Avoiding probate court: How creating a trust can save your beneficiaries both time and money
There are a variety of types of trusts. In this article, however, ‘trust’ refers to a revocable, living trust, or a family trust, that enables an estate to bypass probate. A trust can be created during a person’s lifetime. Or a trust can be established at death, as directed in a person’s will. Trusts are one way the rich stay rich by helping families maintain wealth across generations.
There’s much to know about trusts but key is that they’re designed to protect an estate from paying large legal fees and taxes to wrap up a person’s financial affairs after death. Here’s the crux: if a person owns assets whose net worth exceeds $150,000 in California, is concerned with preserving the value of those assets upon death, and wants to spare beneficiaries a long and expensive process known as probate court, it makes sense to consider creating a revocable trust.
A trust holds property
According to Legal-Dictionary, a ‘trust’ is a relationship created in order to hold, protect and use one or more person’s property for the benefit of others, subject to certain duties. When property is transferred to a trust, ownership of that property is transferred as well. People designated as ‘trustees’ control the trust. Because it’s revocable, however, the trust can be changed or even terminated during a person’s lifetime.
Probate court: avoidable
In most cases, assets held in trust bypass probate – the infamous specialty court that handles the distribution of assets, income and debts following a person’s death. When assets aren’t held in a trust, however, probate court often determines an estate’s ultimate disposition. Unfortunately, fees associated with probate court often can be substantial and take a large bite out of an estate’s value. Finally, the process can take two years to resolve – or longer! For these reasons, it is to be avoided.
The cost of probate in California
How much does an average-value estate pay in probate costs in California? Consider the following.
Who gets paid
Attorney/executor fees1
A $625k illustration1
Here’s how fees and costs might add up for a routine probate case in California that has an estate value of $625,000.
Finally, if the case triggers a taxable event, taxes may be owed, too.
How to a create trust: 6 steps
Learn more about trusts
Questions about living trusts, probate court, or preserving the value of estate assets? Visit www.courts.ca.gov/8865.htm, or contact an estate-planning attorney. If you don’t have one, we can help you find one; contact Ryan or Kitty at contact@courtinvestmentservices.com, (800) 880-2760.
1 www.probateandtrustlawyers.com/probate/probate-costs, 3 May 2019.
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