Revocable living trusts provide numerous benefits for California residents. This estate planning tool, which provides for a faster, less expensive, and more private estate administration, should be considered by every person residing in the state who owns their home and/or has at least a few investments.
While probates in many states throughout the country are relatively quick and inexpensive, California estate planning attorneys routinely recommend revocable living trusts to their clients for several reasons:
The main reason for setting up a revocable living trust in California is usually to avoid the cost of probate. Although a trust costs more to set up than a will, it is far less expensive to settle. California residents face some of the highest probate fees in the country – attorney and personal representative (executor) compensation is set by law at $4,000 for the first $100,000 of the estate, 3% of the next $100,000, 2% of the next $800,000, 1% of the next $9,000,000, and one-half of 1% of the next $15,000,000. For all amounts above $25,000,000, the fee is a reasonable amount as determined by the probate court.
Since 2012, the probate threshold in California has been $150,000 – the probate fees in this state for someone with a gross estate of that amount far exceeds the cost of a simple trust.
When an estate is being settled, the first to be paid are a decedent’s creditors, taxes, the estate attorney and the personal representative (executor). Then whatever remains is distributed to the beneficiaries.
Through the California probate courts, this process usually takes a year or more. For uncontested estates that are not large enough to be subject to estate taxes, a properly drafted and executed revocable living trust can usually accomplish the same – without court involvement – in a matter of just a few months.
With a probate, court approval is required to access the decedent’s assets. In contrast, the trustee of a living trust has control of the trust assets as soon as their position is verified under the terms of the document (e.g., the death of the trustor). In addition, revocable living trusts facilitate control of a person’s assets during incapacity without the need for conservatorship proceedings. As we discussed in Part I, they can also set forth instructions regarding distributions to children, with or without special needs.
When an estate is probated, a list of the decedent’s assets and other private information becomes a matter of public record. In a trust administration, only the pour-over will is filed with the court. Since pour-over wills merely list the name and family members of the decedent, and that all assets be distributed in accordance with the decedent’s revocable living trust, the distribution terms remain private. The trust itself never becomes a matter of public record.
Difficult to challenge
It is much more difficult and expensive to contest a longstanding trust than it is to contest a will through probate.
Estate Tax Avoidance
Individuals and couples with estates exceeding the estate tax exemption amount should explore the benefits and disadvantages of including tax provisions in their revocable living trust. These provisions can minimize or even eliminate your estate taxes.
Couples in which one spouse is not a U.S. citizen, and therefore has a much lower threshold for the imposition of federal estate tax, should also discuss Qualifying Domestic Trust (QDOT) provisions with their estate planning lawyer.
At least consider it!
You may not care about probate fees, management of money for minors, privacy, or will contests. A revocable living trust isn’t for everyone, but this estate planning tool should nevertheless be considered by every person residing in California who owns their home and/or has at least a few investments. Contact the San Francisco estate planning attorneys at Moskowitz, LLP to discuss the most appropriate estate plan for your needs.
Our final post in this series will focus on transferring property to your trust.