0:02 Who are you?
0:03 >> [music]
0:05 >> And where are you going?
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0:10 >> What do you want?
0:18 >> Hello and welcome to Trust & Estates Weekly. I'm your host Kevin Bemel and I'm here every Monday at 10:00 a.m. Pacific time to talk about estate planning and trust and probate administration. Uh a lot from the perspective of professionals like myself and my guest Paul uh who do this for a living, but also for those of you who um you're not doing this for a living and you know maybe you you were made the executor of you know your parents' will and now you're caught up in this uh crazy process of dealing with the court
0:54 and heirs and all that kind of stuff and you're trying to figure out what you need to do and and how to communicate more effectively with your advisors. So, today um I'm very happy to introduce to you uh Paul Velasco. So, Paul and I have known each other I I think for a couple of years now. Uh we're actually working on a case together. Um from not the most usual case I suspect um in [laughter] in that that Paul has ever handled, but we'll see if that comes up in the conversation. Um but um um
1:30 Paul is a a probate and trust attorney um as you can hopefully tell by the Esquire after his name. And uh Paul, thanks so much for uh for coming on the show and talking with me today.
1:41 >> Yes, of course. Thank you, Kevin. I appreciate the opportunity to speak with you, your your fans on your podcast, and happy to give a little bit more information about what I do and the probate process and trust and estates in general.
1:55 >> Great. So, why don't we start out by just talk a few with a little bit about your background so people can get an idea of who you are, you know, the kind and breadth of the experiences you've had.
2:09 >> Sure. Sure. So, I've been in practice for 28 years. The first 5 years of my practice after law school, I worked with a couple of different law firms doing mostly corporate transactional work, some civil litigation, and then tax and estate planning work. That was the last firm I worked with. And after that stint, I decided to go out on my own. I wanted to kind of focus on estate planning and probate and trust administration. So, I decided to do that. I struck it out on my own with a partner. We opened up our office in Long Beach. And there we started to grow fairly quickly. We focused exclusively
2:46 on estate planning, probate, trust and estate administration, trust and estate litigation, conservatorships, guardianships. So, kind of the full gamut of that and then eventually we started to get a lot of work in trust and estate litigation area, which as you know, requires a lot of resources, assistance, and paralegals. And so, we grew rather quickly. And before you know it, now we have a team of about 25 people, seven attorneys,
3:11 >> Wow.
3:11 >> uh you know, numerous paralegals and assistants, and all dedicated to this area of practice. We have offices in Long Beach, Downey, and Irvine. And we service clients English, Spanish speaking. The clientele of ours are Spanish speaking clients. You know, the Latino market is very underserved in this area.
3:31 >> Mhm.
3:32 >> Generally speaking, 65% of Americans don't have any estate planning in place. And when you look at the Latino market, it's more like 75%. So, a lot of people who are without the proper planning to avoid the kinds of things we're going to be talking about, probate. So, it's it's been a great really I I a labor of love for me.
3:53 >> Mhm. I very much enjoy, you know, working with clients, working with people, and not just in one capacity. [snorts] I I'm able to do that in the in a transactional capacity when we do estate planning, but also many situations we end up in court either because uh the families did not plan properly and we're now in probate, or there's something that's gone wrong with with the plan. Either it wasn't done correctly and we're in court trying to resolve issues or problems or ambiguities, uh or because families are fighting. They're contesting the trust, contesting the will, uh or there's fiduciary litigation because trustees
4:28 and executors are not doing their job, not following through, and we have to take them to court to try to remove them. So, uh we do the full gamut of that. So, all of us are dedicated exclusively to estate planning, probate, and trust law, and I am a a certified specialist in that area.
4:42 >> Got you. So, you know, before the show we were, you know, kind of talking about the topics we would cover. Um I'm going to I'm going to depart from that at least a little bit because I'm I'm interested in in the statistic that you you brought up that um while 65% of people don't have an estate plan, 75% of Hispanics do not. What Why do you think that disparity exists?
5:07 >> Well, uh I think of it as just a a lack of information. Uh there's not a whole lot of information out there in the Spanish market uh for estate planning.
5:17 >> Mhm.
5:17 >> Probably also generally there there are very few Spanish-speaking estate planning attorneys, relatively speaking. Uh I think there's only one other certified specialist that Hispanic in California. So, there are maybe a maybe a handful now. Uh very few Spanish-speaking to serve a very big market. And so, I think that's one part of it. I think there's just a sometimes a mistrust in general of of attorneys and professionals or maybe even a fear of speaking with the professional.
5:47 >> Mhm. Also in the Latino community, uh people are very superstitious. If they talk about things like death and incapacity and problems, then they can't have a sense that those issues are going to be, you know, are going to come up and they're going to have to deal with them, which they are going to anyway, but it's important to be prepared. And so it's just really a matter of educating the public. And we do give a lot of presentations so that people have general understanding of what estate planning is, kind of dispel some of the the misinformation that's out there. There's a lot of misinformation on the internet. And so we answer questions. Once people
6:22 have a better understanding of what the process is, and it's really not that difficult. Once you sit down, what what the most common the most common comment I get from both English and Spanish speaking clients is that this was not as hard as I thought it was going to be. Once we sit down and actually do it. So it's really a matter of educating people, giving them the opportunity.
6:41 >> Yeah. I mean, and I think in that regard, that that's that is it's it's it's getting them kind of in the door, so to speak, um to do it. That that seems to be the kind of universal hurdle.
6:53 >> Yes, exactly. And a lot of them, you know, have other professionals or friends or family members who have done estate planning and have recommended us. But it's it's it's really important just to to get them to understand that it's something that's very simple. They sit down and they're very comfortable, especially speaking in their own language. And that's probably another barrier because there are not so many estate planning Spanish speaking estate planning attorneys out there. Many of the people that they would have to meet with are English speaking many attorneys and maybe they'll have to have one of their children translate for them. And it's just not as comfortable speaking in your own language. Many of my Spanish
7:28 speaking clients do speak English also. They just feel more comfortable speaking in Spanish about things that are the most important to them, their family, their finances, their estate planning. So yeah.
7:37 >> Yeah, sure. That Yeah, that make that absolutely makes sense. So you you you been in the you know in this area of of the law for you know a long time, 28 years I think you said. So, how have you seen it you know change and develop over the almost three decades you know during which you've been involved?
7:57 >> Well, on the estate planning side there's just more and more people. There's more information now out there on the internet. People can find attorneys more easily. There's a lot of information that's out there about you advertising their services and so it's a lot more available now than it used to be and so a lot more people are doing estate planning. Even though it seemed like a a very low number because if you're looking at only 35% or 25% of Hispanics have actually done estate planning overall, but it's really it's growing and so there's a lot more information out there, a lot more opportunities to to do estate planning
8:33 and so that has grown a lot since the beginning of my career. I used to have a lot more probates. I still we still still do a lot of probates, but we used to have a lot more than we do now. So, it's it's kind of now people are getting the the catching the wave and really understanding how estate planning can work and to avoid the probate process. So, in that sense the estate planning I think it's just more popular. People are actually getting more information and doing it now. On the probate side things have changed a lot especially since the pandemic where the court process has now take much longer. It used to be that you could finish up a
9:09 probate probably within a year and nowadays it's not like that anymore in either Orange County or LA County or some of the surrounding counties. But it's and I think it's largely due in part to just the number of cases that each probate judge has to deal with. On a daily basis they're dealing with 45 to 50 cases a day and they just anytime you're in a hearing where it has to be postponed or continued it used to be the postponement was maybe 30 or 45 days, but now it's more like 3 or 4 months before you get to the next hearing. Uh even for small issues that have to be corrected, you're still looking at 3 4
9:45 months down the line. And if there's litigation involved, you're looking at years before the case gets heard. So, in that sense, on the probate side, the biggest change I've seen is that it takes a lot longer for it to go through the probate process. Yeah.
9:57 >> Yeah. Um [clears throat] what kind of changes, if any, has there been um in in the actual law itself? Um I mean, you know, the probate laws date back literally hundreds of years, right? To both to both uh you know, English and Spanish law, which is kind of the mix we have here in California. Um on on the other hand, you know, law does does change from time to time, and as I think about it, I I don't believe I've addressed this question to anyone before, but I I think it's an interesting one to explore.
10:33 >> It is. It is. On the estate planning side, in the laws, yes, the laws change, you know, constantly in this area, but typically not in a huge way, not in a way that affects people's estate plans. Like, if you already have a plan in place, most of the time laws are not going to change in a way that requires you to go run to your attorney and make changes to your trust. Most trusts, if they're done correctly, are drafted flexibly enough to account for changes in the law. The biggest change that occurred in the law in the estate planning side is that the tax laws, right? Back 25 years ago, when I was practicing, the the amount that you could give away tax-free was a million
11:09 dollars, right? That's it. You could only give away a million dollars tax-free. Everything else was subject to estate tax at a rate of 60%. So, it's a very huge, very onerous tax, and many people were affected by that. So, nowadays, you know, the the exemption over the years has increased. As you know, today it's 14.99 million, basically 15 million dollars that each person can give away tax-free. And so, on the planning side, most people who who pass away and who have their estate plan are not going to be looking at a taxable estate. Whereas, prior to that, uh many people did have to pay estate taxes or had to do some advanced
11:44 planning to avoid or minimize or reduce those estate tax hits. So, that's the biggest change that I've seen in the laws over the years is that the exemption amount has increased over time. In the history of the estate tax, that that exemption has never gone backwards. It's always increased over the years. Yeah. And And there have been times that you may recall where the estate tax was scheduled to come back, right? That the law was set up in a way where back in 2010, there was no estate tax at all. The estate tax was completely eliminated. And then in 2011, it was scheduled to come back and then you only had a $1 million exemption.
12:20 >> [clears throat]
12:20 >> And so, but that didn't happen. The The The Congress kicked the can down the road and they said, "Well, no. We're going to make it a $5 million exemption now." And then carried that for 2 years and then it increased again. So, over year over the years, while there have been some situations where uh the the Congress has said, "Okay, um in this year, the exemption's going to come back down." It never actually happens. Laws get passed to increase it. Uh and so, today it's it's at $14.99 million. Uh and it's indexed for inflation. So, every year it's it's going to increase just a little bit here and there. So, I don't think the estate tax will ever go away, which is what, you know, most of the On the Republican side, most people
12:56 would favor just uh eliminating the estate tax completely. I don't think that'll ever happen, but the exemptions are now high enough to eliminate the estate taxes for most people. And so, the planning side, that's the biggest change that I've seen. On On the probate side, there has been, you know, little changes in rules here and there, but nothing that really affects uh probates. In fact, the the the fees for attorneys and executors have been the same since I started practicing. Those have not increased over time. Those have stayed the same. Uh it is onerous there pay those probate fees in any event. But uh what I have seen are changes, for example, like the
13:32 most recent change that took effect in April of last year was that uh for your principal residence, if you pass away and you have a principal residence that's worth $750,000 or less, you don't have to go through the entire probate process.
13:46 >> Mhm.
13:47 >> That can be passed on with a much simpler process that typically takes about 4 months, much less cost, not all the probate fees, not all the publication and other things that you have to do in a full probate. So, that has changed a lot and has helped a lot of people. Now, California, you know, for the most part, uh depending on where you live, your your principal residence is likely going to be valued higher than $750,000.
14:10 >> Right.
14:11 >> Uh and if you have other properties other than your principal residence, uh those are not included. It doesn't matter what the values of those are, they're still going to go through that probate process. But at least for that principal residence, many many people have only one property, it's their principal residence, and some people and maybe, you know, in many of my in my clients in the Latino communities, live in areas where the values are around that or less, and so it it helps them. Uh but that's the biggest change that I've seen recently in in probate.
14:38 >> Yeah. And so um um couple of thoughts. Going first of all to to your your uh uh discussion about the estate tax. So, it is interesting because you as you noted, last I think it was last year, um we were looking at poten- No, I'm sorry, not last year. I think it was the year before last. We were looking at there being a a big drop in the exemption, right? And I talked to a lot of people who were concerned on especially on the estate planning side, "What do we do? Do we estate plan as if it's going to go down? Do we ignore right?" It becomes That becomes the real dilemma that I
15:14 think that that happens on the estate planning side. And so, you know, in in the end, you know, it it it didn't go down, but I know it caused a lot of consternation. And And and I'd be interested to know how you dealt with it notwithstanding that, you know, hopefully we won't hit that, you know, cliff again. I'm curious to know, you know, how did how did you advise people or because it was already so high, was it not really an issue?
15:43 >> Well, no. I mean, it would have been an issue for sure if the estate tax had come back down because we were talking about coming back down from a 12 13 million dollar exemption to 5 million or less. We didn't know what it would be and so you know, that would be a huge drop and for many people who were planning on being able to pass their estate along to their family to future generations without incurring an estate tax, that would be a big problem. And so there's there were there were estate planning tools that we can use. Now, we didn't know whether or not that was going to happen. Nobody really knew. My my educated guess was that again, the
16:19 history shows us that it's never gone down and that, you know, you're not going to want to be if you're in Congress or you're in Senate or the house, you're not going to want to be the one that was known as the person, you know, who voted to bring it back down. And so I just didn't think it was ever going to happen. I thought I figured that those exemptions would be set in place and that they would be made permanent which which they are now, right? And indexed for inflation. Until the law changes again in the future, who knows what happens. So yes, there are there were ways that we could do planning that would help to use up their exemption, right? Like either gifting or doing sales to defective grantor trust
16:56 using up your exemptions. You can do SLATs, spousal lifetime access trusts that would allow you to use up your exemption. So there's there were planning tools that we talked about you know, with clients and prepared them that we may have to do this if we don't know what what direction we're heading towards the end of the year. so, we would wait because some of those things are irrevocable, right? You don't want to do something that's irrevocable when you didn't have to do that.
17:21 >> Right.
17:21 >> So, we talked to our clients about those situations and prepared them.
17:24 >> Yeah. Yeah. Okay. And so, then on the other topic of um the probate code changing so that if someone has a house worth $750,000 or less. So, uh how how would that value be determined? In other words, presumably if if it were, you know, God forbid, you know, my my mother died, you know, and I show up in court and say, "No, no, no, judge, it's only worth, you know, $699." Right? Presumably, the judge isn't going to take my word for it.
17:54 >> That's right.
17:55 >> But so, how would that be determined?
17:57 >> Yeah, that's established using uh probate appraisers, right? Probate appraisers, we call them probate referees in probate. Uh they are tasked with appraising properties for probate proceedings. And so, you would actually have to get a determination from a probate appraiser what the value is. And then once you have that determination, usually in in a regular probate, you don't do the inventory and appraisal, appraising the property until after the probate has been opened. The probate gets opened, and within 90 days after filing the initial letters of administration, you have to file your inventory and appraisal. And so, uh you typically won't do that until later. But in a situation like this, before you
18:34 file the petition, you have to file you have to request a probate appraiser to appraise
18:39 >> Oh, okay.
18:40 >> So, that appraisal gets done ahead of time. Once we have that appraisal, now we know. Now we know that we can use that process. Yeah. So, that's how it works.
18:47 >> Got Got it. That that that makes a lot of sense. I mean, you know, on a probate that small, someone like me wouldn't wouldn't be involved. It's, you know, um and so, I've never I've never actually worked through that process, but it makes sense. So, and it's it's it's sort of reversing the process. Once you know the value of the property, then I guess you know whether to file for kind of this abbreviated probate or or if it's too high, then I guess you have to file the the full probate at that point.
19:13 >> Correct. Correct. And And it's important to know that that that's only available for decedents passing away after April of 2025, April 1, 2025. If you die before then, that law does not apply to you. So, you have something where there's, you know, a probate somebody has died a year ago, 2 years ago, 3 years ago, and they just never gone through probate, and now they're ready to go, that you're not going to get the benefit of that change in the law. You'll have to go under the prior law.
19:36 >> Okay. So, let's take a quick sponsor break, and we'll come back and talk
19:40 >> some more. Okay.
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20:29 >> So So, Paul, you you you talked about how um you do a lot of uh educating people so that they can understand the process, the value of um you know, the estate planning process. And again, this is kind of diverting from uh what we talked about before the show, but I I think it would be interesting for viewers to um at least get a bit of a sample of what are some of the issues that you highlight for people when you're uh helping helping them understand uh why they should go through
21:05 uh you know, why why they should prepare an estate plan, right? Especially since what, you know, somewhere between 2/3 and 3/4 of people don't. So,
21:15 >> Yeah, what people don't understand is that everybody has an estate plan. Everybody. Everybody has a will. Either you did it yourself or the state of California has the will for you. And that's what most people don't understand. When I ask people, "What's going to happen to your property if something happens to you and you don't have any planning in place?" Many people think that it's going to go to the state. No, it doesn't go to the state. It's going to go to your heirs, right? And in the probate code says, "If somebody dies intestate without a will or trust, these are the people who will inherit from you." It may or may not be the people they would have chosen. But, why would anybody leave it up to the state to decide who gets to their
21:51 property. They should get to decide that. And so, that's the most important thing about estate planning is you get to decide where your property goes. And not only that, but how your children and family will receive that property. And that's And I talked about not only the importance of estate planning and what it entails and what are all the documents, but that, you know, it that you can do some amazing planning for your family if you set things up correctly that you're going to miss entirely if they end up just going through probate and getting your property. You're going to get the property, yes, but there's so many ways that they can do it. It And And the biggest mistake that I see people make when they do their estate
22:26 planning is doing it by either going to paralegals who don't know what they're doing, like We the People and outfits like that, who just have these boilerplate documents that, you know, they can put anybody's name in and it just is very very vanilla. There's also uh these programs that you find online, like you know, What's that one popular one that everybody uses, LegalZoom? When they try to do things themselves, RocketLawyer, and they have these plans. And what people don't understand is that
23:01 you don't know. You're not going to know whether these documents are done correctly. If you don't go to an attorney and somebody who specializes in estate planning, you're not going to know whether the documents are done correctly. And with estate planning, it's not something that you use immediately, right? You do these documents in preparation for something that may happen to you in the future. And it's only then that they're going to be brought out and used. And if it's only then that you're finding out that they weren't done correctly, well, it's too late to do anything about it, right? So, it's really, really important that if you're going to do anything, it's like anything else in life. If you're going to do something, just do it right. Go to the right people, to the experts who can help you and set things up. Because if you do proper estate planning, there's some great things that
23:37 you can do for your family that many people miss. In I would say 99% of the trusts that I reviewed that are prepared outside of our firm, um they miss this planning opportunity for their children. So, that when they pass away, there's two ways to leave your assets to your children. Two two main ways. One way is what's called an outright distribution. It just says, "When we pass away, our trust terminates, you know, our trustee settles our final affairs, but our trust will then terminate, and all of our property goes to our children, and then it's theirs to do with whatever they choose." But the other way to do it is to keep the property to keep the trust going, to
24:12 keep the property in trust. So, that when somebody passes away, when parents pass away, the property then goes to their children, but in trust. It remains in the trust. And now it becomes a trust for each of their children. I have two children. When I pass away, my daughters will inherit from me, but my trust is not going to end. It's just going to split up for each of them. You know, trusts will continue. Those are referred to often as generation-skipping trusts or dynasty trusts. And the idea behind that is that you get certain benefits that you won't get by just giving them an outright distribution. Number one, protection from creditors. If they in the future are sued or
24:48 somebody comes after them, we live in a very litigious society, unfortunately. Things can happen. If they're in this trust that you've left for them, very difficult for creditors to attack that and to be able to grab get those assets. Number two, protection from divorce. If in the future, my daughters who are married get divorced, those assets that we've left them in this trust are not going to get divided on the in their marriage because those are not those have been separate and segregated as their separate property inheritance. It's never going to get commingled with their marital assets. So, keeping it separate. And then the third benefit they get is that when they pass away, it
25:23 says where the trust already says where the property goes. It goes to their children. So, this is already set up for future generations with all those same protections. Now, I I give them the power and you can give your children the power to change that to say that it once you pass away and it becomes theirs, if they want to change it to leave it somewhere else, they can do that, but they have to exercise that power in writing and if they don't, it's going to go the way that I said it was going to go and it's not going to end up in a probate somewhere where it shouldn't.
25:48 >> [snorts]
25:48 >> So, setting things up that way is is an amazing benefit that everybody has the opportunity to do, yet few take advantage of it either because they don't go to the right people or they just don't know that that's out there. So, biggest I think one of the biggest mistakes that people make is failing to provide protect their family in future with the proper planning.
26:06 >> Right. I I'm and and that's interesting that you brought up the issue of, you know, kind of generation skipping dynasty trust because you're right. Rarely does that get discussed even even with, you know, you know, on on my show. Um the you know, the the the other thing that you that you mentioned um that you know, look, either, you know, either you make your own will or you use the will that you know, the state of California has for you. You know, one of the things I always highlight to people is rarely will the cost of going through
26:43 probate be less than the cost to do an estate plan. And I I I think that people have this idea that it's it's it's so expensive, but to get through even a basic probate these days, you know, you're you're easily talking 20 to 25,000 dollars or more between lawyers, the the fiduciary, the court fees, all that kind of stuff. And uh I I I I I'm I'm wondering, you know, how do you talk to clients about
27:20 you know, this aspect of of doing their estate plans? Because I can imagine, too, that some people tend to be, you know, penny wise and pound foolish, if you will.
27:28 >> That is true. That is true. Certainly, um you know, economics come into the picture when people are doing their estate plan, and they want to know what it's going to cost. But what I show them first is what it's going to cost their family if they don't do planning. And I literally bring out the sheet that has those numbers. Because the the fees for a probate, for attorneys and executors, administrators, are based on a sliding scale, right? It's a percentage of the estate. And so I show them the numbers. If you have a $1 million estate, the attorney's fee is 23,000, the executor's fee is 23,000, there's about 5 to 7,000 dollars in other court costs. You're looking at over $50,000 just to probate
28:04 your house in California. And the fees will go up beyond that if that if the estate is higher, and if there's litigation or any issues going on, the attorneys can charge, you know, additional comp for additional compensation. So, very onerous, very time-consuming. It's now a year and a half, closer to 2 years, to close a probate. So, we when we when they hear that, that just that just opens things up for them. They're they're shocked. They had no idea that's how much it would cost. So, then when you talk to them about what it costs to do an estate plan, whether it's a few thousand, it's typically between 3 and 5,000 dollars for basic planning. There's, you know, advanced planning beyond that, and it costs a little bit more, but for basic
28:39 planning. So, when you compare that to what your children are going to pay in a probate, it's it's really a no-brainer. People understand that, and they see the value of doing estate planning. So, yeah, it's expensive to
28:49 >> Yeah, for sure.
28:50 >> Yeah. Not only that, but, you know, uh if you were receiving any type of government benefits like Medi-Cal, if you're going through probate, there's going to be creditors claims, right? The the state is going to be able to file a claim, uh Medi-Cal recovery claim to recover that money. And I've been involved in many situations where the claim is hundreds of thousands of dollars and often just wipes out the estate. Whereas, if you have a trust, Medi-Cal cannot seek recovery with assets for assets in a trust.
29:16 >> Oh, interesting.
29:16 >> Yeah, it's it's a it's a big thing. And And so, there's a lot of different ways that people can save money, not only attorney's fees and executor's fees, but also creditors claims and things that happen in a probate that are more difficult for creditors when you when all you have is a trust.
29:29 >> Mhm.
29:30 >> Mhm.
29:31 >> So. [clears throat]
29:31 >> Fascinating. Fascinating. Um shoot, I had a follow-up question and now and and now it went away cuz you brought up the Medicare thing, which which I I didn't realize Medicare can't uh you know, can't in essence make a claim against a trust. That's
29:44 >> And and the law changed in 2017. In 2017, prior to that, you uh Medi-Cal could recover uh assets that were held in a trust. And so, people would do Medi-Cal planning. They would create irrevocable trusts and ensure that those passed outside of their, you know, probate estate. So, so yeah, it it was very very important to do that kind of planning back then, but now, since 2000 January 1, 2017, the law has changed and now, if it's in a trust, no probate.
30:10 >> Yeah.
30:11 >> And no Medi-Cal recovery claims.
30:13 >> Yeah, very good.
30:14 >> Yeah.
30:14 >> So, so switching over to the administration side now, um talk about some some of the common uh issues that that that you end up wrangling with, you know, because people didn't do a trust. Um oh, so this was a this it was actually more of a follow-up comment. I think what what what people don't understand is the the flaws in their estate plan don't get exposed until they're gone.
30:47 >> Right.
30:47 >> All [laughter] right. And then it's their heirs who are dealing with whatever was done incorrectly, right? And so now, you know, here you you know, here here we are. Now we're in probate. So what are some what are some of the common issues that you see um you know, that that end up that end up being dealt with in probate
31:07 >> Yeah.
31:07 >> because there wasn't an estate plan or maybe because you know, the estate plan was not done um as optimally as as it otherwise might have been.
31:16 >> Yeah, yeah. I'll talk about a very common thing, very common mistake that people make in their estate planning and it's a crossover between trust and estate planning and probate. So what happens is that when you create a trust uh let me set it up a little bit. When you create a trust, it's not enough just to have a trust. There are other documents that are going to be part of an estate plan, a complete estate plan including powers of attorney and advanced health care directives and things like that. Also, everybody who signs a trust should also sign a will. And a will in this context is different. You don't need a will that says where all your property goes when you pass away. The trust already does that. But you need a will as a backup in case when
31:52 you pass away, there was something that was inadvertently left out of the trust. Maybe some bank account or stock that you forgot is still sitting in your name. A lot of times people will initially put their property into the trust and then later they'll do a refinancing of their property and many situations that property they don't even know it, but in all the paperwork they signed for a refinance, property comes back out of the trust and into their name and then it never gets put back. And so they pass away and that property sitting outside the trust. So the will catches those things. The will says at my death, I leave all of my property to my trust. So anything in my name goes to
32:28 my trust. It's referred to as a pour over will because it pours everything into the trust. That's the idea. If it's not [clears throat] in the trust when you pass away, the will will get it there. The problem with relying only on the will to do that is that wills get probated. Wills are subject to probate. That's why a will is not enough for estate planning. If all you do is a will, it's better than nothing because in a will you get to name your beneficiaries and we don't get to rely on the state the state California's will for you. You have your own will that says where you want your property to go. Unfortunately, it's not enough. It's still going to get probated. So, the problem with relying only on the pour-over will to get everything into
33:04 the trust it still has to be probated. And the whole idea or the main idea of doing a trust is avoiding probate.
33:10 >> Right.
33:10 >> So, how do we do that? Because my clients make mistakes, too. My clients I tell them how to we initially when we help them to set up their estate plan, we do all the deeds for their properties to get them in the trust. We record them for them. We prepare letters that they give to their banks and financial institutions to make sure that everything's titled properly in the name of the trust. We help them to fund the trust because an empty trust, you know, if you think of a trust as a box into which you're putting all your assets so that when the trustee opens it up, they have access to it and we can avoid
33:38 >> Right.
33:39 >> Oop.
33:50 >> Oh, that was weird.
33:51 >> Yeah. [laughter] I'm here. So, what I was saying is that if your if your box is empty because you you didn't properly fund your trust, then you you're going to end up having to go through probate through the pour-over will and get it into the trust. So, my clients make mistakes, too. As after I do the plan and we get everything in there for them as they go through life, they're going to acquire new things. They're going to open up new accounts. They're going to buy new properties [clears throat] and many times they'll forget to put things in the trust. So, what we do in the trust, there are provisions that you can include in the trust that allow you to avoid probate even in situations where they make a mistake and they inadvertently leave something out. It's these provisions are
34:27 from a case known as the estate of Hegstad. There was a case that was decided back in 1993, uh more than 30 years ago, in which a gentleman, Mr. Hexstead, did a trust. He had many assets, including many real estate properties that he put into the trust, but there was this one property that was specifically left out. It was not titled in the name of the trust at his death. So, when he passed away, they were going to have to do what you would normally do, probate the will, and then get that property into the trust. But, instead of doing that, instead of filing a petition for probate, the attorney made a petition in the trust court, and asked to recognize Mr. Hexstead's intent. His
35:04 intent was that that property, too, was supposed to be part of the trust, and we know that from the trust itself, because at the back of the trust, he made a list of assets, and on that list was that one property that was inadvertently left out. So, So, the lawyers made the argument that, "Hey, that was a transfer to the trust. We don't need a deed to do that. The transfer was on the schedule. We want the court to issue an order saying that that transfer into the trust on the schedule makes it part of the trust estate." And the court did that. The court agreed. So, that was 30 years ago, but today, those petitions that we file with the court to get those into the trust to take advantage of that case are referred to as Hexstead petitions.
35:40 We're getting asking the court to confirm a property that was outside the trust that it is part of the trust, because we know that from the trust itself. Now, you can only take advantage of that case, of that ruling, if your trust has the right provisions. Uh so, in that case, we needed to know what was Mr. Hexstead's intent. Even the property even though the property wasn't in the trust, was in the terms of the trust that it showed what his intent was. So, in all of our trusts, we do a general statement of intent. It says, "Look, our main purpose in doing this trust is to have a plan for the distribution of our property to our family, but also to avoid probate. And therefore, if we make
36:16 a mistake, if I inadvertently leave something out, I want the court to issue an order like they did in that case, the estate of Hexstead, and put everything in the trust without probating it." I state that that case specifically in all my trust. At the back of the trust, I do what that case did. I list all of my clients' assets at the time that they do their trust. Everything is there. Their properties, their investments, their accounts, their business, everything. And then a catch-all at the end that says, "Not only these things, but anything else I may acquire in the future." Such as real estates, investments, timeshares, copyright, a non-exhaustive list of things that may acquire that would also be considered to
36:52 be part of the trust. And in the 28 years I've been doing this, never once have we had to probate one of our trusts because we they will always be able to use that Hegstad petition, which is a much shorter, much easier petition, much less costly than going through probate. So, if you have the right provisions in your trust, and I will say most trusts do not have those right provisions, you'll be able to take advantage of that Hegstad case. If you don't, then your estate's going to end up going through probate. And so, we do have a lot of situations where clients come to us, they do have a trust. Unfortunately, things are left out and we still have to go through probate because they don't have the right provisions in the trust. So, yeah, that's we see we see that a
37:27 lot. So, hopefully, you know, you can if you if you set the right provisions in the trust, you have the schedule of assets, you have a statement of intent, it's pretty much a slammed up, you know, to get a court order after that.
37:39 >> Very good. Let's take another quick break and we'll come back and talk some more.
37:42 >> All right.
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38:23 searching. So, we we we talked about um one of the most common uh issues um that that you deal with in probate. Um what are some of the um unusual uh issues that you've had to deal with in probate? Um you know, this may be more helpful for, you know, professionals, um but uh you know, they do come up even for, you know, a lay person who's the executor of a will.
38:56 >> Yeah. So, a common issue that we deal with, and I would say it's at least maybe five to 10 times a year, we deal with it and again, it's prevalent mostly in Hispanic community, but not not uh exclusive to that. And that is this, is that uh in situations again, especially in the Latino community where the husbands are the ones that manage all the assets and the finances, right? Often times, they're the ones that have all the property in their name. Uh maybe they bought a house, you know, 20, 30, 40 years ago together, and when they bought it initially, both were on title, but then they're later going to do a
39:31 refinancing, and they do a refinancing where the spouse comes off the title because the spouse is at home, doesn't have a job, is not working, doesn't have, you know, great credit. Uh whereas if you just have the husband on title, they're going to get a better rate of interest rate, whatever the case may be. There are issues that come up like that, and so you have these situations where spouses then sign off, and they put the property into the husband's name as sole and separate property. And then that person passes away. And the question is, okay, well, who's entitled to that property? And many times there is no trust or will. And so we have to go by
40:06 intestacy, right? Now, in a marriage where everything is community property, and somebody dies, everything goes to the spouse. All community property goes to a spouse, right? And if the spouse has to file a petition with the court to get that property in their name, they file what's called a spousal property petition that says my husband's passed away, these assets are ours, our community property, they all belong to me. And therefore, the court can just issue an order after that. No probate for a spouse where their assets going to a surviving spouse, so we get to avoid that. The problem is that this property, because often the deed says that it's in
40:42 that person's name as sole and separate property. Well, separate property does not go all to a surviving spouse, it gets divided between the children and the spouse. So, many times it's more than one child, so it's 2/3 to the children and 1/3 to the spouse. And you know, this is this is often a marriage of long-term, 25, 30, 40 years, everything is in their, you know, in the spouse's in the surviving spouse's name already, except these things, except the real estate. And so, we end up having to go through and the court is not going to take the argument anymore that it's community property. When somebody dies, the presumption isn't anymore that it's
41:19 community. When you're going through a divorce and you acquire property during the marriage, there's a presumption that property acquired during the marriage is community property, right? Not so when somebody dies. The presumption is that the title controls. Whatever the title says, that's the presumption that it's separate property. And so, in this case, you have to overcome that presumption. In many situations, we have to overcome that presumption to say, "No, this really belongs to uh the the there was no intention to to transmute the character of the property from community property to separate property.
41:54 The the wife who signed didn't really understand what she was signing. Nobody really explained it to her. She thought it was just part of the refinancing process and she thought that she was still on title after everything was said and done. Didn't find out till later that she wasn't. And that what she signed was a deed putting it into her husband's name." And so, we show those things to the court and often, I would say 99% of the time, we get a ruling that the court agrees with us. And there've been in situations where there's children from a separate marriage of the deceased spouse, and they're going to fight that. And so, we often end up in a situation where we're working through a settlement. But, in many of these cases, we're able to show
42:30 that no, that the intention really was that it was supposed to be community property. We can prove that it was community property, notwithstanding the form of title. But, you're it's not going to be something that's easy. You have to make arguments. There are cases that you support you, and you have to overcome that presumption in court.
42:46 >> Right. And and generally speaking, is is the court more likely to hear positively a petition in in a situation like that for, you know, the personal residence of of the couple, or does it look at equally this does it look at the same for, you know, maybe they had a an investment apartment building or or some other piece of property? How does the character of the property impact how the court looks at that issue?
43:18 >> Yeah, so it's not so much whether it's the principal residence or rental properties or any other type of property. It's more than the facts surrounding Well, how did this get changed, right? If it was Sometimes it was never in the spouse's name to begin with. The husband just took title from the in the beginning. And so, the court wants to know what's the background. What actually happened? In many situations, we can show that again, it was a refinancing, and we can show that the trust deed, the deed of trust that was at the same time of that deed. So, there was a refinancing. That's why this was done, but it was never explained to the spouse. Spouse didn't really know. In many situations, spouses the the the
43:53 Latino and Latino community, they don't speak English. They don't read. And so, they had no idea. In order for there to be a transmutation, a change from community property to separate property, it has to be knowing and voluntary. You have to know that you were signing something in which you were giving it all to your spouse. Now in a in a particular case that's that we that we cite, there are situations where somebody signing a deed to their spouse as sole and separate property can be a transmutation. In the one case, the spouse who signed the deed knew that what she was doing but knew that they were going to get a lower
44:29 interest rate. And so she she kind of got the benefit of her bargain when the court says, well, you knew what you were signing. You were going to get a benefit out of that. You bargained for that. So yeah, this is not you know, this is knowing and voluntary. So we're going to say that yes, that deed constitutes a transmutation. But in a situation where somebody doesn't know what they're signing, it's never explained to them and it's done in the context of a of a refinance and no really intention to give everything to their spouse, then the court's going to look more favorably on that. And of course, the the C spouse is not there to testify or anything and so in many of those situations, the
45:04 children does it is helpful for the children to sign consents that they consent to the spousal property petition so that it ends up going all to the surviving spouse. So that's that's what ends up happening. The court will look at the evidence, look at the circumstances, are the children consenting or not? But even in situations where the children don't consent, we've been very successful in getting a a very favorable result for the surviving spouse.
45:27 >> And and I would imagine that at least in some of the cases, um the children are going to end up getting the asset at when the second spouse dies anyway, right? So it's it's not as if they're losing out long-term anyway. Um whereas if there's, you know, children from a second marriage or something like that, I would imagine it it that then if that getting consent from the other heirs might be more complex or
45:59 >> Yeah, that's exactly what would just happen. We just finished two months ago a three-day trial on this very issue where it was children from a prior marriage. My client surviving spouse, they got married. They were They were married for 18 years or so. It's a long-term marriage. They purchased this property during the marriage. This very thing happened. This was the English-speaking couple. But she didn't know what she was signing. She came in and it was it was a purchase from the beginning. It was not a refinance. They were just having her sign She thought she was on the title. She thought she was buying the house. But all the documents they had her sign was no, she was giving it to him because he was going to get a better interest rate
46:34 supposedly. We don't know all the facts about that.
46:37 >> Yeah.
46:37 >> But But that's what happened. And so when he passed away and realized that she's not even on the title, then she came to us and we went through all of that. So unfortunately he has children from a different from a prior marriage and when we filed the spouse of property petition to make all these arguments about why this is really community property and should pass 100% to her, they objected. And so we ended up going to a trial on that and still hasn't been decided. So we're actually just wrote the first briefs of the post-trial brief that's our kind of our closing arguments. The other side's going to do the same thing and in March we'll know. We'll know what the judge what the court ultimately decides, but I think we we it
47:13 was very favorable for us. I think we we put on a good case and I'm very positive, but you know, you never know until
47:20 >> Right. Yeah.
47:21 >> it's out of the question. So it's a sad thing really for her to lose that because this is something that and we showed from the bank records that that was the joint account that was used to pay the down payment. It was that account that joint account that was used to pay all of the expenses related to the property, mortgage, insurance, all of that throughout the marriage. So it really was community property, but unfortunately the way it was titled, you know, the court's going to have that presumption. You have to overcome that presumption. I think we did, but you know, the court's going to make that decision.
47:49 >> Right. I I I think it's it's perhaps important to also um mention that aside from the financial loss to this client, I think there would be an emotional loss in the sense that this is the place where she lived with her husband, I think he said 18 years, right? And presumably if if you don't prevail, so I would guess what the house has to be sold and now now what does she do? Where does she go? So I'm curious people think of lawyers as you know, they're they're just the law, you know,
48:24 kind of thing, but you don't we know each other, so you don't strike me as being that way. Talk if you would a little bit about the the sort of non-legal, non-financial issues with which, you know, you have to deal with your clients and and how you how you handle those.
48:44 >> Yes, yeah, and look, it's death is is a very tragic thing. Whether somebody's been sick for many years and they finally succumb to their illness or it's something that's sudden. In this case it was sudden, he had a heart attack, death was not expected and so unfortunately, you know, he didn't plan. If he had planned, if they had come and done an estate plan, this would have all been avoided, right?
49:04 >> Right.
49:05 >> Uh, but yeah, and so that's the thing is that it's what you not only if you don't plan properly, not only are you going to deal with the financial fallout of all of that and the time delays associated with probate, the cost associated with probate, uh, but now you're going through these emotions of having lost somebody and having to deal with those things and fighting with family in court. So it it does take a very big emotional toll. And this particular client, yes, she's living there, she's expecting to be able to live there for the rest of her life. She's working hard so that she can pay the mortgage, the mortgage is still there, she still has to pay that, so she's trying to hold on to that. Yes, it was sentimental value
49:41 certainly is is one thing, they lived there together, they had their marriage there together, but it's also her life, right? It's where she lived. Where is she going to go? And if she loses this case, she only gets 1/3. There's three children, right? So, if this is determined to be separate property, she only gets 1/3 of those proceeds and the other 2/3 go to the children. And so, it would be a devastating loss for her. And then fortunately, we can't control that, right? We don't guarantee uh results for our clients. We do our best under the circumstances of the facts we have to get the best result we can for them. And then, like I said, I'm I'm very optimistic about this particular case, but uh yeah, it's it's a devastating for
50:18 your family if you don't plan properly.
50:20 >> Yeah. So, we we we have a just a few more minutes here. Um share if you would perhaps one more um somewhat unusual issue um that that that you see kind of coming across your desk.
50:36 >> Yeah. Well, I'll I'll I'll just talk about just very briefly uh another big common mistake that people make in estate planning. And it has to do with couples who do estate planning. Uh when you're a couple who does estate planning, especially if you have a blended family, if you have children from different marriages, it's so important to get that planning right to ensure that if something happens to one spouse, that the that that spouse's children are not going to be short-changed by the other spouse, right? And so, when you do a trust as a married couple, it's important to understand that a trust is a contract between you. You're creating this contract with your spouse. And you're saying, "All these assets that we have,
51:12 we're putting in this trust, and this contract controls what happens with all these assets in three different phases of their lives." The first phase is during their joint lifetimes. And all it says is, "These are our assets that we put in the trust. We can do with them whatever we want. Uh the trust is revocable. We can amend it. We can change it." That's phase one. That's for everybody, every married couple. Phase two, what happens when the first spouse dies? And this is where most people miss. Most people that come in to me with their trust and they want me to review a trust done by somebody else, and I ask them, "Do you know what happens when the first spouse dies? What happens with the assets?" And and there
51:47 are different options. There are different ways that that can be set up. The question is, what happens when the first spouse dies? Does the trust remain revocable? Can the survivor still change it? Can the survivor amend it in any way? Can the survivor use and spend the money freely? Are there any restrictions? What if the survivor remarries? Can they include a new spouse? Can they leave everything to a new spouse? All of that depends on what they chose, and most people have no idea. They have no clue what they chose when they did that because the attorney just picked it for them. And so it's so important to know what your options are, what are the consequences of each option, and which best fits your family, right? So that's that's what's
52:22 important. Pe- Many people miss that. So really important to have that discussion if you're a married couple doing your estate plan with your with your attorney.
52:30 >> Well, and and you you mentioned blended families. Uh so um when you're doing an estate plan um what kind of input, if any, do you get from would say children of of a you know, a married couple that's doing a plan? Um you know, you as the lawyer as opposed to maybe them doing it, you know, informally on their own.
52:57 >> Yeah, so it's really up to the clients whether they want to include their children. Most do not. And and my recommendation is no. This is your decision. These are your assets. You get to decide how things go. If they want to include their children after uh everything's done to have an explanation of how things work, generally speaking, we we can do that for them. But typically, no. I meet with the clients. So very little involvement from the children. And and then we go through the choices and the different ways, especially like I said, in a blended family situation you know, what will happen if something happens to one. Well, you certainly want to provide for the survivor for the rest of their lifetime. I mean, depending on we have
53:32 no idea how long they're going to live or what they're going to need. You want to provide for their needs. At the same time, you want to set things up in a way that protects their family. That when when second spouse passes away, that their family gets a portion of what's left that that was intended for them, too. And there are ways to set things up to to ensure that. But many many people miss that kind of planning, and it just doesn't get done.
53:52 >> Yeah. Yeah. So, you know, Paul, it's it's been great talking to you and you know, learned learned some new things here as as as long as I've been doing the show and this is my my fourth season. So, it's it's it's always great to take take new information away. So, I really appreciate you coming on the show and and talking with me today.
54:13 >> Yes, thank you for the opportunity. Appreciate it, Kevin.
54:16 >> Yeah. So, for for those of you who are watching, um like I said, Paul Paul and I are working on a matter together. So, presumably that is a strong recommendation for Paul. He's he's an an outstanding attorney, and you can see by the the depth and length of his knowledge that if you have a matter dealing with estate planning or probate and trust administration, you will be extraordinarily well served by Paul. I will put his contact information in the show notes once this episode posts on
54:51 YouTube, and I encourage you to get in touch with Paul if you have questions. I'm I know I didn't realize your staff was as as large as it is, but somewhere among the 25 people, there's someone there I suspect that can help help help a client with almost anything that that comes up. So, um just let me do a quick wrap-up and we'll talk offline for a minute. So, thank you so much for joining us today. I I I know you got a lot out of this episode as as is so often the case when I when I have a guest on, and but I
55:26 hope you enjoyed it as well. If you know someone who can benefit from hearing what Paul has had to say, I encourage you to send them a link to this episode, especially if they're reluctant to do an estate plan. Say, "Hey, you know, I I I I saw this this this lawyer Paul Velasco, and it'd be worth it for you to listen to what he has to say, and maybe that'll help your friend out, or help maybe your parent out if it's if if it's a family situation." Uh so, real quickly then, tomorrow at 10:00 a.m. Pacific time is my show Business Lessons from the Military, and
56:01 then on Wednesday at 10:00 a.m. Pacific time is my show People Making Money. So, hopefully hopefully you'll tune in later in the week. And then every other Thursday at 5:00 p.m. uh Pacific time, join me at Jigger's Place. We'll have a cocktail and a schmooze, and talk about all the things completely unrelated to finances as we head toward the end of the week. So, so Paul, one one more time, thank you so much for uh being my guest today, and look forward to our continued working together. And that just leaves me to sign off. Marie darling, you are my bell. Courage at all times, my
56:38 friends.
56:40 >> Thank you. Thank you for the opportunity, Kevin. Again, I appreciate it. I did very