 Stop sharing my screen and hand it over to Stu. Well, thanks, Leah. We could have done this without you and I really appreciate all you've done. Okay. I'm Stu Bronsty and I'm one of those lawyers that does a state planning. I've been doing it for a long, long time. And I put together this presentation for people to just sort of understand what it's all about. I did get some questions and a lot of the questions are answered in the presentation, but I'll go over. Three of these right now. Because they're, they're sort of outside the presentation. First one, if you have a living trust and the items listed on schedule a change saying account is closed or a new account is open, does the schedule a need to be updated with the attorney? The answer is no. Schedule a is just where you start with, with your assets to put them in the trust. But later on. The, the trust just is the one who purchases the assets or the trust is the one who that puts its name on the assets. So you don't have to change schedule a and you certainly don't have to change it with a lawyer. Also about, let's see, can you have a clause saying when somebody mentioned as a beneficiary and they sue for whatever reason, they are to be eliminated as a beneficiary. The answer is you can put that in there. And the reason is because it may not be all that useful. And the reason is because if somebody sues. Because they should have been in there and they're not, which does not happen very often. And they win. They're going to win whether you have that clause in there or not. So. If they lose, then they lose everything. Is that what you really want? So that's something to consider. Also about ways to give money to charity in a way that minimizes taxes. Your organization may have to pay when you make a gift to a charity, the charity does not pay taxes. On that. So I'm not sure if that was what the question was about, but those are the questions. Okay. I will be. Now, if you have questions, put them in the chat. And Leah will collect those. Okay. Okay. So I'm going to go ahead and do that. I'm going to do that. I'm at the end. I'll go over as many. As possible. Okay, let's see. So what. What is the state planning about the first question I get a lot is, well, what is an estate? People say, well, I don't have a lot of money. I don't have a big house. Why do I need to plan my estate? And the answer is. That having an estate. It just means. That you have to have. Something to pass on when you pass away. And if you have something to pass on when you pass away, you should plan that a state to make sure it goes where you want it to go. So if the only thing you have to your name is your car. And you were just in an accident. And the cars now worth a hundred bucks. You still have an estate and that's it. You have a wrecked car that's worth a hundred bucks. And you should still plan your estate. So what can you do to plan your estate? Well, there are a lot of things you can do. And I can't cover everything now, but I'll cover most of the major ones. But probably the most common thing that people do, the most popular thing that people do actually is. Nothing. There was an article a while ago. And I was either the. The New York Times of the Wall Street Journal, I forget that said that almost two people out of three. Don't do anything to plan their estate. I think that a lot of people have trouble facing their own mortality. And they just don't want to deal with it. So the fact that you guys are here and dealing with this. Is that the state of California already puts you in the top third. So congratulate yourselves for that. Now, if you do nothing. Unlike some people, the way some people think, your state does not go to the state of California. Gavin Newsom won't get his grubby little hands on your estate. Instead, what happens is that the. Legislature has written a will for you in the law. And what it says is actually what a lot of people would want to have happen. It says that if you're married, what you have goes to your spouse. If you're not married, what you have goes to your kids. And if you don't have kids, what you have goes to your parents. If they're still alive. And to your sibling to their, to your siblings, if your parents aren't alive to your siblings and to their kids. So that's pretty much what most people would want to happen actually. If you have an issue like a little better than a nephew. If you have a son that's a drug dealer. And you don't want to leave him anything. You can't do that with the legislature's will. You have to write your own well. And make it clear exactly what you want to do. Now there are some other reasons to make a will too. Even if you want your, your. Your, your, your. Your. A wall is to go where the legislatures will, says it'll go. And one of the reasons is that there's a, there's a really high chance that your state will go through probate. And in probate. You're required to have somebody called an executor. Well. If you write your own will, you get to pick who that executor is going to be. The executor is the person who gets all your. your property together, make sure that it all goes where you want it to go. And if you write your own will, you can choose your executor. But if you don't write your own will, you don't get to choose your executor. In fact, some judge is going to do it. Very often, it's the first person who gets in the court to say that they want to be the executor. Usually, it's a family member. Sometimes, it's not. I was working within a state a few years ago where this lady died owning a little apartment building in the inner sunset. It was worth quite a bit of money, but she didn't have a will. So her daughter went into court and said, I'm the daughter. I'm an inheritor. I want to be the executor. And she had a grandson, who was the son of another daughter who died before she did. And her grandson said, wait a minute. He ran into court and said, I think my aunt's going to try and cheat me out of my inheritance. Make me the executor. And the judge looked at these two people. And like we look at six-year-olds who are squabbling said, well, if you guys can't figure it out, then neither one of you is going to be the executor. And he picked one of his golfing buddies to be the executor. Not only to be the executor, but to get the $45,000 executor's fee, which could have stayed in the family. But no, it couldn't because the family members were squabbling. If the lady had named an executor, that would not have been a problem. There's also another reason to make a will, even if you want your stuff to go where the legislature's will says it'll go. And that is that your executor is required by law to have what's called a fidelity bond. A fidelity bond is just a fancy name for an insurance policy that protects your errors against your executor's stealing from them. It's issued by an insurance company and everything. And like all insurance products, you have to pay a premium. Well, this protects your errors against the executor's stealing from them. But the insurance premium isn't paid by your executor out of his big fat fee. That comes out of the estate. It comes out of the pockets of your kids. So if you write your own will and you choose an executor you know is not going to steal from your kids, you can waive that bond requirement and save your kids or your errors several thousand dollars. Another way you can plan your estate is to use a trust. And I'll talk more about trusts in a little while but there are some major differences between wills and trusts. And I'll talk about those in a couple of minutes. Let's see. All right. So one of the things that trusts can do is to avoid probate. Why do you want to avoid probate? One of the reasons for avoiding probate is the high cost. In California, which is not the most expensive state but it's close, executors and attorneys for executors have what are called statutory fees. The legislature has made a law that said that lawyers and executors get a percentage of the size of the estate because they don't want errors to be dinged to be taken advantage of by fees that are too high. But for a lot of estates, the fees are really high anyway. So the fees run 2% plus $3,000 for the first million dollars and 1% for the next nine million dollars. So if you have a $1 million estate, your executor's fee is going to be $23,000, your lawyer's fee is going to be $23,000 and then there are other costs. So that's going to be $50,000. That's a lot of money. So that's one reason to avoid probate because if you use a trust or some other way to avoid probate, the cost is usually much lower. In probate, when you have a will, in California, the average probate goes less from one to two years. In fact, it's hard to get a probate done in less than one year. I had one probate that I did that was pretty easy. And we went as fast as we could possibly go and we didn't get it done in less than a year. Sometimes probates take a lot longer. Three, four, five years isn't all that unusual. I actually had a very unusual case one time where I got a call from people who said that they were named in this lady's will and the lady died and they hadn't heard anything. And she died 21 years ago. So I came in and I was able to close the estate in the next six months and get them their money. Probates being open for that long are unusual but every once in a while it does happen. When you use some other method to avoid probate, usually they don't take nearly that long. Okay, when you write a will and your estate goes through probate, all the information in the probate file is public. In fact, I filed the probate petition one time, took it to the court, filed it, got back to my office and within two hours I got a call from a real estate agent who wanted to sell the property owned by the estate. Somebody got that information within two hours. It's that public. So what's in that file? Well, the will of course is in the file and the will talks about your family and all that. But also in the file, they're required to list all your assets, every asset, your bank accounts and bank account numbers, real estate that you have, everything is listed in the probate file. Also all your close relatives are listed, their names and addresses and the form even tells them they have to put down how old they are. So if you have a sister who doesn't want people to know how old she is, then you better make sure that she dies before you do if your estate's going to probate because if you died first and people get that probate file, they'll be able to figure out how old she is. Okay. So what in the world is probate anyway? We've heard that it's something that happens after you die and it's something about going to court but what really is it and what's it for? Well, probate was really set up for one particular purpose and that is that we all have certain kinds of things that have written ownership, written title. So if you have a house, you have a deed and you can't give away or sell your house unless you sign your name on a new deed. If you have money in the bank, you normally can't get your money out unless you sign your name on something or at least give a pin number. And if you have a car, there's the pink slip and you can't give away or sell your car again, without signing your name. So you can imagine that there's a problem, right? Because after you die, well, you can't sign your name anymore. At least most of us can't sign our name anymore. So that's the problem that probate was set to solve. That you can't sign your name anymore. So how is that property transferred? In probate, a judge's court order takes the place of your signature to transfer ownership of those properties that would otherwise need your signature. That's really pretty much all of it is. But there's a lot of other things that go on in there as long as the legislature has you captive and you're a state captive. They do other things. They wanna make sure that all your creditors get paid before the greedy relatives, for example. But I have a will, people have said that to me. I have a will, why should my state have to go through probate? Well, unfortunately, having a will doesn't avoid probate by itself. In fact, there are things that in addition to transferring title, there are things that probate does that protect your will. That if you didn't have your assets could be at risk. For example, imagine going on a trip to Greece for six weeks and you come back and you go to your bank to get some cash out of the ATM and you can't do it. The ATM says that your account's closed. So you walk into the bank and you talk to a banker and the banker says, oh, I'm surprised to see you. This guy came in and he told us you died and he showed us a thing that he said was your will and it said you left everything to him. So we just gave him all your money. One of the things that probate protects against is that. So if you have a will, your estate will go to probate and it can actually be helpful in some situations. Now, the legislature says that if you have an estate of over $166,000 that would otherwise have to go through probate, then it has to go through probate. If your estate is below that, they figure, well, that's not enough to worry about. If somebody steals it, they can get it back. It's not all that much according to the legislature. So if you keep the assets in your estate under $166,250, you can avoid probate even without using a trust. So for example, if you have bank accounts and you name beneficiaries on the bank accounts, those accounts will go directly to your beneficiaries when you die. They do not need to go through probate and they are not counted against $166,250. If you have stock account with a stock broker and you have beneficiaries named, those stocks will go to your beneficiary. Doesn't matter what your will says and it will not go through probate. If you have money in an IRA and the IRA names a beneficiary, it will not go through probate. It doesn't matter what your will says and that money is not counted against $166,000, okay? So there are ways of structuring your estate to avoid probate without having to use complex techniques. Now a trust is one of those things that some people should be using to avoid probate, but what really is a trust? We've heard about trusts. They're supposed to avoid probate. They're supposed to be good, but what really are they? How do they work? What are they for? Well, I like to think of having a trust is like having your own private corporation because trusts and corporations really are legally almost identical. For example, there is nothing tangible that's a corporation, corporations own property, but the corporation itself doesn't really exist. The law just says that if you have the right piece of paper and for a corporation, it's called articles of incorporation. If you have that, then we will pretend that there's this entity called the corporation and it's allowed to transact business and buy and sell property. So if you see a building that's owned by a corporation, that's all that it is. A trust is the same way. The trust doesn't really exist in tangible form. It's just an idea that the law says if you have the right piece of paper and for a trust it's called indenture of trust, then we'll pretend that there's this entity out there called the trust and it's allowed to own property and transact business. And if you have a trust, it will have to own your property and transact your business. If you don't, then you've wasted your money because the trust only works for what a trust legally is the owner of. Okay, so you need to take your house and create a new deed and put it in the trust. If you have expensive cars, you need to take those and transfer title to the trust. You should put everything in the trust that you can. Now a corporation is run by the president. The president's responsible and has authority for all the business of the corporation, all the transactions of the corporation. The president can delegate authority to employees but the president is the one with the ultimate power and the ultimate authority and responsibility. A trust has somebody just like a president we call them the trustee. For most people when a person sets up a trust they become their own trustee and put their own property into the trust. So in effect, they become the president of their own corporation and their corporation owns all of their stuff. So they can treat all their stuff the same way they did as before there was a trust. All right, so how does a trust work to avoid probate? Well, I'm going to give you an example but it's an example using the corporation. Imagine that there's a small corporation with maybe a dozen employees and it's got one owner. The owner is the president and every week on Thursday the president comes in, his secretary gives them payroll checks. He signs the payroll checks and all the employees get paid on Friday. Pretty normal natural thing to happen. Well, this particular Thursday he sits down his secretary brings him his checks but before he has a chance to sign even one he hears a loud knocking at the door. Well, he's a little surprised because he wasn't expecting anybody. So he goes to the door and opens it and he can't see a thing because there's this bright light shining in his eyes. So he steps back a little bit to see if he can get some perspective but the light is so bright he still can't see anything but he hears somebody say, my name is Anderson Cooper and I'm here to ask you about your corporate practices. Well, he wasn't expecting that. He didn't want that. He feels a little faint, falls back in his chair has a heart attack and dies on the spot. Now he's got a problem, right? And the problem isn't the dead guy in the chair. The problem is we have a dozen employees who wanted to be paid tomorrow and there was nobody authorized to sign those paychecks. How do we get those checks signed and the employees paid on time? Well, a corporation has not only a president but a vice president. And when a president dies, the vice president automatically becomes the new president. As a new president, he can have the corporation send a letter to the bank saying that there's a new president. He goes down there as the new president, puts his name on the signature card and boom, he's authorized to sign those checks. He comes back, signs them, everybody gets paid on time. No lawyers, no probate courts, no rigmarole. Okay, pretty simple. A trust has somebody exactly like the vice president and we call him the successor trustee. When the original trustee dies, the successor trustee becomes the new trustee and has the authority just for that alone to do what the trust says to distribute the property, the way the trust says he's supposed to do it. Now, just like the vice president had to notify the bank and go down there and put his name on the signature card, successor trustee has to do some things too. One of those things is that he has to get a certified copy of the death certificate of the prior trustee. And then he has to get a copy of the notarized trust to show people that he's the next one in line. And that's all that he needs to do. Okay, now there are different kinds of trusts and trusts are divided in a lot of different ways so trusts can fit into a lot more than one category. So there are revocable trusts and irrevocable trusts. Revocable trusts are used mostly for estate planning. Irrevocable trusts are used in very rare situations but in very specific situations. So when there's an insurance trust, that's an irrevocable kind of trust. Insurance trusts are specific and used by people in very high tax brackets. Most people don't need to worry about that. But if you have a state or if you have in a state of more than $12 million, an insurance trust could be really helpful. Non-profit trusts, you've heard of like trust for public lands. Non-profits can be either corporations or trusts and the non-profit trust needs to be irrevocable. And estate planning trusts, when the person who sets up the trust dies, that trust then becomes irrevocable. And as it's irrevocable, just like a corporation, it becomes its own tax-paying entity and has to pay taxes to the extent that it or at least file tax returns if it doesn't owe any taxes. So there are other ways to avoid Pro-A2 and one is to use what's called the pay-on-death account. You can have an account with a bank or a stockbroker where you can name a beneficiary. They can call it different things, but a POD account is one of those names. If you have a beneficiary that you name, then what is in that account will automatically go to that beneficiary when you die. It will not go to Pro-A2. It will not be counted against the $166,000 Pro-A2 dividing line. And it doesn't matter what your will says, it will go to that person. Joint tenancy is another way that people avoid Pro-A2. Joint tenancy is not a great way to avoid Pro-A2. And the reason is because when you make someone a joint tenant, and I've seen people do this, where parents will add a child as a joint tenant of their property to pass it to them when they die without Pro-A2. The problem is when you do that, the child becomes a full co-owner of your property at that moment, not just when you die. And that could lead to some problems. For example, let's say the house is too big for you. You want to downsize and move to a smaller place or you want to move to a warmer climate when you retire. Unless your joint tenant child agrees and signs off on it, you can't do that. You can't do it without their consent anymore. If your child gets into financial trouble, let's say your daughter's in a bad traffic accident and is in the hospital for a year, runs up $3 million of medical bills, but you only have $2 million of medical insurance, your daughter is a full owner of your house. Her creditors can get at the equity in your house even while you're still alive because she is a joint tenant. She is a co-owner. So joint tenancy is something that I don't normally recommend. What's similar to joint tenancy for married couples is called community property with rights of survivorship. Now, I do recommend that and there are two reasons. One is that when couples own community property and one dies, well, I'll talk about some of this a little bit later, but community property with rights of survivorship is good for married couples for several different reasons. One is that the title automatically goes to the village spouse without any kind of probate process. And then in addition to POD accounts, there's a thing called a TODD. It stands for transfer on death deed or it's also called a revocable transfer on death deed. We're still under a pilot program. We're now in the last year of the pilot program, the legislature is working on a permanent TODD statute. But in the meantime, there's this temporary law that allows you on one property, residential property only, to name someone as basically a beneficiary on your house. Excuse me, so that when you die, the property will go automatically to that person or those people will not go through probate, will not be counted against the $166,000 probate delineator and you don't need a trust to avoid probate. So there are other issues with estate planning as well. One is that some people like to leave property to charity, but when you leave something to charity, you need to be careful. First of all, there are a lot of different ways to leave things to charity, but the one problem that I've seen happen is that there are lots and lots and lots of charities out there. If you ever go to the IRS website, you can get a list of all the approved charities that have been approved since 1927. There are charities that were approved before that, they're not on that list, but all the ones since 1927 are on that list. And the last time I looked, which was quite some time ago, there were 23,000 pages of them. Lots and lots of charities out there. And you can imagine that with all those charities, there might be a lot of them that have similar names. I've seen this happen that unless you're really careful, a gift that you mean to go to one charity could end up going to a different charity. There was one case, I swear to God, this really happened, it was a judge who told me about this. Where there was a lady from Connecticut who left a rather large gift to a university in California. Now, nobody could figure out why. She had never lived in California, she didn't have any friends in California, her husband didn't either, her children didn't either. And she had no contacts that anybody could find with California. But in her will, she left, quote, $5 million to the University of Southern California, also known as UCLA. Well, you can imagine that was confusing to people in California, if not people in Connecticut, because those are two completely different schools. And what did they do? They could have sat down and talked about it, they could have done a joint inquiry, but no, they both hired lawyers and sued each other. And this lawsuit went on for seven years where they would send lawyers and investigators down to Connecticut and they did research and they did investigations and they tried to figure out which school this person met. Which one she had any kind of contact with, which one she had any kind of good feelings toward. And after seven years, they still haven't figured it out, but half of the money was gone in paying lawyers' fees. I mean, the real tragedy was, I didn't get any of it, but half of it was gone. So at that point, they decided it was UCLA to keep fighting and they agreed to split the rest. The point is that the school that she actually met to get her gift got one quarter of what they should have gotten because of that little mistake. Where to keep your will, that's another issue that comes up from time to time. And conventional wisdom is that you wanna keep it with your important papers and you wanna keep it in a place that people can find it, but is protected against disasters. So one thing that people suggest is a fireproof, waterproof, safe. Now there are small ones, like nine by 12 fireproof, waterproof, safe. So you can get them for about $50 at Costco or Home Depot or you can get a larger safe. But one place you do not wanna keep your will is a safe deposit box. And why? Because you're the only one who can get at that safe deposit box. And if you die, nobody else can get there without a court order and they can't get a court order without your will. There was one case years ago here in San Francisco where, and this was when the Neptune Society first got started. I remember reading in the Sunday paper, there was a big article on the front page of the Sunday paper in the Chronicle about this new thing opening up called the Neptune Society. And while cremation hadn't been, wasn't really new to the world, it really wasn't very popular in modern society up to that point. So it was big news and a lot of people were talking about it. And it's one family found out about it and they decided they were gonna have a family meeting and talk about it and decide what they wanted to do. And at this family meeting, the consensus was that cremation sounded like a great idea. It was cheaper than burial and it was more environmentally friendly. Everybody in the family thought it was a great idea and wanted to do it, except the dad. It freaked him out to think of being cremated. But he was one of these guys who likes to go along and get along and not cause trouble and not make waves. So he didn't say anything, but it really bothered him. So he went to a lawyer and had a well-drafted that said, do not cremate me. Well, your will really doesn't do anything other than give away your property. So just saying, do not cremate me and your will won't prevent somebody from cremating you. It'll give them the idea that this is what you want, but it doesn't impose a legal obligation. So what he did was in his will, he wrote, if I am cremated, my family gets nothing. And then he stuck his will in a safe deposit box and he still didn't tell anybody about it. So after he died, it took them a while to get a court order to get his safe deposit box open and to see his will. And they didn't actually get to his will until six weeks after he was cremated. So that's not a great place to keep your will. Amending your will, yes, you can amend your will with current technology. If you have a will or your lawyer may have a will on a word processor, it might be really easy to just spit out the whole thing again, but you can amend your will with an amendment, just like a one page or half page amendment, with a will it's called a cortisol. Now there are two kinds of wills and there are two kinds of codicils. One kind of will is called a formal will and it can be printed or typed or written or any combination of those, but it has to be signed by two witnesses saying that they saw you sign this will. There's another kind of will that's called a holographic will. And a holographic will does not need witnesses, but it all has to be in your own handwriting, has to have the data at the top, your signature at the bottom and where you want your stuff to go in the middle. Well, there are some kind of esoteric requirements for wills. So if you want to write your own holographic will and you can have a holographic will or a holographic codisol, you can mix and match, they don't have to be the same. But if you wanna do a holographic will or a holographic codisol, you should look into what the requirements are or get help from a lawyer because I've seen situations where people make little mistakes that void their will. I can see seeing lawyers make these mistakes. One of the mistakes is that the law requires and this is the law, it's been the law for 500 years or more. So lawyers are slow to change, but the rule is that a will that where you distribute your assets speaks of the time after you die. So you have to phrase it in the present tense. If you phrase your will in the future tense, it could be ignored by the probate court. For example, if you say, when I die, I will leave my car to my friend, George. If you do that, George isn't gonna get it when you die. You have to say, when I die, I leave my car to my friend, George, present tense. So there was a story about one guy who decided that he wanted to do his own will. And he was a smart guy. He did really well in school, got into Stanford, did really well at Stanford. And because he did really well at Stanford, he got a great job, did really well in life. And he was so grateful to Stanford, he was a big Stanford booster at one point. He even went on the board of directors at Stanford. And so later in life, he decided he wanted to remember Stanford in his estate plan, just to thank them for all that they had given him. But he was smart, right? He had gone to Stanford. He was too smart to have to pay any money to some goddamn lawyer to do an estate plan. So he wrote his own will. He knew all about holographic wills. And when he came to the part about Stanford, he wrote, I leave $100,000 too. And then he stopped, and why did he stop? Well, I think he stopped because the legal name for Stanford isn't Stanford. He didn't want to just put Stanford because who knows where it would have gone. The legal name is the Leland Stanford Junior University. Well, I don't think he wanted to write that all out. Like, that's gonna give him a writer's cramp or something. That's a long thing. And besides, he was on the board of directors. Once he had a rubber stamp, said the Leland Stanford Junior University. So in his will, he wrote, I leave $100,000 too. And then rubber stamp, the Leland Stanford Junior University. When he died, they did not get one penny because that part was not in his handwriting. So be careful. All right. All right. Now, income tax can be an issue in estate planning and in estate issues. So, but the income tax issue starts with the question, what is basis? Basis is a tax term that basically means what you pay for something. It's the number that you subtract from the profit from the amount you sell something for to determine what your taxable income is. So if you have a house you bought for a million dollars and you sell it for two million, your basis is $1 million and you have $1 million of taxable income. Now, basis can go up or down depending on circumstances. For example, if you buy a house and you make capital improvements, not including repairs, but capital improvements, then the money you put into capital improvements can increase the basis. If you rent it out, then you depreciate it and depreciation reduces the basis. So that's what basis is. So here is how that comes into play in an estate situation. Let's say you bought a house for $50,000. You sold it, it's now worth $500,000. If you sell it now, it's $500,000 minus the 50 basis for taxable income of $450,000. It's pretty simple. And it's the same thing for a married couple. In California, each spouse generally owns half. So if they bought a house for $50,000, each one owns has a basis of $25,000 in their half. It's currently worth $500,000. So if one of them dies and sells it, or if they sell it, basically there's $450,000 of taxable profit. However, if one of the spouse dies, the rule is different. It's still worth $250,000 for each half. The surviving spouse still has a basis of $25,000. But if this is the case, if this is joint tenancy property or something other than capital gain property, the basis for the spouse who died goes up to market value on the date of death. So that spouse is half. The basis goes up to $250,000. So the basis is increased from $50,000 to $275,000. Surviving spouse sells it for $500,000 and there's capital gain of half of what they would have paid before, $225,000. But that's still too much in California. Why? In California, we are special under the tax law. We have community property and the tax law, federal tax law treats community property differently. Here's how community property works in California. Each spouse still has a market value of $250,000. The spouse who dies, their basis goes up to the market value on the date of death. But the other spouse who's still alive, if it's community property, the basis on her half goes up too to the date of death. So with community property, if one spouse dies and the surviving spouse sells it for that value on the date of death, there was zero capital gain. And the same thing works when there's only one person who has a child, for example. If a child becomes a joint tenant, the child becomes owner of half the property. When the parent dies, each half has a value of $250,000. The parent's half gets a basis, increased to the value on the date of death, but the child's half does not get an increase in value in basis. The child gets the same basis in his half as the parent had who gave it to him. So if there's one parent alive and that person makes a child the joint tenant and the parent dies, the child sells the property, the child will have a capital gain of $225,000. But if the property is inherited completely, say if it's in trust so that it avoids probate or if you use a TODD to avoid probate, but the child inherits the whole thing on the parent's death, then the basis on the whole thing goes up to market value, sold for market value, and there was zero taxable income in that case. Now there's also, in addition to income taxes, there's also estate tax. And the reason estate tax is an issue is what I like to call the marital penalty. And what that means is that, let's see, what it means is that the way most people handle their estates, if you do it in the normal course of events, your estate or after both spouse dies, they're going to pay more in estate tax than they need to. So at the moment, each person has a lifetime exemption from the estate tax of about just under $12 million. But that amount is set to get cut in half for people who die after 2025. So I'll talk about having an estate of $6 million per person. So let's say there's a married couple with $6 million per person, so they have a $12 million total estate. One spouse dies, owning $6 million, and that amount is exempt. So there's no tax. And you would expect that when the second spouse dies, it's $6 million, and it's also exempt, so there's no tax in either estate. Unfortunately, it doesn't work that way in real life. What normally happens is that one spouse dies owning $6 million, and there's no tax in that estate. But what happens is that spouse leaves his half to the surviving spouse. Surviving spouse then owns both halves, the whole $12 million. So there's no tax on the first spouse of the estate, but when the second spouse dies, there's $16 million exemption, $6 million is taxed, and then the tax is $2,400,000. That's a whole lot more than zero. It could have been zero, but instead it's $2,400,000. So how do you deal with that? Well, one way to do that is using estate planning trusts. First spouse dies, only $6 million, it's tax-free. But instead of giving it to the surviving spouse, he can give it to his kids. So if he give it to his kids, then it stays tax-free and the surviving spouse never owns it. So it's not taxed in the surviving spouse of the estate either, so then there's no tax. But how many people wanna give that much money to their kids instead of the spouse? Most people wanna leave the surviving spouse with all the assets until the surviving spouse dies. So here's how that would work. When the first spouse dies, the property goes into a trust instead of going to the kids. Now, with this trust, the surviving spouse can be the trustee. Surviving spouse can manage it. The surviving spouse can be entitled to all the income from the trust for life. The trustee, the surviving spouse can also get at the principal if it's needed for purposes of health or education or maintaining her lifestyle. But even though the surviving spouse has all that access to it, it's not treated as owned by her. So when the second spouse dies, she's only credited with her half of the estate and there's no tax in either estate. That's what I mean by the marital penalty and how to avoid it. Now, trusts are not just for estate planning or just not for tax things. They allow you to keep control. For example, if you have an heir that can't handle money, do you want, if you have a child who can't hold a dollar to save his name, he'll spend anything that he gets, do you want to give that child control over a large estate? And the answer is probably not. So a trust can allow you to appoint someone to handle that person's money to make sure that he doesn't go and blow it all. In fact, I'm the trustee of a trust right now for a client who died and had a son who has been in that or jail for a long time. He's a drug dealer, drug user. He just, he gambles and he just can't hold on to money. So I am handling his trust and doling out money to make sure that he has what he needs, but not enough that he can go blow his whole inheritance. When there are children from prior marriages, that's another time that trusts can be useful. I've seen situations where couples with kids from prior marriages will have this estate plan where they write their wills and say, when I die, everything goes to you. When you die, everything goes to me. And after we both die, everything goes half to your kids and half to my kids. The problem with that is that sometimes, and I've seen this happen more than once, one of the spouses will die, the other spouse will change your mind and leave everything to her kids and nothing to his kids. And you can prevent that from happening if you use a trust. And finally, grandchild's college fund. Let's say you've got an 18 year old who you wanna help go to college. Well, if you give your 18 year old $400,000 in cash, are they gonna use it to go to college even if you tell them to? I don't think so. Here's what they're gonna do with that money. So if you keep that money in a trust, then you can prevent them from using that money for anything other than what you intend them to use it for. Almost done. A state planning isn't only for what happens after you die. It's also useful for while you're alive. For example, if you are temporarily disabled, you should have a power of attorney. It allows you to appoint someone to manage your affairs if you are unable to manage your affairs for yourself. It allows the person, if you're in the hospital, you broke both your arms, you can't write checks, you can't pay your bills. It allows someone you appoint to make those payments for you to interact with people for you with your bank, with your creditors, with whoever you need to. To handle your affairs. And if you're permanently disabled, then a thing called an advanced healthcare directive. Some people call it a living will. It's actually a healthcare power of attorney. Can allow you to appoint someone to make healthcare decisions for you if you're not able to do that for yourself. For example, well, we've heard of a lady named Terry Shiva a few years ago who did not have one of these documents. Her doctors said that she had become brain dead but then she was on life support. Her husband wanted to pull the plug basically and her parents did not wanna pull the plug. They thought that she would still come back to life at some point and so they fought in the courts. Well, if you don't wanna have people fighting in the courts for you, you can have a healthcare power attorney that'll tell people what you want and you can direct them how to handle your situation. You can tell them that if you're permanently disabled, if the doctors say there's no hope of recovery to pull the plug or you can tell them, I believe in miracles, don't pull the plug, keep me alive till the last possible moment. It's up to you if you execute this document instead of up to some judge. And that is, let's see, Leah, are you there? We're- Yes, I'm here. Okay, okay, let me stop sharing, okay. There are a lot of questions in the chat and somebody just raised their hand. Okay, how much time do we have? As you know, I think we need to be done in about 11 minutes if that works for you. Oh, that works for me. Okay, so first question, if your IRA goes directly to charity, the charity does not pay taxes on it, but if your IRA goes to the trust first, does your trust pay taxes on your IRA? If the money goes to your trust, then yes, your trust has to recognize that income, but then your trust gets a tax deduction for the contribution to the IRA. It's better if it goes directly because your trust may not get a deduction for the whole thing. There are limits on some deductions, but the trust will get a deduction. They'll have to recognize it as income, but then they'll get a deduction for it. Okay. Okay, thank you. Next question, are local governments considered nonprofits when they received a donation? Normally, yes. Okay. Next question is, how can a trust save on taxes? Okay, well, I already talked about that. If you have other more specific questions, contact me outside of this program. Okay. Next question, I have owned the property for 40 years, paid taxes each year. My double last name on the deed and the assessor stocks has my last names inverted. After all these years, I wanna make sure this property will go directly to my kids without any problems, but do you recommend I do to make this right? Well, one thing you can do is to make sure that the property is actually in your proper name. That's one thing. And what the assessor says and what's on the deed may not be the same thing. So you need to check the deed to make sure the deed is correct. If the deed is not correct, then you can fix that. In terms of going to your kids without rigmarole, you can use a transfer on death deed or you can use a trust. Those are the best ways of dealing with that. Okay. Okay. Christy, you wanna take that, we're trying to figure out, this is just a lot. Okay. Okay, so here's another question. For a property, does simply adding the inheritor to a property deed as a tenant in common serve the same function as putting it into a living trust? Does, no. If someone is a tenant in common, then they become an owner of a part of the property. But when you die, it will not go to them. The rest of the property will not go to them automatically. It will still likely have to go through probate. So that is not a good way to do that. And joint tenancy is also not a good way to do that for the reasons that I mentioned. The best way to transfer property real estate to children is either with a transfer on death deed or with a trust. Thank you, Stu. Here's another question. What impact does Prop 19 have on the estate? Do you have to have your beneficiary on the property? Okay, with Prop 19, there was a recent change in the law with Prop 19. What Prop 19 says is that your beneficiary does not have to be an owner of the property until you die. But if you want your beneficiary to get the same property tax rate that you're paying, then they have to move into... This has to be property that you're living in. They have to inherit it and then they have to move into it within one year. And if they do, then they'll be able to keep your property tax rate. If they ever move out, then the property tax will go up even if they remain the owner. So that's what new Prop 19 did. Thank you. Here's another. What should I do if the lawyer who did the living trust discontinued his firm? Do I need to renew the trust? You don't need to renew the trust. The trust should be independent of who drafted it. So as long as where you want your stuff to go is still the same as it was when the trust was drafted, you shouldn't have to make any changes. You shouldn't have to worry about it. If you do need to make changes, then you should look for another lawyer who can do that for you because the first lawyer is not around to do that. But you don't have to redo the whole trust. Thank you. Here's another. Do you need an attorney to write a will? You need an attorney to write a will. You do not need an attorney to write a will. In fact, in California, the legislature has created estate planning forms that you can use for free and write it yourself. If you go to my website, down to earthlawyer.com, you'll see three free estate planning documents from the California legislature. One is called the California statutory will. One is called California statutory power of attorney and one is called California statutory advanced healthcare directive. You should have all of those. The two powers of attorney should be notarized. The will does not get notarized, but you need to disinterested witnesses, disinterested meaning somebody who's not named in the will. And you should be able to fill those out yourself. That's how they were designed. Okay. Yeah. Okay. Any other questions? Thank you, Kirstie. Yeah, there's a lot more. I was answering a question that bumped me all the way to the bottom and where we were. I can read it. Go ahead. Okay. So can you avoid probate by having your property a transfer on death on the deed? You can avoid having real estate, one piece of real estate as the law now reads, one piece of residential real estate, avoid probate by having a special thing called a transfer on death deed. But no regular deeds do not allow you to put a beneficiary's name. Okay. Next question. Thanks, Stu. Can you avoid probate by having your property TID on the deed? It's called TOD. And if it's on the normal deed, the answer is no. The answer is no. You'll have to have a special deed called a transfer on death deed. Thank you, Stu. The next question. It's the only way to avoid probate to form a trust. No. Costco sells NoloPress, Quicken, E-Wil, and Trustmaker. Is that any good? There were some. Well, first of all, that's not the only way. Another way, if you have less than, if you have only one piece of real estate or fewer, then anything that's got your name on it in terms of changing title, if you can name a beneficiary on that, you can avoid probate that way by keeping all the things that do not have a beneficiary under a value of $166,000. If you can't do that, then a trust is the best way. You don't have to go to a lawyer for that. There are a lot of other sources. NoloPress is usually pretty good. I'm not familiar with that particular book, but they usually do really good things. I know a lot of lawyers who use NoloPress books in their practices. There's also like SusieOrmond.com and LegalZoom and other places. I'm not thrilled with their trusts, but for simple situations, they can work just fine. Thanks. The next question, I think you already answered this in your talk, will financial assets still go to probate if there are beneficiary designations on the accounts? Yeah, no, they will go directly to beneficiary. Doesn't matter what your will says, they will not go through probate. Thank you. Next question is, what is the cost of creating a trust? Well, that depends on a lot of factors. There are some lawyers you can get standard kind of off the rack trusts for as little as $1,000. Some standard fees are as high as $5,000 or $6,000. Depends on the lawyer in part. Depends on how much tailoring you need for yourself. It depends on a lot of things. If you want to get a trust and you're happy with, say, a top you would buy at Sears, then getting a $1,000 trust might be okay. If you like to get something at, say, Bloomingdale's because it's a little more your style, then you might want to pay more for a trust that would be that where a lawyer might spend a little more time and tailor it a little more to your specific circumstance. Thank you. Next question is, if you do pay a debt, if you do a pay on debt, is the bank obligated to notify the beneficiary that the account exists? You know, I guess they're talking about a mortgage on the property. And what, probably not. What happens is that when somebody passes away, they should have their important papers together so that they can be found and bank loan documents should be among those so that someone who inherits property can keep making those payments. Now, technically under most mortgages, the bank will have the right to call the loan and make you refinance. But most of the time, if you just keep making the payments, they won't bother to do that, but they will probably be notified, the bank will, but they don't have an obligation to notify the heirs because they don't know who the heirs are. But with a TODD, what the heir has to do is file a recorded document called Notice of Death and attach a certified copy of the death certificate and that's how the property goes to the next person in line without probate. I hope that I've made that clear. It's a little bit confusing situation. Okay, so we've got about 20 more questions, Stu. What do you want to do? Do you want me to, do you feel like you would want to answer them in an email? You have to wrap this up. Well, can we save until next time? Whatever you want to do. Yeah, I'd love to answer, but I just don't really have the time to do that at the moment. Okay, all right. Unfortunately, we're going to have to say goodbye to all of you. Thank you for coming. And hopefully if you have questions, not quite sure how we can, we can't answer a legal question. Well, send me an email if you want to and if I have a chance, I will get back to you. All right, well, thank you so much for another great presentation, Stuart Brownstein. We really appreciate your time and expertise and we'll see all of you at the next program. Bye-bye. Thanks a lot, Leah. Bye. Bye.