Why Your Will Is a Ticket to California Probate Court, with Heather Reynolds

0:03 So I think about half of the probate business in California real estate is predicated on the misconception that a will avoid probate. When the truth is, your basic will really is just a one-way ticket to probate court. You're going to get seated in the section with wills versus the section without wills. True or false, Heather Reynolds?

0:24 That's absolutely true. Now, Heather's an attorney in and she only practices in California, so that's only legal advice or legal information appropriate for Californians, but it's generally true around the country. I'm lucky to have her here. She's attorney who services California residents in both estate planning, avoiding probate, and administration of estates and such. So Heather, that's a big misconception. I know it's just not me. I know you get that. I think every attorney, every realtor who deals with houses discovers along the way. Talk about why a will does not avoid probate.

0:58 Right. So, a will is a public document and by default, California law, [snorts] the probate court is in charge of that document. So when we die, our will is filed with the courthouse, the probate courthouse, within 30 days of death. That's the law. So if you want to know what Jackie Onassis left in her will, you can Google it because it's public record. So that's the first thing to know, it's a public document and the jurisdiction of the court is over the will. So the job of the judge is to make sure your will gets followed and that's how the law is written. So every will must be filed with the court within 30 days of death. That is the probate court. Now, if you have assets more than $200,000, let's say, in California, and it's much smaller than that in other states, but in California, if all of your assets, and I'm not talking about taking out how much you owe in your mortgage, cuz you're not allowed to deduct that when we're calculating whether or not your assets will go to a full-blown probate. if it's more than about $206,000 in California, it's on its way to probate. Full-blown. Now, if it's less than that, it may be on its way to that same probate court, but it won't take 2 years and cost tens of thousands of dollars typically. It'll just take a few months and cost, you know, a couple thousand dollars typically. And I can give you some examples of what that looks like. But every will goes to probate, always, no questions asked.

2:32 That is how it works. That's the default. So, the only way to opt out of probate, well, there's more than one way to opt out of probate, and we come up with all sorts of wonderful creative ways depending on a client's situation, but the most obvious way is to write a trust, not a will. A will must be filed in the probate court, whether it triggers a full-blown probate for years and tens of thousands of dollars, or whether it triggers a small probate if you have less than that. a small administration is what that's called. we will end up in probate court and have to follow the rules and have the delays, and it is public. And we have to pay attorneys to go there. So, it is out of the family's hands. It's now public process. and they are forced to hire usually an attorney at whatever the judge says the attorney should be paid, which is usually a percentage in California, much more than people realize. very expensive to die in California. And then and then we end up paying accountants, and because the judge requires it, and then we end up paying sometimes bookkeepers to tell the accountants what happened. and it can take years. Like the horror stories I've heard, my job is to keep people out of that. So, none of my clients ever go to probate. But the horror stories I hear of the people who don't get to me before somebody dies is terrible. So, I am on a mission for 26 years to keep people out of probate, to educate the public. 70% of Americans, they say, have never done anything. So, I mean, a will is better than nothing, but it certainly isn't a probate avoidance technique.

4:11 You know, I saw a couple days ago, somebody posted on LinkedIn that August is make a will month. Oh. I said, "Yeah, that's great." And California And they said, "Make a will and you can avoid probate." Now, in some states, that's true. It is true. I've done this podcast now for 5 years, and I don't know them by name, but there's certain states that there's certain deeds and certain wills and there's certain, you know, if you're married and okay, there's different things can avoid probate outside California. But, what I created my own little meme, and I said, "In California, get a will month is get a will and go to probate court with your will month." Because in reality, there's a section for probates in California with no will, that's dying intestate, that's petition to I guess administer an estate, and there's the petition to execute a will. And that they both go to probate court, and there's no way around that. So, that that's a very powerful misconception, I think, that the people have that can cost them a lot of money and cause them, I think, not to take action that they either I think it's interesting that the fact they could get a will stops them from even getting the will. Let alone getting a proper estate plan that would actually avoid probate.

5:27 Yes, and it's so important. You know, one of the stories I'll never forget was a wonderful man, who was maybe in his 45 or so, and he had a 9-year-old son, and his wife had just passed away with cancer. And they hadn't done anything. [snorts] So, she didn't have a will or anything. And so, we're obviously going to probate regardless, whether she had a will or not, we'd be going to probate. but, the problem was because she had inherited the family home, which was worth about a half a million dollars at the time, it was her separate property under the law, and she didn't write even a will to leave it to her husband. So, California law wrote one for her. If we don't even write a will, we have one, we just may not know what it says cuz California will write it for us. So,

6:16 What could go wrong with that? What could go wrong with the state writing it for you? [laughter] So the judge says, "Okay, well, the law of California is if you die and you don't say where your house goes, then it goes half to your husband cuz it's her separate property, it's not community. it goes half to her husband and half to the 9-year-old son." And then the judge says, "Well, a house is not an appropriate investment for a 9-year-old son because it's way too risky. I mean, it could burn down in a fire, you never know. So, I want you to sell the family home now that you've just lost your wife, and I want you to invest the money for your son cuz he gets 250,000 and you get 250,000, and I and I want you to invest that money for your son and don't touch it until he's 18, and on his 18th birthday, he gets whatever you've, you know, grown it to. And it costs a couple thousand dollars to come into the judge and ask for any of it if he needed any of it. so, he's expected to just raise his son without the family home on 250,000 dollars. And then on his son's 18th birthday, it'll probably double by then with the rule of 72 and a good financial advisor, it's probably going to be worth half a million. So, on his 18th birthday, his dad gets to write him a check for a half a million dollars, and we ended up in probate for like a year trying to get this all settled. and he was forced to sell the family home and give his son half the money at 9 years old. So, that's just a horrible story of how we would never, Mother would never have planned it that way.

7:45 No. and if she had just written a simple will, we'd still be in probate, but at least it would have gone to the husband to be able to keep the family home and take care of the son. So, those are the kinds of stories I see that I just they're heartbreaking. And it's so easily avoided. I mean, this is not an expensive process, truly. most attorneys take credit cards. It's the best money you'll ever spend is to just make this happen for the loved ones that you're leaving behind. Because they're already suffering. They We can't avoid that they're going to miss you. We can't avoid that your 9-year-old son is not going to have a mommy. But we can certainly avoid the misery of not having enough money or having, you know, that's what life insurance is for sometimes. Or we can avoid the legality or the financial stress of having to hire a bunch of lawyers and accountants and bookkeepers and judges to run our family show and make it all public to the world.

8:41 Yeah. Yeah, it's just it just must be so difficult. I used to go to probate court every day and you'd see these stories. of course lately in public, I think Jay Leno famously, his wife unfortunately is very ill and they don't have a proper document, if you can imagine with all the travesties he's spent his career and he has to go to court to get control of his wife's medical decisions. I think they've been married for 40 or 50 years or something. He's a what He's one of the greatest human beings, I think, in the world. They have no children. And it's not about money, it's really just about being able to make medical decisions, let alone, you know, and she hasn't passed yet. So, it's it's really amazing. So, let's talk about what's involved, because I think sometimes people think, well, that's a lot of work to put a estate plan together to avoid probate. Well, it's a lot of work to go to probate. Let me just say off the bat, having been through that and having worked with customers, filing the petitions, getting a bond, getting your letters, notifying, opening bank accounts, all that's also a of work. It's It's not really about avoiding work. What's really involved for a client who wants to do an estate plan? Let's say it's a you know, husband, wife, maybe a couple kids, a basic house, some money in the bank, securities, and such. You know, what are we really talking about? It just seems to me it's not as having done it's not as much as we make it seem to be until we start. And like anything else, once you start the process, you can kind of get into it a little bit. But talk about what's really involved in putting together a proper, at least a minimal, basic estate plan for a family.

10:05 Yeah, great question. It's a lot easier. At the end of the process, my clients usually say, "That was a lot easier than I was thinking it was going to be." Yeah. and I'm grateful for that, but I take as much of the burden off of them as I can because obviously there's emotional barriers and sometimes financial barriers to actually having the courage to step forward and do this work, which I think is why 70% of Americans have never done it. aside from the fact that they're not educated about the worst-case scenario if they don't. So, I think it's really easy to you know, work with an attorney who will do most of the work for you, and then I spend about 2 hours with my clients in the very beginning. So, we have a Zoom conversation like this or an face conversation sometimes, and we just find out who they are, what how many kids, what are their wishes, what are their fears, how do we avoid those fears cuz an attorney with experience has 26 years of experience to know how other families have avoided the concerns that they may be having, like maybe one of their children is you know, not [snorts] behaving well with money, and how do we deal with that? Or somebody's getting sued, or we don't like the son-in-law, or there's a health issue, or somebody's on government benefits, and how do they inherit at the same time? And there's all those fun little things that happen in every family. So, we get all of that out on the table, and then I tell families, "Okay, everyone's custom, but there are basic documents that everybody needs. and in order to avoid probate, most of my clients need a trust. And a trust is a wonderful, flexible document that remains private. Unlike a will, it sounds just like a will, but it is private. And it's called a trust because we're trusting someone to follow my wishes without a judge supervising.

11:49 So, there has to be someone I trust enough, well, a spouse, children, whomever, friend, brother, sister, that I trust them to follow my wishes without a judge looking down over their shoulder to make sure they're following my wishes. So, without a probate supervision. So, the trust is a contract, sometimes between just me and me if it's if I'm single, or between a husband and wife. And they agree that when one of them is incapacitated, the other one would be in charge so we don't have to go to probate court for the rest of your spouse's life asking a judge permission to pay bills. that's worse than a probate at death is like years and years in the probate court taking care of someone either because health concerns or because of financial issues. So, having that Yeah, I mean, there's nothing

12:35 I really think that if we can make everybody who owns a house or is married or has kids spend 1 hour in probate court in LA County and watch people going through that, they would they would claw your doors until their fingers are bloody to get in to get an estate plan done to avoid having a guardianship or conservatorship placed on their kids or their spouse. I It's just having seen that pro- You can't even describe how miserable that process is. I'm sorry to interrupt you, but I just flashed back to what it was like.

13:05 And you're a number, you know, it's not like they care. [laughter] You're treated like that, you know, like get in line, come back 3 days later with you know, a different document, and it's it's miserable. It's like standing in line at the DMV, right? It's like that. And having to come back three different times or something. So, there's a not a lot of human dignity in the process in my personal experience. okay, so we got to have a trust in place and like that's the centerpiece of a typical estate plan. An estate plan is just a set of documents that every family needs a set because we not only need to cover what's in the trust. We try to put everything possible inside of a trust before someone passes because a trust is living. It's alive. It doesn't die. So the court the probate court doesn't have jurisdiction over it. So that's that's how we get away with this is like this living contract that you create that you can update anytime you want. It's revocable, changeable, amendable. you get to decide that the rules apply even if you're incapacitated, even if you pass away, and no judge has anything to say about it. And that's where the trust comes in. So that's the core document and that document usually talks about who gets which assets and when and how and do the kids need it in the trust until they turn a certain age and they're mature enough or do we need to put it in a trust to protect it from the government or from asset protection for divorces or whatever the concerns are. We have unlimited imaginative ability to create in mine I put a treasure hunt in for example because I really want my nieces to travel around the world and I might not be able to afford it today to send them on that trip, but I'm going to do it when I kick the bucket. So you are unlimited in a trust to put in all these wonderful creative ideas of what you want to leave behind not just financially, but in your values, legacy, that kind of stuff. Then the next most important document in my experience is the durable power of attorney for finance. And everybody needs one starting at the age of 18. And it doesn't matter if you have money or not.

15:08 Both that and the health care directive. Age 18 is part of being an adult. We all need a power of attorney and a health care directive. That keeps us out of the probate court while we're alive if we become incapacitated, but we're still alive. Then the jurisdiction of the court is not allowed to step in cuz we have a separate document called a power of attorney either for health care, which in California is called an advanced health care directive. and different states have different names for it, but the document idea is the same. So we've got to have a power of attorney for finance. We've all got to have a health care directive. We will probably need a trust and we have to put everything in the trust. It's not enough to simply sign a trust and put it to bed and never look at it again. We actually have to transfer our home into the trust before we pass away. ideally all of our bank accounts, ideally everything we own in the world, and that's the general rule of thumb. And that's when 90% of Californians they say have not done the work. And I blame the attorneys. I think the attorneys are to blame for not getting all that stuff in the trust because I think it's not fair to create a trust for someone, charge them a couple thousand dollars, and then they go to probate anyway. Why? Because nothing's in the trust when they die. It actually has to be in the name of the trust to avoid the probate.

16:31 So I include that. If I can stop you there today, I think that point is so important. I feel like as a real estate agent, if I sold a house, I got a house under contract, right? You want to list your house for a million dollars, I get you an offer.

16:43 Yeah. For here's a million dollars. I said, "Okay, here's I can pay me now. I hope you're able to close the escrow." I walked away. You said, "Whoa. I paid you to get the house closed, not just to get it into escrow." And I think with custom This is such an important point that if you're going to shop for an estate plan with an attorney, you need to ask the question, will they assist you or provide the service to transfer the assets into the trust? And that in my make means notarizing documents, it means recording perhaps documents verifying the recording of the real estate for sure. And then so at end you know you got what you wanted which is the safety and security of having the plan that's effective. Short of that in my way and I and I've asked this question of every attorney I've interviewed on estate planning and all the ones I've interviewed have always said yes they do it because the ones who don't just don't know what they're doing or they're just grabbing for money. They're not really building a practice based on trust and protecting family's wealth.

17:38 Right and I think that's one of the benefits of getting an attorney who actually helps the family when someone dies. Yes. Cuz that's when the music that's when it hits the fan. You've got to make like how embarrassing if I had drafted a trust and there was nothing in it and then they die and we all go to probate anyway. Like what was the point? So I don't

17:56 Other than your Other than your fees there's no point. I mean and that's I think my point. Exactly. I can I been on a bit of a soapbox in this for a few years and I and I

18:06 [laughter] I'm I'm an attorney too. I've interviewed enough attorneys. I've seen enough probate cases where I can say with in probate court 90% of cases are handled by attorneys who've done one or less probate in the last 12 months. 90% of cases. Now the top 1% of attorneys are fantastic. They're good but the 90% they don't know what they're doing. Same with estate planning. They're they're the attorneys who do drunk driving and business corporation and divorces and then the occasional estate plan. They don't understand the importance of funding the estate through the end and those attorneys that do estate planning and or estate administration as a primary business or maybe estate litigation well they don't want to administer a state that's not funded. They don't want to be litigated on the estate plan they wrote that wasn't funded. And so that's a really important distinction and I think definitely if you're shopping for estate planning attorneys that to me is the one of the key questions is will you see it through the recording of the documents, the notarization of documents, the funding of the estate. That's so important and again sorry to interrupt you but that's I say this every episode and I say it a few times because to me that's the standard that has to be hit.

19:08 Yeah, absolutely. And so some attorneys can get away with charging $1,200 for a trust because they don't do anything. They just make a trust and you sign a trust and you're done. And then who cares? It didn't help us because we're ending up in probate anyway if everything's not in the trust. Now, I have had even really high-end, wonderful, very busy clients, successful people who didn't have time to actually fund the trust and get everything in. And that's when the attorney stepping in to assist to make sure that all that happens is really important. Not only you know, the practical aspect of that, but planning for each and every asset separately is really important because we might have you know, update all of the life insurance policies to name the trust as the beneficiary, but we might not do that with the retirement accounts. So, every retirement account has to be looked at and decided, how does it coordinate? So, we're going to have to probably update beneficiaries on retirement accounts and life insurance and homeowner's insurance and. And I write a custom letter to every single financial institution for every one of my clients after we make a checklist of every financial asset, you know, with account numbers and everything. So, that the next person in charge knows where to find everything.

20:28 We're going to check off each item on the list and I tell my clients, we are not done until we have checked off every single item on that list and here's a custom letter for every single item or deed or whatever. so, at least we get the ball rolling and then we get the forms and then we sign the forms and we send them in. That probably is what takes the most time in getting it all handled. But, the good news is you don't have to do that all at once. That can happen over 3 4 weeks, something like that. So, people are busy. They have kids. Who has time to do anything other than just you know, go to work every day and come home and hope you get enough food and lunch for the kids the next day. So, anything you can do to get the attorney to help you to get everything in the trust, do it. It's worth it. It's the best investment you'll ever make.

21:14 It Now, there's a then there's ongoing process that goes over time as you buy and sell property and as you open new bank accounts and new securities accounts and retirement accounts, you need to have some kind of maintenance plan. I remember doing an episode of this and I was talking about how my plan was at the time we kept it in this filing cabinet right over there. I said, "Oh, wow, you know what? I've changed security company about 6 months ago and I don't think we put it in the trust." I don't think I Now, why did I not? I don't know, but you know, the guy didn't ask who was handling our account for us and I didn't think about it. thinking, "Oh my gosh, I have to do that right away." So, talk a bit about, okay, let's say we met, we wrote the world's greatest plan for me personally, my wife, my family. We did all the work and the follow-up, we funded everything, but 2 or 3 years later, or 5 years later, what's the process to keep it up-to-date? I bought a house, I sold a house, I bought a business, I sold a business. What do we do to make sure that's up-to-date?

22:06 It depends on how well the attorney trained you to be independent of them. So, I try to train all my clients how to do that in the very beginning. So, the first 2 hours we get to know each other and then they go away from that meeting with two or three things they need to get from me, like account numbers or something. Then a week later, I have all their documents ready. We have another Zoom call, we go through every single document, every paragraph of every document to make sure they know exactly what it says, that it's perfect, they understand it. And [snorts] because I'm currently living in Washington state and all of my clients are in California, I then mail them all the documents with instructions. And then we follow up to make sure that every letter that I included gets mailed out to those different places. So, the client is working with me to become an expert in how to put everything into the trust. Then I create in the binder I send them is a little card to put in their wallet that says, "In the future, all assets go into the following name." And there's an instruction letter also. But, they always have this little card in their wallets. So, the next time they walk into a bank and they think, "We're opening a bank account. It needs to be in my trust." or financial account, they whip out the card out of their wallet and hand it to the financial advisor. The financial advisor's job is to fill out the forms to make sure they do this correctly. And if they need to call me right there at the bank so I can tell the banker what to do, that's all included. So, they always know they can call me and make sure that I can educate the banker or the financial advisor.

23:33 Who do we need to name as the beneficiary? So, over the years, they know they can just pick up the phone and say, "I don't remember. Ask my attorney. Here she is." And I always help them to make sure it gets done right. But,

23:44 Can I Can I step right through though? Cuz I just think you're you're dropping some gold here and I want to make sure we have a chance to appreciate it. Yeah. So, I think that in business, too often we seek to avoid doing administrative work like repeating ourselves or giving out account numbers or names of accounts. But, to me it seems like A, this is the work that's important for your customer's success and therefore you have to do it. I.E., helping them fund the trust properly. But, B, the benefit is, you know, how many phone calls would you like from bankers of your clients opening new accounts? I think the answer is, "Well, you take those all day long because those people have other clients who need estate plans." And if they see you to be responsive, effective, and professional, you know, this client likes you must be decent. That's how we generate business. And so, I think sometimes we're we worry so much about being efficient that we just put ourselves right out of business. So, again, to those attorneys who avoid those calls, I think that's a business mistake. You know, you have staff that can help you with that. I think you want those phone calls. You want to meet a wealth managers. You want to meet you know, the bank the bank the manager at Wells Fargo down the street or wherever. I think it's a big mistake to avoid that. and the handing out the business card, I think it's a beautiful idea. I'm sorry to interrupt, but I just think that's a gold

24:55 Yeah, you're right. that you dropped for us. Yeah, my greatest referral, you know, benefactors are financial advisors and bankers that like my work and have seen it work. And they become my clients and then all of a sudden, they always have to give three, you know, as a rule for compliance, they have to give three names, but they always say really good things about me. So, it makes a big difference that I'm easy to work with and I explain everything to the client. And so, to answer your initial question, it usually takes about 2 hours in the beginning to get everything figured out with the attorney. And then I always spend 2 hours with the client at the end to make sure we read through it and understand it all before they sign it. So, the client is spending about 4 hours with me learning all of this. It's a lot of education. I don't think most attorneys spend that much time with clients in my experience.

25:45 No. but I think that the clients deserve it because for the rest of their life, they're going to have to be the expert unless they call me on how do I put everything in my trust?

25:57 Yeah. And I want them to feel confident and an expert at how I put everything in my trust because they're often the one who has to teach the banker how does this work? How do I name my trust? What's the tax ID number? I have to educate the client to that so they feel confident walking into a bank. so then I ask the client, you know, as things changes happen, I'm going to send you the flash drive with all the documents so you have all the working versions. God forbid something happens to me, you have all your documents, you can walk into any attorney and say, "Help me, I need to update this." Or if you don't need legal advice and you're just changing a bank account number or you're just changing, you know, the name of your dog or something, you can just go in and make the change yourself. Reprint the document, resign it, re-notarize, re-witness, whatever needs to happen with that document. I want to empower my clients to feel really confident doing anything that doesn't require legal advice. And then, if they need legal advice, they call me. So, I always try to send out a newsletter once a year to remind clients if there's changes in the law or and you know, remind them, "Oh, if there's been a big change in your life, you've got new somethings, you bought a new house, you've got a new business, you just had a new grandchild, whatever, don't hesitate to call me and say, 'Hey, do I need to update my trust because of such and such?'" And I'll say yes or no. And then I can tell them it'll probably take us 20 minutes. We can do it together on Zoom. You don't even have to come into an office. And I'll send them to you in the mail. You sign them, we're good. So, that's really been working well to empower my clients not to try to control them and figure out ways like keeping their will in my safe or something so that I'm the only one who can make the changes for the rest of their lives. I want to empower them to have all the documents. They can make changes. Most of my clients are college educated and can make their own computer changes. Mhm. Legal advice is a different matter. And so, I My job is to teach them what are the red flags when they need to call me for a legal matter. not for updating bank account numbers or new houses they've bought.

28:04 Right. Well, look, there's a lot to cover. We've kind of come to the end of the time we have here. Heather, I really enjoy always when we talk together. I feel educated and I think more importantly inspired just to take the next steps that I do on my own. And I think that's the message you try to get to your customers is empowering them, educating them so they can be sufficient on their own. and then call you when they need advice. really enjoy our time today. For those who want more information from Heather, her website is heatherreynolds.com. And we'll put it up here. And if you go there, not only do you get to see a picture of the Golden Gate Bridge, but if you scroll down, you can schedule an appointment if you want to talk to her. clicks you can get some time with her. Oftentimes people ask me, "Well, what's the cost to talk to an attorney?" In this case, a good estate planning attorney. In this case, go to heatherreynolds.com, click set appointment, and start the process there, and you're off to the races. Heather can be reached phone number [phone number shown on screen]. If you can't write this down, you want to reach out to me, feel free. If you're driving or something, we'd be more than glad to make the introduction. And Heather, again, thank you so much for coming on today and educating us about the importance not just of having a state plan, but having an effective plan and having a plan to effectuate the plan that we have. So, thank you so much.

29:12 You're welcome. Thanks for having me, Bill. Great speaking with you. And for us, this is Probate Weekly, where we get together week with either probate attorneys or litigation attorneys, or in this case, an estate planning attorney to avoid probate, what the key issues are. I think we learned a lot today about that. Anybody who owns a house, in my opinion, not legal opinion, but business opinion, anybody who owns a house, is married, or has kids, should have at least a plan or talk to attorney to explain why you don't need one if you don't need one. If I can help in any way, please reach out at Bill Gross Probate. Love your comments, likes, shares. If I can help in any way at Bill Gross Probate on social media. As always, make today your best day ever. Thanks so much.