What Happens in California if You Do Not Have an Estate Plan at Your Death?

With the coronavirus pandemic, many people have asked, “what happens if I die without an estate plan?” Without a properly prepared estate plan, California does your planning for you. You will not have a say in who will be appointed Guardian of your minor children, who will receive your assets, or when they will receive them. A valid estate plan, generally consisting of a Revocable Trust, a Pour Over Will, Advance Health Care Directive and Durable Power of Attorney, allows you the ability to make those decisions and makes your wishes legally enforceable.

Trusts and Wills

Generally, a Trust and/or a Will states your testamentary wishes (what happens to your estate upon your death) for your assets. In the event of both parents’ deaths, your Will can also appoint Guardians for your minor children.

In California, if you die without a valid Trust or Will you have died “intestate” and are subject to California’s intestacy laws. That means the State of California determines where your property and assets go, regardless of your wishes.

The Court first appoints an individual called an administrator to implement California’s rules with respect to your assets, and aides the Court in determining all of your assets and liabilities. The administrator then pays your debts from your assets and distributes the remaining property in your estate to your heirs as determined under California law. If an heir is under the age of majority, age 18 in California, a Guardianship proceeding will be required to hold that minor beneficiary’s share of the estate until he/she has attained age 18 (Guardian of a minor child’s estate). Having a child inherit at age 18 may not be in line with your wishes and is a result that is preventable.

The Court must also appoint a guardian for a minor child if both parents are deceased or no longer available to care for him/her (Guardian of a minor child’s person).

With a Trust and/or Will you decide who you want your assets to be distributed to, how much will be distributed, and when they will receive it. This is especially important if you have young children who may be inclined to spend their entire inheritance immediately, special needs children, spendthrift children, or  children with a drug or alcohol issue. A Will has to go through probate if the estate is valued at more than $150,000. A Trust avoids probate completely and is a very time effective and cost effective manner to administer your estate.

Advance Health Care Directive

An Advance Health Care Directive (also referred to as Durable Power of Attorney for Health Care) allows you to appoint an agent to make health care decisions for you in the event you are unable to do so. Additionally, it can be used as a guide for your health care provider and agent by memorializing your health care preferences.

If you do not have an Advance Health Care Directive and you are unable to make your own health care decisions, your health care provider may consult with someone whose desires are contrary to yours. The people closest to you who know your health care preferences may have no say in the types of treatment you receive. Specifying your health care wishes ensure that you receive the care you want. More importantly, health care providers are bound by HIPAA (Health Insurance Portability and Accountability Act) rules and may not be able to speak to family members about your condition or care without a Court order.

Durable Power of Attorney

A Durable Power of Attorney allows you to name an agent (“Attorney in Fact”) to make financial decisions and take actions for you in the event of your incapacity.

Without a Durable Power of Attorney, a court appointed Conservator of your Estate will be required to give a family member or private professional the legal authority to make financial decisions on your behalf, including but not limited to paying your expenses and managing the care of your house and other assets.

Having a properly prepared Durable Power of Attorney allows you to specify the scope of your agent’s authority, which can limit the access your agent has to your finances. For example, you can authorize your agent to pay your bills, but not sell your house, and a Court appointed Conservator will not be necessary.

The Costs of No Estate Plan

Without a valid Trust and Will if your estate is worth more than $150,000 at the time of your death, it will likely have to go through probate (there are exceptions). It is important to keep in mind the cost of probate which can be easily avoided. The Administrator of the estate and the attorney who represents the Administrator will each be paid commissions/fees as predetermined by the California probate code. The commission/fees are as follows:

• 4 percent of the first one hundred thousand dollars ($100,000);

• 3 percent of the next one hundred thousand dollars ($100,000);

• 2 percent of the next eight hundred thousand dollars ($800,000);

• 1 percent of the next nine million dollars ($9,000,000);

• 0.50 percent of the next fifteen million dollars ($15,000,000).

• For all amounts above twenty-five million dollars ($25,000,000), a reasonable amount to be determined by the court.

For example, if your estate, including the fair market value of your house, is worth $1,000,000, the Administrator will be paid $23,000; the Attorney for the Administrator will be paid $23,000; and the Bond, Publication, Appraisal, and Court filing fees will total approximately $5,000. Preparing an estate plan using a Trust to avoid probate, along with powers of attorney, will in most cases cost less than $5,000.

With this health pandemic, it is especially important to have a personalized plan in place. Speaking with an attorney and customizing an estate plan ensures the assets you have worked hard for are preserved and passed on to the people or charitable organizations you care about in a responsible and cost effective manner.

Kira S. Masteller and Lani Fu are attorneys in our Trust & Estate Planning Practice Group.

This information provides an overview of a specific developing situation. It is not intended to be, and should not be construed as, legal advice for any particular fact or situation.