Avoiding Probate with a Properly Funded Trust, with Crista Hermance

0:03 Well, great question on a website recently. Crista Hermance, attorney in estate planning and probate. The website says, "What would happen to your family and assets if you didn't make it home tomorrow?" Well, for me, it'd be one solution. I have an estate plan, but unfortunately for too many people, we either don't have a plan, or have an inadequate plan, or didn't fund the plan, or didn't execute the plan. The answer is a whole different set of problems. Crista Hermance is a founder and CEO of a in an estate planning attorney, The Heritance Lawyers. We'll talk about what that means. Crista, thanks for joining us today. What would happen if your average client went home and I'm sorry, didn't make it home? What would happen to them and their family and their assets?

0:41 And does this assume that they do not have an estate plan in place? I don't know. Okay. Yeah. So, your client, I'm hoping if they're your client, I'm hoping you have an estate plan in place.

0:50 Exactly. And I think that's where the question comes in is if it's if they're our client, then they have a valid, comprehensive estate plan, so that

0:58 Executed, funded. everything, right? So, they know that if something were to happen, their family knows how to step in and avoid probate court and be able to have some of the stress taken off them by just being able to follow what those decisions are in the estate plan specifically, right? That's that's the goal, right? It is to make it easier on the family to make it so it's not such a burden on them in a very emotional and stressful time.

1:24 Now, make it easier, but isn't it easy? I mean, even with the world's greatest estate plan, managing assets, estates, family members, emotions still are complicated enough without the added stressor of litigation.

1:37 Yeah, I think it also just goes down to the people that I've talked to that have been through both of these have flat out said, "Having a trust made it so much easier than not having a trust." Right? They've had family members that have passed away in both situations and are now, you know, the ones shouting from the rooftops, "You need You need a trust in place because they've seen what it's like not having it and they would much rather have that process.

2:06 If there's if there's exceptions to it there's worse with trust so because usually trust have more assets involved there's more potential disagreements and therefore I think it's more attention than maybe a probate case may but to be in a same trust without the estate plan you'd be way worse off. So I don't think there's any circumstances where you're better off without a plan. Kind of like life in general I think.

2:27 Yeah. No, I think it's definitely going to be less stressful. Lays out very specifically what people want.

2:36 So the reason I got into this business as a real estate agent broker in probably real estate was I saw that a couple of things. One, so many people needlessly pass or incapacitated without a plan in place. And I think that the perceived hurdle to go from where I am to having an adequate plan is much higher than really. Now there is work involved like anything else in life of value there's some work involved. Talk a bit about what you try to do to help lower the bar of effort as much as you can to try and make it you know more effective for people to get started.

3:11 Yeah, so from our process perspective, you know, we try and make it really easy for clients to get over that hurdle of just getting an estate plan in place. A lot of times people put it off year after year because they don't want to have to deal with making decisions. They don't want to deal with the stress. They don't want to get the paperwork together. And so you know, that's one of the things I think that we do really well is be able to get it done for clients in a very easy manner and then they just know that you know they have that plan in place if something were to happen. I think it's really important then for families when they have this plan that if something were to happen that somebody was in a car accident, right? And they already have this plan. They their family knows they can go to this plan to be able to say, "Okay, what are the things that we need to step into?" The assets have all been laid out. They've been funded properly into the trust. And now it's just a matter of kind of doing the paperwork, depending on if somebody's incapacitated, right? Or once somebody passes away.

4:09 Now, I'm not sure how much you see where people how to plan, but the plan didn't get executed. You know, the classic case as a real estate agent is you know, you go to the listing appointment, you say to them, "Well, I noticed you have property in the name of you know, John and Mary Smith." "Oh, no, we have an estate plan." And my heart sinks cuz I know what that means. They go back [laughter] and they pull this folder and they open the folder up and there's a binder and it's leather and it's beautiful and they open the top page and it says, "Don't forget to sign this and take this to the recorder's office and blah." And they go, "Oh, I guess [laughter] we never did that."

4:39 Yes. Classic case. So, I think that I've been around long enough where that was more normal years ago when we didn't have as many online services, we didn't have COVID. I think that pushed people to getting comfortable with remote services. Talk a bit about what the difference is between kind of those plans that are great pieces of paper but not effective versus what an effective one looks like at the end.

5:04 Or potentially kindling for a fire, right? Getting it started if it if it doesn't actually work in court. Yeah. and that we see that and I see it very often like you said, it's not so much that the attorneys aren't doing it. If they hire an attorney, most of the time I see nowadays the attorneys are getting it properly funded into the trust by getting it recorded. But where I see issues is when somebody maybe does a refinance on a home and then they have it pulled out of the home to finish the to finish the refinance and then it never gets put back into the trust. So, that we saw that big time when the interest rates were so low and we actually did like an exercise of all of our clients at that time to check all type to check all the titles and reached out to everyone that didn't have it in their trust and they had no idea, right?

5:53 Right. I also see it very big right now because of people doing estate planning on their own using online services

6:03 Oh, no. using chat GPT to create their estate plan and they think that once they, you know, get these documents drafted and printed that that's enough. Where in all reality, you know this, right? They don't actually understand that they now have to get a grant deed recorded and get it transferred from their name into the name of their trust, right? And that's just something that we're not seeing happen continuously. So, we're still having to go to court.

6:29 Well, in the first steps the first issue talk about deeding out refinancing. I can say as a former lender there's no excuse for that to have to happen. That's just lender laziness or lack of knowledge because almost all lenders certainly Fannie Mae, Freddie Mac, FHA, VA will accept trust certs. It's the title company or escrow doesn't know what they're doing and then the mortgage officer doesn't know what to push them back. As a result I don't even like it that you could do it back and forth because that just creates a couple problems. One, potential typo right? Wrong address, wrong APN, typo of the name leave out the middle initial. Now you have the son with the same name, questions. There's and also that deeding it back in doesn't have title insurance which may or may not be important. It's only important if you get sued, then it becomes important. So, I would just public service announcement, there's no reason you should ever have to and just push back and if and if you need some help on that one, reach out to me. I'm glad to help. Advise attorneys or I'm not attorneys or lenders and escrow title on that one. And the second one you said about

7:35 Online platforms Oh, yeah, online platforms. I think 90% of them never get executed. I think that's Just the standard number. That even seems low

7:44 [laughter] that's from what I've seen that because people just don't know. They think all they need is the documents done and because they don't have somebody that's walking them through it or potentially doing it for them, they just don't know how important it is.

7:55 And then I'll I'll have people say, "Well, it's not a big deal. You can get a Heggstad petition." Which in California, there's a process where you can file a petition to get it treated as though it wasn't a trust when it wasn't a trust, which it's not a big deal. It just costs as much as a probate typically. And it doesn't

8:13 Yeah. And in LA County, you can't get a hearing for 6 months on those petitions, whereas a probate, you get it in 3 days. You get a little priority to time period. So, you know, it's no big deal except for it's a big deal. I mean, it's not it's not it's not magic pixie dust you can do a Heggstad petition. It's a another cumbersome, expensive, mind-numbing process you can go through.

8:31 Yeah. And depending on the judge that you get, That's true. they yes, and so it really depends on the judge depending on what evidence they want to see to show proof that you had the intent to actually have it in your trust. And so, you know, we've had people come to us where they had the estate planning done, the house wasn't in the trust for whatever reason, and we knew going in front of the judge that it was going to go in front of that it wasn't going to be successful and we just had to go to a probate because of the evidence. And we knew that that judge wanted specific evidence to show and they didn't have it. So, it's not a good fallback plan to you assume a Heggstad petition. It's just get it funded properly the right way the first time.

9:12 So, stop again offended when you when you say that. It really just means you have a property that you bought as yourself or you yourself and somebody else and that you move your interest of that property into an entity called a trust, typically a revocable trust. My just like you might with an LLC, you don't personally have control. In this case, you turn it into the trust and now the trust is the entity. So, if you pass, the entity is controlled by the trust documents. Is that a fair assessment or

9:40 Yeah. Yeah. And so, what's involved is you as attorney, do you create the deed from the person into the trust?

9:50 Yes, that is part of the package that we do for our estate planning clients is preparing a grant deed transferring title from them to them as the trustees of their trust.

10:00 And then do you get that notarized in your office or offer notary service? Yes, we do. And then do you offer recording service as well? We do.

10:09 And see, that's the key. Why would you not today? It's not what it used to be. It's not You have to mail it to the county. I just like to make the bar like just disbar your attorney doesn't do that. I don't get it. Why would Why would you leave it open to the You're going to put it in the mail and send it

10:24 [laughter] When you put it like that, when you put it like that, yeah, I mean, sometimes and I don't see it as often with newer trust [snorts] anymore in estate planning attorneys. but I have had some cases recently where, you know, an estate planning attorney did the whole estate plan and didn't even prepare a grant deed transferring title. So, the

10:49 Common. It was not even part of what they did and I was like, how This is the biggest asset that they own. Why wouldn't you do that? And I feel like it's a it's a disservice because people just assume the attorney's telling them what they need to know and what they need to do. And it's no just you charge more money because it's additional work that needs to get done and they need to do it.

11:09 Yeah. Well, if the attorney says, you know, they charge additional money to do that, that's a that should be a mandatory thing you have to do additional. Yeah. You know, again, if you have three or four properties, you charge, you know, extra for the extra two or three. Maybe you don't. I don't know. Technology today, do you really need to Like once you put it in your database that you have the property, how hard is to kick out the pop the legal description of the documents? I guess, you know, maybe. But whatever, nominal. It shouldn't be thousands of dollars.

11:35 Yeah, no, I wouldn't say thousands of dollars, but there's there's definitely like the recording fees on a second property in California are higher, right? And so there's additional recording fees that are going to be due. And then it's also it's not just it's not just drafting the document, it's actually doing research on the property to figure out what's going on with title.

11:54 Right. And so you need to understand who owns title, if there's any confusion, it's researching title to figure out who owned it prior.

12:03 Mhm. you know, how are they holding title now? Is it as joint tenants? Is there going to be any type of severance of that tenancy? And so there is some research that goes into it that needs to be done because people it amazes me when I see chain of title sometimes and I'm like, I can't believe that the recorder's office allowed this document to be recorded, right? And then I see rejections for things that I'm like, I don't even know why this was rejected. And so it's you know, it's so interesting how people can sometimes just record documents, you know, like I think the smallest probate I had to go through probate is somebody had transferred they had one property and they owned it amongst a bunch of family members and they kept just transferring percentages to different people within the family.

12:47 And to be able to sell the house, we had to put an eighth of a property through probate Yes.

12:55 Because they had just transferred percentages and percentages and percent and like figuring out that was I mean, that cost more than the probate fees itself was just researching chain of title to figure out what was going on.

13:05 Right. Yeah, and it has to get done. You know, it's interesting. I There was a time when the county never rejected anything. right? As long as it was a deed and then it was original, they would and so there were there were there were scams where they would, you know, people record liens that weren't good with different people. I mean, there's all kinds of you know, different ways that they took advantage of that. And so, the county at one point got very diff- very challenging. And so, I would I would say one in my closings, one in 10 get rejected for a mistake. I mean, literally, I say to them, "Well, why did they pull the title?" We don't know, but it's all set We're ready to go for tomorrow.

13:44 Mhm. Okay, but why did they pull the title? We don't know. Well, how do you not know? Like, and how do you don't you have to correct something? Like, just to make them feel good, don't we do something? No, just resend the

13:53 Some- Sometimes it's literally like the white on the side of the sheet isn't like it doesn't match the other side. Like, the margins aren't Like, and that's that's sometimes where we see it get rejected for something like that, you know.

14:04 Yeah. With your scanner, it got kicked out or something. So, and yet and I think the important point is you better pay attention it got recorded or not, because you can get rejected and it looks to you like you got it recorded and you put that in your file and you move on. You'll find out years later, "Oh, I have receipt right here." What?

14:22 Yeah. That can look pretty stupid. So, it's too bad we have this discussion now. When I started doing this podcast 6 years ago, one of my selling points to attorneys was and to clients, I would literally pull the public records and send the attorney the deeds and the and the chain of title, so that they could, you know, expedite the process. They could do it, too, but it was just a way, you know, my assistant did it for me, but it was a way to expedite things and

14:44 Yeah. create goodwill. And then, after they finished the estate plan and recorded it, 3 days later we go back online and pull the recorded deed to show that it was done. The attorney might have the proof that it was recorded, but we sent them the actual deed that's with the coin stamp on it that Again, customers kind of like that. Well, nowadays, the attorneys just for the most part, the good ones just do the recording themselves and it comes back that way and there's no more drama, right? They The customer gets a package with a recorded deed in it. So, I think that's great and I think it's To me, that's a minimum standard. If the If whatever service you're using isn't doing that, you're not getting what you're paying for. That's That's really what you're paying for.

15:18 Yeah. No, I agree. And that's one of our processes. We wait for it to be recorded, we print that recorded document out, and we put it in their estate plan so they have it.

15:27 One of the issues that I'm sure you deal with occasionally, and I you know, don't put you in a difficult position, but I know I get these phone calls myself and I refer them to attorneys from time to time, is you know, mom, dad, you know, having different issues, mental issues, and we now we know where you know, the end is near, or we're worried about medical issues and medical decisions and how that affects the estate plan and all that, so we need to get with an attorney. talk a bit about the standard of competency. I'm a real estate broker, I'm not an attorney, so I don't get involved in estate plans. As far as selling a house, like what's the standard there that I should be aware of? And then at what point is it too late to do an estate plan for a you know, family member or you know, a potential estate planning customer?

16:13 Yeah, it's it's tricky to be able to kind of assess that, right? And it's it's really hard for a doctor to be able to determine whether somebody lacks capacity, right? They don't have that mental ability to understand you know, that by signing this deed, putting my son on title, I'm essentially giving my house to my son, right? They don't understand what that is. So, we see incapacity issues if somebody maybe has had a stroke or they have Parkinson's or dementia or Alzheimer's. So, those are things when we have family members, right? The kids that call in and they're trying to kind of figure out what next steps are for the parents, the attorney in our office would have a conversation with the parent to understand what is their capacity level at that we can understand. So, we're going to ask them questions, have a conversation with them, and just see, you know, are they able to follow along with the conversation? Are they able to answer our questions? Are they remembering everything that we talked about? To really see if we feel like they have that capacity to be able to do an estate plan, depending on the situation between the family and where we see the capacity, we might request that the family get a letter from the doctor saying that they have the capacity to sign legal documents. And so we are very careful with this, especially if there's family members that are fighting over assets, right? We want to make sure that the that our client is going to be protected, that their assets are going to be protected, that nobody is trying to influence them into doing a plan and leaving out other children. And so when once if we're in a situation that we see that, we might reject the case, right?

18:00 Especially if we feel like it's a family member that's trying to unduly influence somebody that's not in the right mental capacity. And unfortunately, we do see that it happens and we fight these cases, right?

18:11 Mhm. to be able to once somebody's passed away, you know, they signed legal documents a week before they died and they'd been in the hospital, you know, 6 weeks prior to their passing and heavily medicated. There's, you know, they didn't have the mental capacity to sign these documents. And it unfortunately it happens all the time.

18:30 And I see these do-it-yourself attempts that I know are just going to get people stuck in the mud. I had one recently where the son called me and said, you know, we knew mom was sick so we got an attorney's letter and I have power of attorney.

18:43 Mhm. And [clears throat] so it's great. He said, yeah, but the letter says she doesn't have capacity. That's why the power of attorney is good. Oh, okay. But now we realize we want to sell the property, but we're concerned about in her name we're going to do a trust. So we need an estate plan. I said, ooh, I think you have a problem there cuz she didn't have capacity and you have power of attorney. Does she have the capacity to do the estate plan? Now, can a child though with a power of attorney implement an estate plan for a parent who doesn't have capacity?

19:10 So it all depends on what the power of attorney letter says and the ability to be able to do it. And I would say that I believe that I knew that in that there to sell real estate it has to be a specific power of attorney that specifically And this is not a requirement just legally, even if it wasn't legal, this is what the title companies are going to require in order to get title insurance. You're not going As I tell attorneys all the time, it doesn't matter what's legal. If the title company won't insure it, you're not selling the house. I'm sorry. It just ain't going to happen.

19:35 Yeah. And so, this is a case where the power of attorney was one guy, I think at Staples or Office Depot 10 bucks. And it just said, you have power of attorney to make decisions in business and whatever. Didn't say the property, didn't say the right to sell property, didn't say an estate plan.

19:48 Yeah. And so, I'm just like, "Ooh, you really kind of put yourself in a box cuz you got the doctor's letter to say she's out of capacity. You got the You got [laughter] the attorney letter. It's like you've proved that you can't do anything kind of in the That's where you need an attorney, I think,

20:02 Yeah. to help handle those things beforehand. So, talk a little bit about those do-it-yourself situations that people get themselves in a box. Yeah, and then they end up spending way more money had they just done something earlier that was going to cost less money, but more money than they wanted to spend, right? And we see that every day, right? Anytime somebody loses capacity or court is involved, you know it's going to be four to 10 times more money than probably the original cost of doing it.

20:30 It's like changing oil in your car. It's only cheaper not to change your oil, but in the long run it's cheaper to change your oil regularly cuz that way you don't have to rebuild an engine or your car runs longer, so.

20:38 Yeah. So, I'm sure one of the questions you must get, you know, somebody goes, "Okay, I need an estate plan. I got it." and they call you up and you have a conversation and you talk about in general terms, ready to move forward. And then it comes down to cost. And there's no way that you can charge the same as a service that does a lot less than you because they're doing a lot less than you. They don't have you, for example. How do you have that conversation? What's what How do you try to frame it to a prospective client or you just rely on the fact they've been referred to you or they know who you are and they're going to have to make that decision on their own.

21:10 Yeah, I find a lot of people that are referred to us are okay with the cost because they had somebody that had a great experience. you know, for us it's always been about the client experience and making sure that clients feel like, you know, they're getting the value for the money that they're paying. And, you know, we have such amazing clients and they've left us a lot of reviews over the years. And so, I think it helps kind of especially from a social perspective, the ability for people to kind of see what other people's experiences are. I think it's also understanding what's included in that cost because if somebody is very just focused on the cost and not really what it comes included, they may just immediately think I'm just going for the cheaper rate but not really understand what comes included. And I think that's where people potentially have issues cuz maybe there isn't a grant deed that's going to be included, right? Maybe it doesn't include a recording. Maybe it doesn't include the notary. And the you know, the fees to have all the documents signed. And so, sometimes people just go the cheaper option but they're missing out on stuff they really need to be to have this comprehensive plan. For us, I'm always trying to find more things to be able to add value to our estate planning clients, right? Things that are really going to help them not just right now in the process of creating their estate plan, but it's down the line.

22:31 And so, one of the things that I just started doing is I'm hosting quarterly funding workshops for our clients to be able to come in person to our office in here in Ventura. And actually, I'm going to go through, you know, different assets and then I'm going to answer questions about how to fund specific things. And then I'm going to do another one as a webinar for our clients, right? And that's just something that I just added this past week because I see it as a need and I think it provides them that extra value.

23:00 I would think another one that the online's really dropped the ball on is the discussion and the kind of human interaction on the subject of who's going to be the successor trustee. Because anybody can say, "Oh yeah, my older kid, you know, he's successful businessman and he's or she and I'll put them as number one and my other kid number two or have both of them or have two."

23:20 [laughter] I'm laughing cuz litigation's always when there's two, it never seems to work out right. So, you know, and of course the online service will go, "Okay, great. You filled in the box, you checked yes, you checked A, B, C." I would imagine you would say, "Whoa. Do you really want these two siblings co-trustees successor trustees? Let me tell you from my experience, that's the part that they're not paying for, they don't get with the online, but that's the part they really need to make the whole thing effective.

23:44 Yeah. Yeah, cuz we do both sides at our firm, right? We do this estate planning, we help clients put the plans in place and then we do the after. And, you know, after somebody passes away or somebody gets sick, right? So, we're helping families in all the senses. And I will tell you in the after, right, when somebody passes, what I see is when you have somebody that you've chosen and generally and I have this conversation with people all the time. And they say, you know, can I name my adult children as the successor trustees? And I say, "Absolutely." And they said, "Well, I don't know how to pick. Can I just do both?" And I said, "Well, you know, generally speaking, if they don't agree on something, that's when we end up in court." So, I tell them, I said, "Pick your favorite." I'm just kidding, I don't say that. I say I say I say pick the

24:30 Had one child, so I'm I'm not very sensitive to that question. I imagine I have two. If you have two children Yes, but the reason I say, "Don't pick your favorite," I say, "Pick the one that is going to be the kindest, right? That is going to act with the most integrity." Because you actually made this comment and you said, "You know, the oldest is the one that gets put in charge." And the cases that we have where we represent beneficiaries, it is almost always because the oldest was put in charge and now they're a bully, right? They won't give access to photo albums, they won't give access to personal property of the parents, right? And they're not being they're not communicating with the beneficiaries and they're literally being forced to hire us to represent their beneficial interest because their older sibling who is now in charge is completely shutting them out. And so it's, you know, I generally don't recommend you having cos, but sometimes they have clients they fight back and they say no, my kids get along great. We've never they've never had issues. I think they'll be fine. Then you know, we do what they want, but we at least have the conversation. But for some clients it's no, you know, pick one and then list the rest as backups, right? To that one if you can.

25:41 I think that conversation is the whole ballgame of value. I don't I mean to diminish what you do, but you look at the fees for the online one and an attorney's what? It's all a big difference. That decision's going to dwarf the value difference cuz you get that wrong on an online service and you just writing a ticket to go to court and it's just not going to work I think any way you slice it.

26:03 Yeah. Well, look, I know I kept a little longer than we had planned on. So I really appreciate Crista Hermance, founder CEO of an estate planning attorney from The Heritance Lawyers. Now I'm going to put up the website Heritance Lawyers, but I have to ask a question as a as a English minor in college I don't remember the word Heritance anywhere, but I get your first your last name first two letters H E R I just playing Scrabble with your name here.

26:26 [laughter] Where did that come up from? I so Heritance comes in wordplay inheritance and heritage, right? So it's kind of like that legacy that we see with our clients when we're doing planning as well as the inheritance side, whether it's, you know, that they're putting the inheritance in their estate plan or we're helping people once somebody's passed away to acquire that inheritance. So it's kind of a play on words and it doesn't hurt that it's the initial part of my last name.

26:54 I'm always shocked when attorneys demonstrate some sense of humor there because I'm not used to that [laughter] being gregarious with them. Crista Hermance again, founder CEO The Heritance Lawyers [phone number shown on screen] and the website is theheritancelawyers.com. If you can't get that cuz you're driving or whatever, reach out to me. I'd be honored to make that connection and put you guys together. Crista, thank you so much for coming on today and sharing with us both the goal of the estate planning and some of the pitfalls to avoid along the way. I really appreciate your time today.

27:21 Absolutely. Thank you so much, Bill. And for those of you watching, this is Probate Weekly where we get together and talk every week, often with attorneys, more probate side, but in this case it's more avoiding probate through proper estate planning or avoiding litigation when you have a trust to administer by administer it properly. Let me get your comments, questions. If you have anything I can help with, please reach out @billgrossprobate on social media. As always, make today your best day ever. Thanks so much.