My previous articles for COMO-CAL’s “The Voice” have been about how mobilehome owners can organize to buy the mobilehome parks where they live. This article is about estate planning – another topic about which I get many questions.
First of all, congratulations for starting to read this! Estate planning is a topic most people don’t like to contemplate. Surveys show that between 50% and 60% of Americans don’t have a will, or any kind of estate plan. It’s not pleasant to think about the undeniable fact that sooner or later, all of us will die. But for many of us getting along in years, there’s this nagging – and appropriate – feeling… “I ought to do something about making an estate plan…”
What is an “Estate Plan?” It’s more than just creating a will or a living trust stating who gets your property after you die. An estate plan should also include:
Taking steps so that after your death, your heirs avoid going through probate court proceedings;
Making a plan for your own care, if someday you can’t make decisions on your own;
Taking steps to avoid estate taxes (if you are married and own large amounts of property);
If you have young children, making arrangements for their care in the event of your death.
You can achieve these things through a “testamentary document” such as a will or a living trust.
If you die without creating a will or trust, the State will decide what happens to your property according to “intestate succession” laws. These are set formulas that divide your property among your closest living relatives. Other possible heirs, such as friends or charities are completely excluded. The State’s formulas may not match your wishes about how your property is distributed upon your death.
Wills and Living Trusts – What’s The Difference?
Wills and living trusts both have the same purpose. They let you leave your property to specific individuals. However, there is one big difference between a will and a living trust. Assets put in a living trust don’t have to go through probate court after your death. This is because when you create your living trust, you transfer ownership of the designated property to yourself as a “trustee.” During your life, you still control all the property in your living trust. You can do with it whatever you like. After your death, the person you name to be your “successor trustee” distributes the property according to your wishes. Your specific wishes are written in the living trust document.
Why is it worthwhile to avoid probate court proceedings? There are two reasons: time and money. It can take a year or more to go through probate. It takes time to file the deceased person’s will with the probate court, gather their assets, pay the estate’s debts and taxes, and finally distribute what is left. As probate proceedings go on, fees for attorneys, accountants, appraisers and the probate court eat into the amount that will be inherited. Compare this with the distribution of assets under a living trust, which can be accomplished without court proceedings, with less expense, and usually within in a few weeks.
What Do I Need – A Will or a Living Trust?
Many people actually have both. They use a living trust to avoid probate. They also have a “back-up” will to cover property they don’t get around to transferring to the trust, and for types of property that are best not put into a living trust (e.g., your car).
Some “small” estates left only by a will can avoid probate. California has an out of court affidavit procedure for transfer of property, and a separate “simplified” probate process as well. However, these procedures apply only to estates with less than $100,000 in assets. While some items don’t count towards the $100,000 limit (e.g., property that goes to a surviving spouse, payable-on-death bank accounts, vehicles), many people are surprised to discover their assets exceed $100,000.
For example, many MH park residents have equity in their mobilehomes of $100,000 or more. If your combined assets exceed $100,000, and you have only a will, simplified property transfer procedures won’t be available. After your death, your estate would be required to go through probate court.
For many mobilehome owners in California, the best “cornerstone” of an estate plan is a living trust. To avoid the probate process, and for simplicity and speed of administration, the living trust is an excellent estate planning tool.
David Loop is an attorney and homeowners’ association board member at resident-owned Aptos Knoll Park, near Santa Cruz. You can ask him questions by sending an e-mail to email@example.com, or calling 831-688-1293