Gene wrote these answers himself, to the questions clients ask him most. Every situation is different; Gene will apply current law to your own facts during a consultation.
Living Trusts
Do I need a living trust?
Yes, unless your estate is worth less than $208,850 and you do not feel the need to protect yourself in the event you become incompetent.
A properly prepared Living Trust Estate Plan with accompanying documents avoids a court conservatorship case if you become incapacitated and avoids a court Probate proceeding upon your death. You designate your own agent (e.g., spouse first, selected child in the alternative, etc.) to handle your personal and financial affairs in the event you become incapacitated. Unless you prepare a Living Trust and transfer your assets into it, a Probate case is required upon your death if the assets left in your name are worth $208,850 or more.
What kind of trust do I need?
Short answer: there are essentially two basic types of Trusts.
A single person’s or married couple’s Outright Disbursement Trust will satisfy the needs of most persons by providing them with a Trust that avoids Probate. They are inexpensive to prepare and inexpensive to administer. You (and your spouse if you are married) have complete control over your assets, a Probate case is avoided upon your death, and a Conservatorship case in the event you are incapacitated is avoided as well.
More complicated alternative Trusts are available if your estate is sizable enough to incur an estate tax liability and/or you wish to prevent your surviving spouse from having the ability to change your estate planning wishes should you die first. Those trust options include Trusts which split into two or three Trusts upon the death of the first spouse in order to minimize estate taxes and/or to prevent the surviving spouse from altering your estate planning wishes. Options also include Charitable Remainder Trusts, QTIP (Qualified Terminable Interest Property) Trusts, Irrevocable Trusts, and Insurance Trusts.
Make sure you have the right Trust prepared for you, but do not overpay for a Trust more complicated than necessary for your estate.
How does a revocable living trust work?
California law requires a Probate case in court if you have $208,850 or more worth of assets held in your name alone at the time of your death. The transfer of your residence and any other real property you own, along with all of your personal property and any substantial non-tax-deferred savings or investments, directly into your Trust’s name leaves your estate with assets under $208,850 in your own name, and the need for a Probate proceeding upon your death is avoided. The most crucial work involved in drafting a Living Trust Estate Plan is to properly fund the Trust and for the attorney to make sure the client knows how to use the Trust to avoid Probate: simple rules, but they must be understood and followed.
What about the primary residence exemption from probate?
If your family home is worth $750,000 or less (a rarity in Southern California), that property can be transferred using a streamlined one-time petition with the probate court. More information would be needed to determine if the estate qualifies for that process.
What about estate taxes?
Fewer and fewer people need to worry about the government taxing their estates. Estate taxes, subject to a few exceptions, do not start unless your at-death net worth is $15 million or more for a person who dies in the year 2025 or later. Estate taxes, if due, are more than 40% of all assets in excess of that starting point. Please note that there are limitations on the amount of assets you get a stepped-up basis on. You should consult with a CPA to review that issue.
What should I know about funding a Living Trust?
A large part of the work involved in preparing a Living Trust Estate Plan is properly funding the trust. There are generally three categories of assets:
- Assets directly owned in the trust name
- Assets which can be placed into the trust by the trust being designated as a death beneficiary of the asset
- Assets held outside of your trust
Assets placed into your trust include your home, rental property, business, savings and investment accounts, stock brokerage accounts and the like.
Assets in the second category are those with beneficiary designations, such as 401(k) and IRA accounts and life insurance policies. Every case must be reviewed and a determination made as to whether it is advantageous to designate the trust as a primary or contingent death beneficiary. For example, a desire to leave a share to grandchildren in the event a child predeceased you, or a desire to meter out trust benefits to children or grandchildren who may not be mature enough to spend or invest the funds wisely, may weigh in favor of designating the Trust as a primary or contingent death beneficiary, usually the contingent death beneficiary after your spouse. You must, however, be aware that doing so jeopardizes a child’s right to roll over any tax-deferred accounts and continue deferring taxes owed on such assets.
The final category is assets typically held outside of your trust: day-to-day checking accounts, small savings accounts, vehicles and the like, keeping in mind that you never want to keep liquid assets outside the trust if they accumulate a total value of $208,850 or more, as a probate is then required upon your death.
I cannot tell you how many times I have been required to petition a Probate Court asking for a post-death funding of assets into a trust because a trust was executed without the assistance of an attorney and the trust was not properly funded. Don’t count on the Court letting you avoid a formal Probate proceeding in that regard.
Why should a senior citizen consider a living trust?
As we live longer and longer, the probability of dealing with incompetency issues increases. What if I suffer a stroke or medical setback that prevents me from being able to attend to my financial affairs and/or living arrangements?
A properly prepared Living Trust Estate Plan anticipates such “real life” complications and provides for the designation of an agent (such as your spouse, child or other person) to take on the authority of handling your personal and financial affairs in that instance. You are able to completely avoid court conservatorship proceedings: a public court case with a mental competency examination, thousands of dollars in attorney’s fees, and court supervision of your affairs.
What does a Living Trust cost, and what documents are included in a Living Trust Estate Plan?
Remember always the lesson you learned at a very young age: you get what you pay for! Not surprisingly, that rule also applies in estate planning. You essentially have three choices in having a Living Trust Estate Plan prepared:
- Do-it-yourself / paralegal assistance / internet forms
- An estate planning firm
- Working one-on-one with an experienced estate planning attorney at reasonable rates
Choice 1: The first category seldom results in a Living Trust that avoids Probate. Most inexpensive Trusts prepared from a joint conference with an attorney at a seminar, or those prepared by a non-attorney, are not properly funded. You are left to do most of the work, and they do not include all of the documents necessary to complete your Living Trust Estate Plan. Be sure to compare and ask questions:
- Does the Living Trust Estate Plan include the preparation and recording of Grant Deed(s) transferring all property I own into my Trust?
- Does it include an in-person (or Zoom) meeting with an attorney who handles estate planning, whom I can ask questions of, and who will customize my estate plan?
- Does it include a Durable Power of Attorney for financial affairs?
- Does it include an Advance Healthcare Directive for emergency medical decisions?
- Does it include an Assignment of all my personal property into my Trust?
- Does it include a Certification of Trust, which I will need to provide to any banks or investment advisors to transfer those accounts into my Trust?
- Does it include a Pourover Will that accompanies the Trust?
- Is an attorney who has my documents on file available for follow-up questions or problems I may have?
Choice 2: The second choice, an estate planning firm, may have all the expertise you need but is also likely to be overpriced for all but the very largest of estates. Estates of $15 million or more may well be able to take advantage of carefully drawn and very expensive tax planning trusts, but the average person is well advised to be careful about spending the kind of money it will take to have such a firm prepare your Estate Plan.
Choice 3: The third alternative, or middle ground, is what we offer: meeting one-on-one with an experienced estate planning attorney who will prepare a comprehensive Living Trust Estate Plan for you for a reasonable fee. Not as cheap as the Internet forms or the quick paralegal services and, not surprisingly, not nearly as expensive as a large estate planning firm with expertise beyond what you will need.
Does a will alone avoid probate?
No, a will alone actually guarantees it, unless your total estate is worth less than $208,850.
California law requires a Probate proceeding if assets in your name alone are in excess of $208,850 at the time of your death. A Will merely allows you to designate who the court-appointed representative (Executor) for your estate will be and how your estate will be divided. There is still a long, public, expensive court case in the Probate Court required to settle your affairs.
What are the costs of Probate I can avoid with a Living Trust Estate Plan?
Attorney’s fees and Executor’s fees are fixed by law on a sliding scale under the California Probate Code. Those fees are, for example, $26,000 for an estate worth $500,000, $36,000 for an estate worth $750,000, and $46,000 for an estate worth $1 million! Keep in mind those fees are based upon the gross value of the assets in your estate (without deducting outstanding mortgages on your home, outstanding debt, etc.), and additional fees are due if extraordinary services are performed by the attorney, such as selling a home that requires a court-supervised sale. In addition to all of that, an estate typically incurs out-of-pocket court costs of at least $2,500–$4,000; the total costs depend on the size of your estate. A Probate proceeding now averages 18–26 months in Southern California.
Doesn’t a Living Trust only benefit my children/heirs, in that it simply avoids Probate after I have died?
While it is true that the primary economic, cost-saving benefit of a Living Trust is avoiding the expenses and delay of a court Probate process (see above), most people are unaware of the significant lifetime benefit that a Living Trust provides: provisions to avoid a court conservatorship in the event you are incapacitated.
If you suffer a stroke or are incapacitated by Alzheimer’s, dementia, etc., in the absence of a Living Trust, court proceedings separate and apart from a Probate proceeding are required. That process, known as a Conservatorship, is time-consuming and very expensive. A Living Trust Estate Plan with the proper accompanying documents provides you with the opportunity to designate a spouse, child or other third party to act as your agent under your Power of Attorney and as “Successor Trustee,” and to handle all of your affairs without the necessity of the legal process known as Conservatorship. Examinations to apprise the Court as to whether you are incompetent or not, court hearings to determine who should be appointed your representative, and continuing obligations to account to the Court for the handling of your financial affairs can all be avoided by a properly prepared Living Trust Estate Plan.
How do I amend or update my living trust and estate planning documents?
Amending your Living Trust is essentially the same as revising a Will. A follow-up appointment can be made to address any changes you desire. The time and cost of the amendment process is significantly less than the cost of preparing the original trust. In the absence of an unexpected death of a beneficiary, a change of heart as to who should handle your financial, personal or medical affairs, or a change in the law, amending your trust is usually not necessary. Our office will advise you in writing if any changes in the law impact your particular estate plan, and we can confer without charge to determine if an amendment is necessary. Those changes are infrequent, and few, if any, amendments to a Living Trust are usually required after it is signed.
What are the most important things I need to know about a living trust?
A properly prepared Living Trust will avoid Probate, a long, expensive, public case to settle your affairs and distribute your assets. A substantial percentage of Living Trusts prepared do not accomplish that goal, usually because assets are not properly funded into the Trust and the client does not have a working knowledge of how to use their Trust.
Never have an important legal document such as a Living Trust prepared by a non-attorney, especially through a seminar where the non-attorney is marketing insurance or annuities. Their primary motivation is to sell you an investment plan through their office.
What documents do I need to gather in order to start preparation of a Living Trust Estate Plan?
No documents are required in order to discuss how a Living Trust Estate Plan can work for you. If you wish to be prepared, you can gather or decide the following:
- Grant Deed for any property/land you own
- Property Tax Bill for any property/land you own
- The name, address and phone number of your first, second, and third choice for Executor / Successor Trustee / financial care agent
- The name, address and phone number of your first, second, and third choice for Healthcare Agent, to handle any medical decisions you are unable to handle yourself
- A copy of the Mortgage Loan Statement for your residence (a formal notice is required to be given to your mortgage lender when you transfer your home into your Trust)
- A general outline of how you wish to have your estate distributed upon your death
What is involved in administering a Living Trust after death?
Administering a Living Trust is a private (not a public court case), out-of-court and fairly inexpensive process to follow. Depending upon the nature of your estate, the complexity of the assets in your Trust, and whether you have outstanding creditors (bills due at your death), the costs vary. You typically pay for such services on an hourly basis. Beware of law firms that over-complicate the trust administration process and charge substantial fees for doing so.
Learn more: living trusts · estate planning · schedule a consultation with Gene.
Probate
If a trust wasn’t completed, what does probate involve?
California law requires a Probate proceeding if you have assets worth more than $208,850 (gross value, not net) at the time of your death. A rare exception is a primary residence worth less than $750,000, which may be transferred with a one-time Petition to the Probate Court. A Will alone merely allows you to designate who the court-appointed representative (Executor) will be for your estate and how your estate will be divided. There is still a long, public, expensive court case in the Probate Court required to settle your affairs.
What are the costs of Probate?
Attorney’s fees and Executor’s fees are fixed by law on a sliding scale under the California Probate Code. For example, an estate worth $750,000 will cost $36,000 in Probate fees, and an estate worth $1 million will cost $46,000 in Probate fees. Keep in mind those fees are fixed based upon the gross value of the assets in your estate (without deducting outstanding mortgages on your home, outstanding debt, etc.), and additional fees are due if extraordinary services are performed by the attorney, such as selling a home that requires a court-supervised sale. In addition to all of that, an estate typically incurs out-of-pocket court costs of at least $2,500–$4,000; the total costs depend on the size of your estate. A Probate proceeding now averages 18–26 months in Southern California.
How do I start a probate case?
Set up a free, no-obligation consultation with an attorney who handles Estate Planning and Probate matters. Bring a certified copy of the deceased person’s Death Certificate, along with any Will or other Estate Planning documents.
Learn more: probate and trust administration · schedule a consultation with Gene.
Wills
What does a will do?
A will allows you to designate who the court-appointed representative (Executor) will be for your estate and how your estate will be divided. If your estate is worth more than $208,850 (gross, not net), you should consider a trust.
Does a will alone avoid probate?
No, a will alone actually guarantees it, unless your total estate is worth less than $208,850.
California law requires a Probate proceeding if you are worth more than $208,850 at the time of your death. A Will merely allows you to designate who the court-appointed representative (Executor) for your estate will be and how your estate will be divided. There is still a long, public, expensive court case in the Probate Court required to settle your affairs.
Learn more: wills · schedule a consultation with Gene.
Estate Planning
What does a Living Trust Estate Plan do for me?
A Living Trust Estate Plan with the proper accompanying documents provides you with the opportunity to designate a spouse, child or other third party to act as your agent under your Power of Attorney and as “Successor Trustee,” and to handle all of your affairs without the necessity of the legal process known as Conservatorship. A properly prepared Living Trust Estate Plan will help avoid court hearings to determine who should be appointed your representative, examinations to apprise the Court as to whether you are incompetent or not, and continuing obligations to account to the Court for the handling of your financial affairs.
What documents are included in a Living Trust Estate Plan?
- Living Trust
- Grant Deed(s) transferring all property into the Trust
- Durable Power of Attorney for financial affairs
- Advance Healthcare Directive for emergency medical decisions
- Assignment of all assets
- Certification of Trust
- Pourover Will
Doesn’t a Living Trust Plan only benefit my children/heirs?
While it is true that the primary economic, cost-saving benefit of a Living Trust Estate Plan is avoiding the expenses and delay of a court Probate process, most people are unaware of the significant lifetime benefit that a Living Trust Estate Plan provides: provisions to avoid a court conservatorship in the event you are incapacitated.
If you suffer a stroke or are incapacitated by Alzheimer’s, dementia, etc., in the absence of a Living Trust Estate Plan, court proceedings separate and apart from a Probate proceeding are required. That process, known as a Conservatorship, is time-consuming and very expensive.
Learn more: estate planning · powers of attorney and health care directives · about Gene · schedule a consultation with Gene.
The information contained herein is general information about the law only. The law is subject to change. If you have a specific legal question and want your question(s) answered, consult with an attorney.