A Conversation About Estate Planning - what you need to know, now.

Hey everybody, uh, this is Penny Kidd with PennyWise Coaching. I am here today with my friend Samhita Basu, and she is across the country from me but right here with us today. So I'm excited to get to share some of her knowledge with my Wise Guys, as I lovingly call my tribe of people. Um, and those are people that are just trying to be wise with their money. So one of the important parts around money and what I have seen, and I know you deal with every day, is when people are, you know, end of life kind of thing, either their own end of life or they're dealing with somebody else's life coming to an end and how that impacts finances. And what can we do to be smarter, wiser before we get to that situation and have a situation on our hands? So can you start by just kind of telling us a little bit about you and what you do and anything personal that you'd like to share with my community? Sure.

Well, thank you for having me on. It's a pleasure to talk to you and all of your, your Wise Guys, which, by the way, is a great, great name. My name is Simona Basu. I am one of the partners and co-founders at Norton Basu LLP. We are a minority women-owned law firm based out of the Bay Area in California with offices all also in Southern California. So we serve the entire state. We focus solely on estate planning, probate, and related litigation. So that's kind of what we do is help people prepare for these events and then help the people who didn't prepare properly. So the fact that we litigate really informs how we do our estate planning and how we advise our clients, because we kind of see how things can go wrong or right. We've kind of seen it all. We see the full life cycle of an estate plan. Yeah, I bet. And estate planning is just a really, really crucial thing for everybody. I think a lot of people were thinking about it during the pandemic. Maybe the urgency has gone down a little bit now, but it's still an incredibly important thing for everybody to have in place in their lives.

Well, yeah, because we— I think it was in our face during 2020 and 2021 where people maybe were passing away or getting really sick that had never thought that could happen to them before.

Right.

But, right, you know that that's, you know, none of us are getting out alive, right? And then, right, it doesn't really matter. We have to do that.

Yeah, it's pretty much guaranteed. So it's going to happen to all of us. I mean, we all are going to pass away one day. I think the way to think about it is, you know, how do you want to leave your family? Um, because while we— while I might know that I am definitely going to die one day, I don't know when that be. So I want to be prepared. I want my family to be prepared so that they are not scrambling, dealing with a financial mess, or trying to figure out what my wishes are while they're grieving. And so it's really— you really do it for the people that you leave behind, to kind of have all your affairs in order so that things are easier for them.

Yeah. Yeah, I— it's definitely been a part of my story and why I became a financial coach, because I lost a friend that we were just starting to talk about our finances, and then she was hit and killed by a drunk driver at 42. And you don't, you don't ever think, oh, I'm not old enough. I'm not going to worry about that yet. So do you think there's an ideal time for people to be getting their affairs in order?

I think the minute somebody turns 18, there are some documents that they need because now they're no longer, you know, a minor. So, you know, at the very least at the age of 18, you should have an advanced healthcare directive and a power of attorney. You know, in case something happens to you, right? You wanna make sure that your parents or your siblings or whoever it is, your family, your friends can help take care of you. Even if you don't have a lot of assets, those are still considered estate planning documents because estate plans are not just about what happens when you die, but what happens if you're incapacitated. So you need to take that into account. What your estate plan includes will change as your life changes, as you get older, as your family expands, as your assets change. It is not a one-and-done kind of set of documents. They are living, breathing documents, which means they can and should evolve along with your life. So I don't think there's ever such a thing as thinking about it too early. There is such a thing as a second too late, and we come across that quite a bit. So it's better to be early than to be even one second too late.

That's right. Yeah, that's really true. Okay, well, I have some questions because not everybody is an attorney that's watching this, hopefully. And I think it is one of those things that there's a lot of myth out there and misinformation or whatever. And I also believe that I'm probably not alone that we have to hear things over and over and over again to sort of understand them and get them. So hopefully, even if this is a repeat for somebody, they'll take away something different from it. So can you start off by telling me maybe the difference between a will and a trust?

Yeah, and I think this is probably where a lot of misconceptions and misinformation is floating around out there. People think, oh, I have a will, I'm fine. So every state has their own laws as to what the probate process looks like. Probate is a process where the court looks at your will and it says, okay, let's gather everything that you own, let's pay off all your debts, and then distribute things per the terms of your will. That may sound great to you, but because your wishes are being met, but the problem is that it's going through court and that is a lengthy and expensive process, definitely in California. And I'm guessing it's pretty lengthy in a lot of the more populated states as well, right? So, um, The other thing is that the probate process where your will is being probated, which means in the, the basis of the word means to prove. So your will is proved, right? And it is handled, the entire process is overseen by the court. That process is a public process. That means anybody can go and look up your will and look up all the documents that were filed in your probate case. And, you know, know who your beneficiaries are and what you have and who's getting what. So a will will determine who gets what, but it will not be a private process and it will not be cheap, nor will it be fast. The— a revocable living trust is a document that basically holds the same kind of information in terms of who gets what, when do they get it, under what terms, what are your assets, who should act if you were to die or if you were to be incapacitated. It's an all-encompassing document that gets— can be updated throughout your life. But once you are— once you have died, that process of transferring your assets to your beneficiaries, whoever your trust says, that is a private process. And that process can be concluded very, very quickly, sometimes in a matter of just a couple of months, as opposed to the years that the probate process takes, which is what happens if you only have a will. So So a will is after death. It's a public process that takes time, a lot of time, and quite a bit of money in most states. And a revocable living trust, private, easily updated, and a lot faster. And frankly, it's more economical as well.

So should everybody have a trust or is there—

No, everybody should not have a trust. So whether or not you need a trust depends on the laws of your state. The nature of your assets and, you know, kind of what your wishes are. So if you have minors, then yeah, you, even though you may not have a large amount of assets, you may want to consider a trust because you can be a lot more flexible and delay distributions to the minors until maybe beyond the age of 18. Because if you, you know, in the trust, you could say, I don't want my kids to get anything till they're 25 or 30 or 35 or whatever that age may be, 21. You can, you can set a date there. So I think not everybody needs a trust, but it kind of depends on your situation and your level of assets and the state you live in. So you should talk to somebody who's familiar with all those things to advise you. Don't get talked into a trust if you don't need one. But in our state, in the state of California, if you own property you absolutely need a trust.

Okay. Yeah. And I think people that I talk to all the time feel like we don't have enough money. We're not, you know, we're not rich. We're— everybody thinks people are rich that make more than they do, right? Or make a lot more than they do. And yet in, in our, even a middle-class kind of environment, especially what, you know, even in Colorado, properties have gone up. And I think really around the country, that relative to maybe what other things are your assets, when you start adding them up, they can be a significant chunk of change, right? If they were all to pass to somebody.

They can, and correct. And I think, you know, the name estate planning is in and of itself kind of misleading because an estate means one thing legally. But when it comes to just the common English people, when they think of an estate, they think of a lot of land, a huge house, you know, that's what they think of as an estate. So I think, you know, in layman's terms, estate means something that's not me. I don't have that. I just have like one little house, you know, and my cars and my bank account and my Charles Schwab account, right? So I don't have an estate, but legally the term estate means anything that you own in your name, right? So When you add all of that up, your estate is based on everything that you own in your name that you have access to during your lifetime, and it's the gross fair market value. So people tend to get distracted by the fact that my house is worth $400,000, my mortgage is $300,000, so my estate, my house is really worth $100,000. It's like, no, that's your equity. But in terms of how things will be calculated under the law, at least here in California, it's based on the gross fair market value. So So it doesn't— the law does not care what your equity is. The law cares what the house is worth. So if you bought it for $400,000 and it's appreciated to $500,000, that's what will be included in the estate calculation, right? So it's important to understand what an estate is. It's everything that you own. It does not matter how much it's worth, and it does not matter, you know, what debt there is against it, or, you know, lien or whatever, mortgage, doesn't matter. You're looking at the gross fair market value of all of your assets.

And it's the sentimental things as well, right? That I think people—

Absolutely.

You know, they only think about the monetary things, but what I have experienced in dealing with, you know, some things around friends and families' estates, it's not always about the money. It's about, you know, the favorite grandma's—

Yes, it tends to end up being those sentimental items can cause a lot of havoc. But I would say that it's really a proxy fight for, you know, who loved mom and dad the most or who did the most or whatever resentment you have towards the person who's left or their relationship with the person who died is really never about the thing. It's about something else. It's about a relationship that's gone sideways and they're fighting it out over the estate. And that could be over the money or over, you know, the family photo or the family Bible or the jewelry, whatever it may be. So there's a lot of landmines there, which we talk about with our clients, it's important to talk about the relationships in the fam— family. Where is there something strained? Where has there been an issue? How are the relationships between the siblings? And it's a fine line to talk about, well, everything's great right now, but you know, in the future, 10 years from now, what's it going to look like? And your children will get married and those spouses will have influence over your children. So let's draft everything very carefully with all of these factors in mind.

It's a way to reach into future generations, isn't it? By saying these are my wishes today and this is how it impacts your legacy, really.

Yeah.

So what are some of the benefits at death and during lifetime? Have we touched those? Is that— are there any others? Yes.

So we talked about how it, you know, a living trust avoids court, right? The costs overall will be less than having to go through the probate court. The timelines will also be much more streamlined. The trust has the room for a lot of flexibility. Like I said, it can also be kept private. But I think the biggest difference between a trust and a will is that a trust can help take care of you if you are incapacitated. A will cannot. So If you have assets that are titled in the name of your trust. So what that means is when I talk about titling something in the name of the trust, that means instead of something being— your bank account being Jane Doe, it'll be Jane Doe as trustee of the Jane Doe Trust, right? So that's what we mean by titling things in the name of the trust. Now it's no longer in Jane Doe's name as an individual person, it's in the name of the trust and she is acting as the trustee of that trust. So if Jane has all her assets titled appropriately in the name of the trust, if Jane is in the hospital for 2 months, or if Jane is diagnosed with dementia and is starting to forget things and pay bills multiple times, or forgetting to pay bills, etc., her successor trustee can step in and help pay bills, manage her bank accounts, all of that kind of stuff without having to go through court. And And this also helps in— a power of attorney can kind of do that, but the problem with the power of attorney is that financial institutions are hesitant, at least here in the state of California, to accept powers of attorney that are more than 8 or 9 years old because of the high rate of fraud. So if you have an older power of attorney at the time that you are disabled or incapacitated, the bank is really not going to accept it. So that's where the trust really comes in handy because that is time that does not— even if your trust is 20 years old, if your successor trustee is able to serve and things are properly titled and they have the right paperwork, they can go ahead and access your accounts as a successor trustee and help take care of you. So that's one of the big advantages of a trust beyond what we've talked about with regards to probate.

That's huge. Yeah, because I know I have, I have walked with several clients on that, kind of fighting with the bank and trying to get, you know, to help mom who no longer can, you know, serve in her own stead. And it's, it's a big hassle, and I don't blame the banks for being protective. They have a lot of obligation, but it's super frustrating when you're the person, right?

Yes, absolutely. And, you know, that's just based on our experience that we've had over the last 10 years with all sorts of banks, not just in California, but in some of the surrounding states, Nevada, Arizona, etc. It is incredibly difficult. I mean, we've had banks refuse court orders, we've had banks refuse to honor powers of attorney, and they're just being very, very cautious. And this includes, you know, escalating this to their legal department. You know, we've talked to the bank's legal department and they just won't budge. So the most practical way is to have the trust, have everything titled properly, and make sure that your successor trustee is is able to act.

Yeah, that's cool. How do you decide who to put in charge of your estate?

This is a good question. It's pretty tricky. You know, a lot of people feel like they need to be fair with their children. For if, you know, if you have children, a lot of people are concerned that if I pick one child over the other to be the successor trustee, the other ones will feel slighted. We always say Being a successor trustee is not an easy job. It's a lot of work. You want to pick somebody who has the maturity to deal with attorneys, CPAs, maybe realtors, the IRS, the government, etc. And, you know, who can kind of manage, who's familiar with dealing with these kinds of professionals and managing the entire process. It's not simple. So you want to pick the most well-suited person. Now, if there isn't a person that you know personally. And it doesn't have to be a relative. It could be a friend, you know. But if you don't have friends or family who can play that role, then you might want to think about private fiduciary. A third-party fiduciary is usually licensed and they can be named as your successor trustee and they can step in and they do a really great job. There's a lot of great private fiduciaries. You want to do a little bit of research, make sure you get somebody who's good and has a good reputation. But you can absolutely name a third-party private fiduciary. We're seeing a trend towards that now. Or you can name an institution. So there are banks and trust companies that do this, right? The difference is that the banks and the trust companies are going to charge a significantly higher rate than a private third-party fiduciary. But depending on the nature of your assets and your family situation, that That might be the way you want to go. So there's options if you don't have somebody in your life who can serve in that role.

Do they get paid as like if I hire a third-party person today and I don't die for 20 years, are you paying them?

Like, no, they usually do not get paid until they start to act. So if you are disabled, let's say you're incapacitated and they have to step in, then they will charge. And let's say you recover, then you would take back trusteeship of your trust. But let's say, you know, you develop dementia and the successor trustee has to step in, then that's when they would start charging. They do not usually charge. In my experience, I have not seen a fiduciary who charges just to be named.

Okay, that's good. Yeah, I think I know somebody right now that I have to be like, okay, go watch this video because that answers one of the questions. So the single person who doesn't who doesn't necessarily have family that she can do something.

Yeah, a fiduciary is a great option for them. I will say though, we have seen some very shockingly high rates from banks and institutions. So you probably want to ask about the fee schedule. How much do you charge, et cetera? What's extra? I know there are a couple of large banks that I was really quite surprised to see the rates that they charge. But we've had clients who say, no, I trust them. I've been with them for forever. So I want them to be my trustee. And they're more than happy to take that on.

Okay. So in thinking about a trust, does that include guardianship for your minor children?

No. So your nomination of guardianship is a different document. We create a different document for that here. It's listed in your will. We do a backup document, a will as well, along with the trust. But the trust only talks about your assets, who's in charge of those assets and getting them to your beneficiaries. Guardianship is a different thing altogether. Guardianship is about who will be legally responsible for your children if both the biological parents have died. And it's called a nomination of guardianship because it's like a referral, a very, very strong referral for a job. So you could say, I'm giving this person a really, really high job recommendation, like a recommendation for this job. Here's my letter. Here's my wishes. But at the end of the day, that person has to go through a court process to be appointed by the court, which means the court will look into that person's person's, you know, background, make sure that they are capable of taking care of the children. And that's an entirely separate process which usually takes place in a separate hearing. It's a separate process, and you want to find somebody who can— at that time when it becomes necessary, you'll need an attorney to walk you through, you know, they will need an attorney to walk them through that process.

Right.

But that nomination is very key. Like I said, it's like a really good job recommendation. But from the time you've nominated a guardian to the time they're needed, if their life has gone off the rails, and they've been in prison or they've been convicted of some sort of crime, the court is going to look into that and they may not appoint them.

Okay.

So that's something to keep in mind. It's not a slam dunk. Usually we all pick great people, but you never know what can happen. So something to keep in mind. Right.

Or their health or whatever. I mean, you know, correct.

Or they're just not capable of doing it, right? Like maybe your child is 17 and the, you know, at the time of your death, you know, so they're almost, you know, an adult but not quite. And the person you, you— those when they were 2 is nominated, maybe it was your parents, and now your parents are in their 80s, right? And they just don't have the capacity to do it, right? So that— those are things to think about. And that's something that you can change as time goes by. When your kids are young, you might have a certain preference. As they get older, you might— your preferences might change. So you should update your documents.

Okay, so talk about that a little bit, about how do you make changes to a trust?

So usually, you know, most people go back to the original attorney. You don't have to. You can go to any estate planning attorney. We've had a lot of clients say my original attorney retired or they're not answering my phone calls, so I'd like to make some changes. So any experienced estate planning attorney can make the changes for you. Those are called amendments. The trust is usually amended. So if you're just changing, let's say, your successor trustees, then you're going to do an amendment. If it's been 20 years since you did your trust, you're probably you're going to need to restate the trust because the laws have changed. The estate tax limits have changed. Maybe your family situation has changed. So you're probably going to want to restate. Too many amendments makes it very hard for the people you leave behind to have everything in one place to understand because they have to read multiple documents and cross-reference, and it gets quite complicated after one or two amendments. So we always say, try not to do a whole bunch of amendments. You want to, at some point, just restate if you're amending it. And amending it and amending it again. So that's how you do that. For things like power of attorney, nomination of guardian, estate, advanced healthcare directive, those documents cannot be amended. They have to be redone. So you can't amend your power of attorney. If you think you can just cross out somebody's name and write someone else's, bank is not going to accept that. It's an automatic no. The entire document has to be redone.

Okay, good to know. Yeah. Awesome. So you talked a little bit about probate and that being a legal process. Is there, you know, more information about what is probate? I think that's one of those words that, and we hear things all the time, like you can avoid probate, but if I'm not mistaken, some states that's not always the case just by having a trust.

Yeah. So every state is different, right? So, but what you want to do is get an idea of what your state's requirements are for probate. Who meets the threshold for probate. Most courts, if you go to your local county court website, there's a probate department and usually they have FAQs. Here in California, most of the counties have an FAQ. How do I do probate? You know, there's a lot of good high-level information there on what the probate process is, et cetera, how long it takes. I know in Santa Clara County, there's even a timeline of what gets done when and how long it takes. I think the timeline is a little overly optimistic. There's been budget cuts everywhere. So the process is now taking about a minimum of 18 months to 2 years. That's assuming nobody's fighting over anything, just because it's hard to get on calendar. There's not enough court clerks to process the paperwork. Everything is just very, very slow right now. So probate, basically, as we discussed before, the word means to prove in Latin. And so what we're doing is we are proving the will. So we are making sure that the will— the court determines that the will is a valid document. It's not forged. It's been witnessed appropriately, right? There's all these formalities that need to be completed to— for it to be a valid will. So the court is making sure that the will is valid. The original document is lodged with the court, which means the court keeps it for safekeeping so that nobody can alter it post-death. And then they go— there's a process whereby somebody is appointed, either the person that's named in the will to be the executor If those people have all passed or cannot serve, then somebody else is appointed. And there's an entire process where the court will vet that person. There's a hearing to appoint them. There's time and notice given to all the relatives, blood relatives, as well as whoever is named in the will document. So it's a long process, right? And then once that person is appointed, then they have to go about gathering the assets, determining the creditors, et cetera, et cetera. So it is a long process. Every document is public. It is incredibly different— difficult right now in the state of California to seal any of these documents, which means asking the court to seal a probate due to privacy reasons is next to impossible. We've tried it a couple times and have been rejected, even when there are pretty horrific extenuating circumstances. The court wants probate to be a public public process that's open to all. So you're going to get anybody who's a looky-loo can sit in on the hearing. Anybody can see the documents and anybody can see exactly what your estate is worth and who's getting what. That is public. So that's what it means to probate a will.

I'm sure it's not just curious people, it's people with a vested interest in, like, they go hang out and do that because then they're targeting those people somehow.

They are. They absolutely are. So our clients who have to go through probate, they're inundated with mailers from real estate agents, financial people, all sorts of, you know, all sorts of people are reaching out to them. So, you know, that's to be expected because probate is a public process. So that does happen.

Right. That's interesting. Is there a cost to that, to probate and going through?

It's in California, it's set by statute. So it's a sliding scale depending on the value of the assets, which are appraised by a person who specifically appraises property for probate. Has nothing to do with, you know, if you're listing your assets or whatever, but they will value those assets as of the date of death. That's a licensed appraisal, probate referee they are called, who will assign a value to all of of the non-cash assets in the estate. And so based on those appraisals is what your fee will be. And so that is the fee that the administrator gets. So the person who's doing the probate process, the individual who is, you know, kind of driving the process forward, the attorney gets the same amount. So that calculation is the same, and this is all for California. And there are also court fees. You have to publish in the newspaper, etc. So I would say court fees for standard probate are about about $2,000, I would say, for a straightforward probate. We have probates where it's been much more because of the number of filings we have to do because of the complexity of the case. But for a million-dollar probate, so that means gross market value of the assets is a million dollars. So anybody who owns a house in the Bay Area or in Los Angeles, in California, or you're automatically going to be above that. But for a million-dollar estate, you're looking at about $48,000 in fees for— split between the attorney and the administrator. So that's a large number.

And who pays that?

It comes out of the estate. So if the estate is not liquid to pay that, then something's got to be sold to pay that.

Okay. Wow, interesting. And so you're saying that by having a trust, you avoid a lot of those and those fees and the— obviously the price.

Your cost is going to be significantly less. So instead of 5% plus, you know, 5.3% or whatever, you know, 4 to 5% is what you're going to be paying in probate. In trust administration, you're going to be paying about 2%, 2 to 2.5%, right? And the costs are a lot less as well. It might have a few hundred dollars worth of costs, but the fees are usually between 1% and 1.5% for both the successor trustee and the attorney for trust administration. So you're looking at significantly less cost to do it as trust administration than through probate.

Okay. What if you own property—

I don't love that.

And when you own property in another state from where you live, yeah, so if you own property in another state, um, what will happen is in—

if you have a trust, you can hold it through your California trust. So that should be relatively easy to take care of. If you own a property in another state and you're going through probate, once you go through probate in the state where you live— so let's say I live in California, they would do a probate for me in California. And then any property I own anywhere else, let's say Texas, they would have to do what's called an ancillary probate. Probate in Texas to deal with the property in Texas because California probate system is not going to assign a value to an out-of-state property. So you kind of start the process in California. You have to do something additional in Texas. You're going to need a Texas attorney to help you with that. And then, you know, that title on that property can change.

So that's why you need somebody who knows what they're talking about and who knows what they're doing. Because I can see where this just makes you go, my head's popping off. I don't know what to do.

Yeah, it can get complicated if you have complicated assets.

Yeah.

And you definitely want to make sure that, you know, you talk to somebody who's experienced, who's been through it, and who can explain it to you in a way that's easy for you to understand.

Well, and even if it's not complicated, it's something most of us don't do every day, right? We're not experts at it. So you're trying to read the fine print, you're trying to understand the hoops you got to jump, and that's not always the best use of your time and money. I don't think so. I think hiring—

Correct.

Who knows what they're doing really will probably reduce your stress a lot.

Yeah. I mean, my favorite comment is when people contact us for probate and they say it's very straightforward. I always laugh because I'm like, it's never ever straightforward. There's always a hiccup somewhere, but we are prepared to deal with that. Whereas if you're trying to do it yourself, you probably wouldn't be.

Exactly. Yeah, you've seen it before, probably.

Yeah.

All right, well, um, that was amazing and a ton of information. I know, at least on my end, it was a little freezing, glitchy a little bit, but they always seem to catch up. So I think we caught the, the important parts, and, and I, you know, really appreciate all that you have to share. What can somebody do if they want to reach out to you or somebody on your team? What's the best way for them to contact you?

The best way is to contact us via our website. We, our website has a contact form. You can put some information about what it is that you wanted to discuss or the background of the matter or your family or whatever's happening. And somebody will get back to you usually within 24 hours to set up a call to talk more. Our initial consultations are free. So you can just go to NortonBasu.com and all, there's a lot of information on there. Additional information on probate, What's a living trust? Difference between a trust and a will. A lot of information is on our website. So I would encourage everybody to at least take a look at it in terms of educating themselves.

And you're in Northern California. Do you work with people outside of California? We do.

We have clients that are outside of California. We can, we draft for every state. We just can't execute. So you would need somebody local to do the notarization and all of that kind of stuff. But we can draft for just about any state. So if there's an estate plan that you need, that is, you know, you now living in a different state, you can always reach out to us and we can always try and help you.

Awesome. Well, thank you so much for your time. I appreciate all that you're doing for the people that you serve. And I know that, you know, people probably don't tell you thank you enough, but that's a huge gift because it's a tough time for people, you know, on both ends, on the planning and on the receiving end too. And you need somebody that you can trust to do right by you. So thanks for being that. That for people.

So thank you for having me on, Penny. I really appreciate it.

Welcome. And I'll put your contact information in the post so that if people want to reach out to you, it's easier to find there. So thanks everybody for spending time with us. We'll talk to you later.

Bye. Bye.