Estate Planning Basics with Jessica Villar

The following episode is an excerpt transcribed from The Accidental Landlord podcast. You can access the full episode, here


Peter: Jessica, welcome to the show. We're excited to have this conversation. For the sake of our listeners, we have Jessica Villar from Schneiders and Associates with us today.


Jessica: Thank you for having me.


Peter: Yeah, we're excited to bring you on and talk about an important topic for our listeners. But before we get too far, you're with Schneider & Associates. You're an associate attorney with the firm. Why don't you just take a minute or two to introduce yourself and kind of give our listeners a quick bio on you.


Jessica: Yes, definitely. So as you were saying, I am an associate attorney here, and I do primary transactional law with a focus on estate planning, administration, and corporate transactional. So a lot of my practice is dealing with estate planning and having people plan and prepare for that, which I know oddly doesn't always have to deal with that. It's getting your stuff in order if we're just being an adult. So that's a lot of I think that's how, you know?


Peter: This is a topic that most don't think about when thinking, “I want to be a real estate investor.” That the first thing you think about is estate planning and all the stuff that goes along with that. Um, and rightly so if that's the first thing you thought about, you probably never would have taken the action to buy a rental property in the first place. However, it's extremely important. And the reason I wanted to bring you on is because I think a lot of our listeners know what a trust is, but like in our property management portfolio, I think we were talking about this earlier, only about 30% of our clients keep their properties in a trust. And the reason we know is because if the property is in a trust, we have a contract with the trust and not the individual. So it's really easy for us to know who's where and why. So our show is geared towards accidental landlords, a newer landlord that's trying to learn how to do this business correctly. 


Why don't you dumb it down, if you will, in layman's terms, in non-lawyer talk, why it's important for someone to have an estate plan and kind of what that means and all that stuff. So obviously that could be a two hour diatribe, but we'll try to break it up and keep it digestible.


Jessica: I think you hit the nail on the head in that the last thing anyone would ever think about when they own a property is estate planning. The two times people think about estate plan is if somebody is a billionaire, so they have a trust because that's the only people who we tend to think should have a trust or if you're really, really old and you're near and you want to put your stuff in order for when you pass. In California, unfortunately that is not the case. 


In California, we have a probate process, which in essence, controls what happens to your assets when you pass. Now, all you have to own when you pass away in order to have to go through probate, today it's $184,500 to your name. That's all you have to have. So I think we all know that in this great state of ours, there is no real property in any county that you're going to own for $184,500.


And if you do, I would like you to reach out to me so you can let me know what county that is because I'd be really interested. Which is why we always say if you have any property at all, you have to have a trust. And the reason why the trust is important is because it avoids probate. And the reason why probate, you wanna avoid that, is in California, it's a very long and very expensive and a required process. And you also don't have any control over it, right? It's like...


So the state of California dictates what's gonna happen to your property if you go through the probate process and you don't have certain things in place.


Peter: Let's talk about what that looks like. Like break what, let's say, you know, somebody dies, they have over that, you know, they have a couple hundred thousand dollars in assets and they didn't plan for any of this. Now they're in probate. What does that look like for their family?


Jessica: So what happens is somebody has to step up. If you don't have a will, if you have a will, what a will does, and this is also in the misconception, people think, oh, I'll just, I'll drop the will. And anybody who goes to Staples or can Google last will and testament thinks they can learn how to drop the will. And they try to do that. A will does not avoid probate. All a will does, if it's done correctly, is it tells the court, this is what I want my wishes to be. So if you don't have that.


What happens is somebody has to go to court, they have to petition to be an administrator, they have to get the court's permission to be able to act on your estate's behalf. Then now they have to go through and they have to comb through all of your belongings and figure out all the assets you own, they have to get in touch with everybody. Same thing with the property, they have to get that on order to figure out, okay, does your mortgage on there, is there any liens? You gotta make sure you're still making payments. And then they have to petition the court and then the court decides who's gonna get what.


and they decide who gets what in accordance with the law. The law basically has a default will for everybody, for every resident of California. And that means that if you're married and your spouse is gonna get a certain percentage, if you have children, they're gonna get a certain percentage. If you have children that you may not have known about or were not a part of your life, that does not matter. You still get a certain percentage. If you have individuals that you raised and loved and to you were your children, but they legally weren't.


that they're not your child for purposes, and the court can actually not end up giving them anything, even though it was your intent to take care of them. Or if you just, you know, if you have family members that maybe you didn't know about or weren't close with, but you're next of kin, that's who's gonna get your assets. And so that part kind of sucks in of itself, right? To make things worse, it takes the court sometimes a year just to figure that out, just to tell you what's gonna happen to this property.


In addition to that, you have to pay by law a certain percentage of your estate is going to go to the court and it's going to go to your attorney fees. We don't control that. That is, that's by statute. So that's why I say it's expensive because even if the attorney doesn't do anything, they're still going to get a certain percentage.


The following episode is an excerpt transcribed from The Accidental Landlord podcast. You can access the full episode, here

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