Guest Blogger and friend Armine Bazikyan is a local Trusts and Estate Attorney. DIGGS asked her to guest blog on what a new homeowner should do to protect their financial asset.
Now that you have bought one of the most expensive items you will likely purchase during your lifetime, the next step is to protect and ensure that this asset passes to your loved ones if you are not around.
Depending on how you took title to your home, you will likely need to take a step further and create an estate plan. If you don’t, your home will need to be probated in order to pass to your loved ones.
Here is a basic example: Henry buys his first home for $600,000 and takes title as “Henry Homeowner, a single man.” A few years later, Henry passes away. He was single at the time of his death and had no children.
His parents hire an attorney who files a probate case with the Superior Court of California.
Probate Attorney Fees
The attorney’s fees alone will run Henry’s parents about $17,000 and these fees are not negotiable because they are set by law. The fee is based on the total value of the estate and does not take into account any mortgages that Henry may have had on the property. So for example, if Henry had a $500,000 mortgage on the property, the beneficiaries would end up with only his equity of $100,000. The court looks at the value of the property at the time of Henry’s death without taking into consideration his mortgage balance in order to determine the statutory attorney’s fees.
Costs of Administration
The costs of administering the probate estate (filing fees, publication fee, etc) will run anywhere between $500 and $2,000. So, Henry’s parents will lose out on about $17,000 to $22,000 in just attorneys fees and costs.
Now, let’s assume Henry hired an attorney to create an estate plan for him prior to his death. His estate plan included a living trust that is the legal owner of the home. Following Henry’s death, his parents would simply need to administer Henry’s trust. They would walk into our office and present the trust documents and we would begin the private trust administration process. If there are no complicated tax issues involved, we can administer Henry’s trust within a month or two and transfer title to the property to his beneficiaries. There would be no need for probate. The attorney fees for creating the estate plan and for administrating the trust will be a fraction of the costs associated with probating an estate and will be done in a fraction of the time. Most importantly, the trust administration will be privately done with no public filings or records.
So, if you are a new homeowner, the next financial step to take is creating an estate plan that includes a living trust to ensure your biggest investment ends up in the right hands.
If you own property with another individual, then explore the following videos:
Click Here to watch a video on Property Ownership, Part 1: Joint Tenancy
Click Here to watch a video on Property Ownership, Part 2: Community Property
Click Here to watch a video on Property Ownership, Part 3: Tenancy in Common
Contact our office for a free consultation to learn more.
Bazikyan Law Group, APC
240 S. Jackson Street, Suite 310,
Glendale, California 91205
Tel: (818) 649-9110