the California intestacy laws will not produce an equitable result. This is just one more reason to make estate planning a priority.

How Will Your Assets Be Distributed?

Having an experienced estate planning lawyer by your side who can serve as a probate attorney, power of attorney lawyer, wills attorney and trust lawyer can be an invaluable resource. The Gullotta Law Group attorneys can handle every aspect of estate planning, while thoroughly explaining all aspects of estate planning. Contact the Gullotta Law Group today!

For more information about asset distribution, contact a Sonoma County estate planning lawyer from Gullotta Law Group! We are proud to serve clients throughout Santa Rosa.
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