Planning, Protection, & Peace of Mind
Frequently Asked Questions
Should I have a living trust?
You should seriously consider a living trust if you either:
1. Own your own home or any other real property, or
2. Own over $166,250 in investments and other personal property.
When I create a trust, does my ownership in my assets change?
No, when you create a trust, you will serve as the trustee. You will continue to own you property just as before. You can buy, sell, invest, borrow, give, donate or do anything you wish with your assets. You have the right to change your trust at any time.
What is probate?
Probate is a court supervised transfer of your property to your heirs. Many people mistakenly think that only having a will avoids probate. The opposite is generally true. Having only a will almost guarantees that your assets will have to be probated. You need to have other plans in place in order to have your assets transferred outside of the court proceeding.
Why do people want to avoid probate?
Unnecessary Expense. Probate is a court administered processes, which usually involves the use of an attorney and an appointed representative to act on behalf of the deceased person. Both the attorney and the representative are entitled to receive fees payable from the deceased person’s estate. The fees are set by the state of California, and such fees can be significant and often unnecessary. While the representative’s fees may be waived if the heirs are serving in that role, but the attorney fees must be paid. Additionally, court fees and expenses are usually a couple thousand dollars, which usually needed to be paid upfront and not from the estate.
Time Delays. Probate is a court administered procedure, numerous documents and forms need to be filed with the court and many actions required court supervision. As a result, the transfer of property to the intended heirs is often a lengthy process usually lasting between a year or two years. During that time, property may not be sold or distributed.
Public Information. Since all documents relating to the probate and transfer of property are filed with the court, such information is available for public review. Therefore, in most circumstances, not only are the values of the deceased person’s assets subject to public disclosure, but so are the deceased person’s intended beneficiaries and any conditions on their receipt of the assets.
Loss of Control. A judge you have never met or who does not know you or your family or the relationships between you, will be the one ultimately making the decisions as to how your asserts would be distributed. Someone who is able to look good on paper may not actually be the desired beneficiary of the deceased person’s estate.
What if I own property not in California?
If you create a living trust, it does not matter where the property is located as long as it is properly transferred into the trust. If there is no trust, the beneficiaries will have to file for probate in whatever state the property is located, including California. Having two separate probates open can cause all the same problems as stated above, as well as requiring two or more law firms, and having to control property while out of the state.
Does having a trust avoid probate?
Assets held in trust will generally avoid the need for probate as long as the trust is correctly set up and all the assets are properly transferred.
Are there ways to transfer assets other than a trust?
Gifting. An individual can transfer property to others and thereby avoid owning such property at the time of death.
Joint Tenancy. On the death of one joint tenant, the asset is owned entirely by the surviving joint tenant. The transfer is accomplished generally through the recording of a death certificate and affidavit concerning the death. When the joint tenancy is concerning real property, the death will need to be recorded with the county recorder’s office where the property is located. When the joint tenancy is concerning personal property such as bank accounts, the death will need to be recorded with the banking institution.
Community Property with Right of Survivorship. Spouse may hold title as “Community Property with Right of Survivorship.” If the property is not in a trust, usually you will need to go through probate for one half of the property. However, if property is held this way, the spouse can avoid probate if a spousal property petition is used. This process still goes through court, however, is not as intensive as normal probate.
Transfer on Death Deed (TOD). California allows for both real property and personal property to be transferred upon a person’s death through a revocable transfer on death deed. Almost every state has adopted the Uniform Transfer-on-Death Securities Registration Act. This law allows you to name someone to inherit your stocks, bonds or brokerage accounts without probate.
Pay on Death Accounts (POD). You can add a “payable-on-death,” designation to bank accounts such as savings accounts, checking accounts and/or certificates of deposit. You can still control the money in the account, but upon your death the money will not have to go through probate, but it is instead can be transferred directly to the named individual.
Multiple Party Accounts. Multi-Party Account Laws provide generally that, upon the death of one of the individuals listed on the account, the funds in the account are owned by the remaining individuals. The decedent’s share of the funds passes by terms of the contract.
Small Estates. The California Probate Code provides that if the entire value of an estate is $166,250 or less, it does not need to be probated. The total value of the estate is calculated by adding the fair market value of all assets owned by the decedent at the time of death. If this applies to your case, then an affidavit procedure can be used to collect the assets in lieu of probate.
Why should I avoid a conservatorship?
If you become incapacitated and you are not able to take care of yourself or your affairs and do not have a trust and durable powers of attorney, your family may have to petition the court to have a conservator appointed for you. As with a probate, the process is costly, it is public, and it delays the ability of people to make immediate decisions.
Having a living trust and durable powers of attorney avoids the need for a conservatorship. If you become incapacitated, whomever you have named in the trust and durable powers takes over for you without having to go to court. In particular, the “Durable Power of Attorney for Health Care,” one of our basic estate planning documents, will give your family the power to make health care decisions for you, as you have directed.
Are there any ongoing costs when setting up a trust?
No. Once the trust is set up, there are no ongoing costs of management or administration. There is however a cost for any amendments of the trust terms. Setting up an estate plan does save money in the end by avoiding probate and potentially reducing tax implications.
Do I still need a will if I have a trust?
Yes. The pour-over will “pours over” any property that was not properly transferred into your trust, to be administered according to the trust terms. This is a protection mechanism against probate.
How does trust administration work?
A successor trustee takes over the management of a living trust when the original trustee of the trust is no longer able to serve as trustee or when the original trustee dies. The successor trustee manages the trust assets according to the specific instructions contained in the trust. The successor trustee has the same kinds of duties that an executor would have in probating a will. However, distributing from a trust does not usually require court supervision, and is therefore simpler and more private than probate. Almost always, the trustee can use certified copies of the Death Certificate and the trust to begin managing assets right away, instead of waiting for a court order as required in probate.