In this blog I aim to explain the differences between holding assets in a trust versus going through probate after death. The pros and cons of each option will also be discussed, as well as tips on what to consider when setting up a trust or probate. AN OVERVIEW OF TRUSTS AND PROBATES Probate is the legal process that takes place after someone has passed away in order to distribute their assets according to their wishes. Here is a complete overview of probate process including probate timeline. A trust can either be set up during someone’s lifetime or after their death, and is a legal entity that holds assets for the benefit of another person. Trusts can be revocable – allowing changes to be made at any time – or irrevocable – set up with fixed terms that cannot be changed. TRUSTEES AND FIDUCIARIES A trustee is the person responsible for managing the trust, while a fiduciary is the party that oversees the probate process. Trustees and fiduciaries can either be appointed by the court or chosen by the person setting up the trust or probate. They are responsible for managing and distributing assets according to the wishes of the deceased, as well as paying any taxes or fees associated with the estate. PROBATE COURT The probate court is responsible for overseeing the probate process and making sure that all assets are distributed according to the wishes of the deceased. If there is any dispute over the distribution of assets, it can be addressed in probate court. TIMELINE AND COST The time frame of a trust or probate can vary depending on the complexity of the estate and any disputes that arise. Generally, a trust takes less time than a probate, as it can be set up before death and does not require court approval. Probates may take more time due to additional paperwork and court appearances. Additionally, there are usually costs associated with setting up a trust or probate, such as attorney fees and court costs. ASSET MANAGEMENT Assets held in a trust are typically managed by the trustee, who is responsible for making sure that assets are distributed according to the terms of the trust. For example, trustees may be responsible for investing assets or paying out beneficiaries. Probates involve going through the court system in order to distribute assets according to the wishes of the deceased. TAX IMPLICATIONS Depending on the type of trust or probate, there may be different tax implications for each. For example, trusts can help reduce estate taxes and provide asset protection, while probates may require taxes to be paid on any income generated from assets in the estate. SUMMARY AND CONCLUSION In this blog I discussed the differences between trusts and probates, including how they are set up, managed, taxed, and distributed. It has also provided an overview of the timeframe and cost associated with each, as well as tips for researching trusts and probates. Trusts and probates are important tools for managing assets after death, but require careful consideration in order to ensure that assets are distributed according to one’s wishes. It is essential to research both options thoroughly, and consult with an attorney or other professionals, if necessary, in order to make the best decisions for one’s estate. OTHER RESOURCES There are numerous resources available for learning more about trusts and probates, such as books, websites, and attorneys who specialize in estate planning. Here is a link to my eBook 7 Big Mistakes Most Administrators and Executors Make While Going Through Probate” FINAL THOUGHTS Probate can be a long, complicated, and emotionally draining process. The combined complexities of your estate executors’ duties and dealing with your emotional loss of a family member or friend can leave you feeling exhausted and overwhelmed. Parisa Samimi is the founder of Parisa Group and is a top producing agent with 20+ years of experience in the Bay Area. She has guided hundreds of clients through the probate process in the Greater San Francisco Bay area and the counties of Alameda and Contra Costa. As a certified probate real estate specialist, she is committed to giving her clients a clear picture of all their options so that they feel they are making the best decisions every step of the way during the probate settlement. Click here to see a complete list of our blogs. Topics include: Why Real Estate is a good investment, the Home Act and what it means for East Bay homeowners, Making the most of your assets, Appraised Value vs. Market Value,  Probate and Prop 19,  Home buying and home selling process.

PROP 19 AND PROBATE TIMELINE   Proposition 19 mainly highlights the benefits for people aged 55 and above, victims of wildfire and natural disasters, and severely disabled people. But as millennials take over most of the housing market this year, it has already been predicted that this law would severely impact parents and grandparents who were planning on passing down their property to the next generation. It also applies to inheritance by probate. This said, many homeowners scrambled to file their transfers before February 16, 2021, which was the due date given for family transfers.    FOR QUALIFIED HOMEOWNERS:  Since the proposition mainly accommodates the specified qualified homeowners and gives them relief on tax reassessments, there’s not much activity going on. These eligible homeowners can now take advantage of the benefits the propositions have for them and find a home suitable for their needs and possibly accommodate themselves in homes a little more expensive than their current ones. Seniors don’t have to feel locked into their current homes that don’t meet their needs anymore. Especially with the pandemic still going on in the background, qualified homeowners can find homes that can make them feel safe while still having the features they need for comfort. Besides the seniors, the qualification of other eligible homeowners is still up for discussion since there weren’t many implications for them. It’s not been a month since the proposition took its place. Still, we would start to see a movement and a significant change in the housing market, accommodating homeowners looking for properties on their budget.    FOR INTRA-FAMILY TRANSFERS:    Most homeowners completed the process and were able to exempt their children from the possible tax reassessment, but this also gave the inheritors no choice but to make the transferred property their primary home to avoid the significant tax reassessment increase. Along the way, many still questioned regarding the property transfers. What if multiple siblings inherited the family home through probate? Would that mean they have to move in together and make the property their primary home? The best way to settle this, for now, is to seek professional help and discuss among the involved parties on whoever gets to handle the property. The 1-year allowance for the inheritor/s to move into the place and make it their primary home might not be enough time for the family to decide who gets to have the tax exemption. Moreover, families who weren’t able to transfer their homes to their descendants said it gave them only a short time to quickly consider the transfer and relocation due to the COVID-19 pandemic.    Assessors are likely to interpret the proposition differently from county to county. However, there are still many questions that are yet to be discussed and clarified by the legislators.  Families are still waiting for further discussions about Prop 19 to have a clear view of what’s in it for them now that it’s taken into place last April 16, 2021. Assessors are also waiting for clarification on some parts of the proposition which were unclear, especially on probate. People questioned how short the timeframe was given to them to decide how to act for their homes, especially when the pandemic restrictions are still up. For now, families can only see a small portion of their future settlement until another round of discussion comes.    FINAL THOUGHTS  The proposition has still yet to clarify the ramifications it implies for probate. Still, the best way to tackle the dilemma on family inheritance would be a proper family discussion to decide what to do with your inherited property fairly.   As a top producing agent with 20+ years of experience in the East Bay, I have helped hundreds of clients showcase and maximize the sale of their homes in the Greater San Francisco Bay area and the counties of Alameda and Contra Costa. My experience as a former appraiser allows me to help my clients understand the market. If you have any questions, I am here to be a resource for you. 

PROPOSITION 19 ON INTRA-FAMILY TRANSFERS  As we all considering Prop 19 it’s good to note the pros and cons of the proposition. But as I delved deeper into the proposition, I found out that it dramatically affects inheritance.     PROPOSITION 19 OVERVIEW  First, let’s review what is included in proposition 19. The law gives the ability for qualified homeowners (55 years and above, homeowners with disabilities, and victims of wildfires and other natural disasters) to transfer and retain their property tax value to a new property anywhere in the state of California. It provides a great opportunity, especially for wildfire and other natural disaster victims, to save the extra money on the possible reassessment as with the previous law. But for families planning to transfer their properties to other family members, it’s best to have an open mind when reading into the new law. The proposition removes the exemptions on tax reassessment on children or grandchildren’s property inheritance. Unless the inheritor uses the real property as their primary residence, the child will have to face a significant increase in the property tax value reassessment. You will have to make a decision with your property attorney and make plans with the involved parties before the implementation of this portion of the proposition before February 16, 2021.    Group of multiethnic senior friends spending time together and laughing   PROP 19 AND PROBATE  The proposition leans more to the advantage of qualified homeowners who plan to move to a new property without a tax increase burden. But some fail to realize that this is only one side of the coin. Suppose a spouse of a deceased person decides to distribute the properties. In that case, it’s best to seek professional help as soon as possible and look into what the proposition offers regarding the transfer of inheritance and other assets.    If an inheritor decides to keep the transferred property and turn it into a primary residence, the property tax paid will not be the same as with their parents. Still, it will have up to $1 million of the reassessed value excluded from the new property-tax basis. Suppose the inheritor keeps the property but only uses it as a vacation or a secondary home. In that case, there will not be a $1 million exclusion, and the inheritors may face a tax increase.  Proposition 19 eliminated the longstanding protection from tax reassessment of parent-to-child transfers. Initially, this portion of the law aimed to eliminate unfair tax loopholes used by East Coast investors, celebrities, and wealthy non-Californian residents and trust fund heirs. One of the loopholes taken advantage of for quite some time now is the monopoly of properties only distributed to their descendants.    The tax increase garnered would then be used to extend the funds for firefighters and wildfire containment. But as further discussion improved, prop 19 affects probate, posing a disadvantage to ordinary homeowners who wish to transfer their properties upon their passing. It will be more likely to force homeowners to push through selling the property rather than passing it down to their descendants.      FINAL THOUGHTS  Property transfers have been a safety net for passing down a family inheritance without tax reassessment for the family’s next generation.  But with the proposition being just around the corner, it’s better to be familiar with its terms and clauses, especially on how prop 19 affects probate.   As a top producing agent with 20+ years of experience in the East Bay, I have helped hundreds of clients showcase and maximize the sale of their homes in the Greater San Francisco Bay area and the counties of Alameda and Contra Costa. My experience as a former appraiser allows me to help my clients understand the market. If you have any questions, I am here to be a resource for you.