It is better to know some of the questions than all of the answers.
- James Thurber
Frequently Asked Questions
- WHAT IS PROBATE?
- SIX REASONS TO AVOID PROBATE
- SIX REASON TO HAVE A LIVING REVOCABLE TRUST
- HOW DOES THE LIVING REVOCABLE TRUST WORK?
- WHAT ABOUT PROPERTY NOT PLACED INTO THE TRUST?
- WHAT HAPPENS IF THE TRUSTOR IS UNABLE TO TAKE CARE OF HIS OR HER OWN PERSONAL BUSINESS WHILE HE OR SHE IS STILL LIVING?
- WHAT ABOUT DECISIONS REGARDING MEDICAL CARE?
- WHO WILL TAKE CARE OF MY CHILDREN?
- HOW LONG DOES IT TAKE TO CREATE A LIVING REVOCABLE TRUST?
- CAN I CHANGE MY TRUST ONCE IT IS CREATED?
- SHOULD I HAVE MY TRUST REVIEWED?
- WHO SHOULD PREPARE MY LIVING REVOCABLE TRUST?
- WHAT ARE THE DISADVANTAGES OF PLACING CHILDREN ON TITLE IN ORDER TO AVOID PROBATE?
- WHAT DO I HAVE TO PREPARE OR BRING WITH ME IN ORDER TO CREATE MY TRUST?
Probate is a legal process by which the probate court awards title to a deceased person’s property to:
- heirs where there is no will, or
- to beneficiaries under a will.
- guardians for children, and/or
- conservators for incapacitated adults.
The word Probate comes from the legal requirement of proving of the will of a person who has died.
Under California law any estate in excess of $150,000.00 must be probated whether there is a will or not.
Probate allows any person or entity that has a claim against the decedent to come forward and state his claim.
Probate also allows more than one person who has a claim on some item of the decedent’s property to state their claims.
Probate also provides for the naming of guardians for children, and conservators for adults who are under a legal disability.
- Anyone can see your probate file.
- Probate is expensive.
- The court decides who gets your property, not you.
- Probate is a lot of work.
- Probates can take a year or longer to complete.
- Probate can lead to family breakups.
- Probate Is a Public Process:
Probates are posted at the courthouse.
Anyone with the filing fee can get a copy of a probate file.Any interested person can petition the court to open a probate.
- Probate Is Expensive:
Probate Code Section 10800 provides that:
. . .[F]or ordinary services the personal representative shall receive compensation based on the value of the estate. . .
4% of the first $100,000.
3% of the next $100,000.
2% of the next $800,000.
1% of the next $9,000,000.
If your estate is worth $500,000.00, it could cost $13,000.00, to probate your estate.$500,000
-$100,000 x 4% = $4,000
-$100,000 x 3% = $3,000
-$300,000 x 2% = +$6,000
$ 0 $13,000
Probate fees on an estate are determined by the value of the gross estate, meaning prior to any taxes or other charges due on the estate.Other costs include court filing fees and publication of notices.
- Probate Is an Uncertain Process:
Because Probate is a public process anyone can make a claim.Because the court is bound by the Probate and Civil Code, the court will make decisions that may or may not be what you would have wanted.
- Probate Is a Lot of Work:
Anyone with a possible claim must be notified.
- Probate Is Time Consuming:
A Probate can easily take a year or more to complete.
- Probate Can Lead to Family Breakups:
The duration of probate and the stress created by probate often leads to disputes between family members.
A natural part of the death of a loved one is the mourning process followed by a time of healing.
With a probate, loved ones are not able to mourn properly because of the uncertainty and frustration of the probate process.
Probate denies survivors the ability to move on with their lives.
- Only family members know your business.
- A trust is inexpensive: about $1,295.00, and $1,495.00 for a couple.
- You control what happens to your estate.
- No need for court appearances or approval.
- A trust can be administer in a few months.
- A trust will keep your family united when they need each other the most.
- A Living Revocable Trust Is Private:
A Trust is similar to a contract.
The only one who has a right to see your trust is the trustee and the beneficiaries of your trust and then only to the extent that the trust effects them.A person who wants to know what is in your trust must petition the court and the court will only disclose necessary information to such a petitioner.
- A Living Revocable Trust Is Inexpensive:
A simple Living Revocable Trust costs approximately $1,295.00 for a single person, and $1,495.00 for a couple.Costs include such things as filing fees for deeds, and notarization costs.
- A Living Revocable Trust Allows a Person to Control What Happens To His or Her Estate:
Because the court is bound by the trust document, the court will make decisions that are in accord with your wishes so long as they are not illegal or contrary to public policy.
With a Living Revocable Trust you can provide protection for family members who have special needs; or, for those who suffer from drug and/or alcohol dependence, gambling addiction, or an creditor problems.
A Living Trust can also protect your family from Medi-Cal payback obligations.Because a Living Revocable Trust is a private arrangement persons who want to challenge the trust have the burden of making a claim in court.
- Administering A Living Revocable Trust Is Simple:
The persons who must be notified are limited to heirs and beneficiaries, and creditors.
Transfer of title to property is simplified.There is no need for court supervision.
- Administering A Living Revocable Trust Is Quick:
Administering a Living Revocable Trust can be accomplished in a matter of weeks and in some cases days.Funds in bank accounts held in trust can be available to survivors almost immediately.
- A Living Revocable Trust Allows Survivors to Move On With Their Lives:
A Living Revocable Trust relieves the survivors of the added agony of probate, and prevents the kind of bickering and family disintegration that often results from probate.
A Living Revocable Trust gives surviving loved ones the peace and tranquility that comes from knowing that their deceased loved one’s business has been taken care of, and that they died knowing that their family would be taken care of.
The owner of property, as the trustor, gives the property to himself, or herself, as the trustee, to hold for his or her own benefit.
The trustors retain all the rights and prerogatives of complete ownership of trust assets.
When the trustor (or trustors) dies, the successor trustee will pay the last taxes and bills of the trustor, and then distribute the remaining property to named beneficiariesLong Answer:
A trust is created when a person who wants to transfer some property (the trustor), gives legal title of that property to a neutral person (the trustee), to hold for the benefit of a person (the beneficiary) who will ultimately have complete title to the property.
Although the trustee has legal title to the property, the beneficiary has equitable title to the property. This means that the trustee must not act in any way that will injure the beneficiary’s ultimate right to possess the property.
In creating a trust there must be these three persons: the trustor, the trustee and the beneficiary. One person can play any two of the parts. However, to have a trust one person cannot play all the parts.
If a person gave property to himself to hold for himself, there would be no trust. There would be mere ownership.
With a Living Revocable Trust the owner of the property, as the trustor, gives the property to himself, or herself, as the trustee, to hold for his or her own benefit. However, when the trustor (or trustors) dies, the property will pass to another beneficiary. This is why a Living Revocable Trust is really a trust.
The trust is created when the trustor:
- Declares that he has decided to place some property in trust,
- Has named the trustees and the beneficiaries,
- Has given instruction for the operation of the trust, and
- Has put some property into the trust.
Property that has not already been put into the trust can be added to the trust by the use of a Pour Over Will.
There is generally no need to have this will probated because this remaining property is generally not worth more than $150,000.00.Long Answer:
When the trustor dies he can have all of his or her property that has not already been put into the trust added to the trust by the use of a Pour Over Will.
This is a will that states that all property not in the trust is to be added to the trust and distributed as part of the trust.
Because this remaining property is generally not worth more than $150,000.00, there is no need to have this will probated.
What Happens if the Trustor Is Unable to Take Care of His or Her Own Personal Business While He or She Is Still LivingShort Answer:
Under the terms of the trust, a designated successor trustee will act for an incapacitated trustor/ trustee.
Furthermore, a person can appoint an agent to take care of his, or her, business by creating a Power of Attorney in someone that they trust. This can be very useful in cases were a trust must be amended on behalf of an incapacitated trustor.
This agent can be an adult child of the principal, a friend, or some other trusted person.Long Answer:
A person (The Principal) can appoint a person (The Agent) to take care of his, or her, business if he, or she, is unable to do so by creating a Power of Attorney in someone that they trust. This agent can be an adult child of the principal, a friend, or some other trusted person.
The agent that is appointed has all the legal authority to act for the principal that the principal would have if he, or she, could act for himself or herself.
Although the successor trustee has the authority to act for an incapacitated trustor, a Power of Attorney is a favored device of banks and real estate agents.
A Power of Attorney also provided for amendment of the trust of an incapacitated trustor, in the case of changed circumstances.
A person can appoint an agent to make decisions for himself or herself regarding medical care by creating a Power of Attorney for Health Care in someone that they trust.
This agent will have the authority to:
- Consent to your doctor giving you treatment necessary to keep you alive,
- Consent to your doctor not giving you treatment necessary to keep you alive, and
- Stop your doctor from giving you treatment necessary to keep you alive.
The Probate Court will appoint a legal guardian for the children with broad legal powers.
Parents can advise the court as to their choice of guardian for their children by including a NOMINATION OF GUARDIAN with their trust.
In order to best protect the children parents should consider nominating a guardian for the person of the children. That is, some person who will provide a home and care for the children.
The parents should also consider nominating a guardian of the estate of the children, someone who will have the right to protect the financial interests of the children.
In this way the person caring for the children will also be concerned with the assets of the children, and the person caring for the assets of the children will also be concerned with the care of the children, with the result the children are doubly protected.
Generally, creating a trust requires:
- A one-hour interview with the attorney,
- A final meeting to formally sign all the documents.
Your trust can be changed at anytime so long as all Trustors of the trust are living.
Upon the death of the first trustor to die, the terms of the trust become irrevocable.Long Answer:
With a Living Revocable Trust, the provisions of the trust can be changed at anytime so long as all Trustors of the trust are living.
Because the Living Revocable Trust can be revoked or changed, the trustor or trustors retain all the rights and prerogatives of complete ownership of trust assets.
Trust assets can be taken out of trust and sold or given away.
Trust assets can be used as security for loans.
Trust assets can be rented.
With a Living Revocable Trust, upon the death of the first trustor to die, the terms of the trust become irrevocable. However, it is possible to amend certain parts of the trust.
Generally it is wise to review your trust approximately every five years, or whenever there has been a major change in your personal circumstances.
Things to consider include but are not limited to:
- The birth or death of children or grandchildren,
- The incapacity of family members,
- Special needs of potential beneficiaries,
- Differences in earning power between different potential beneficiaries,
- Drug or alcohol dependence, creditor or gambling problems of potential beneficiaries,
- The acquisition or sale of assets,
- Changes in the federal income tax laws,
- Possible changes in the real estate market.
In California licensed attorneys are authorized to prepare Living Revocable Trusts.
Attorneys are trained in the law of Probate, Property, Civil Procedure, Real Estate, and Taxation.
Choose an attorney with whom you are comfortable and with whom you can be candid regarding your most personal and private matters.
The ability to be candid with your attorney assures that your Living Revocable Trust will fit you to a tee.
Avoid mass marketed Trusts.
When the time comes, a mass marketed Trust might fail, resulting in the need to have your estate probated.
There are primarily three disadvantages of placing children on title in order to avoid probate:
- The recipient of an inter vivos gift of real property also receives the donor’s basis in the property instead of a stepped up basis to fair market value as of the date of death of the donor.
- By placing children on title to your property as joint tenants you are exposing yourself to your children’s liabilities.
- The child can encumber or sell that share of the property without your permission.
There is really nothing that you have to prepare or bring with you in order to create your Living Revocable Trust.
A truly professional estate planner will be able to access your records for you.
The best way to organize your affairs and paperwork is to do so with a professional who understands estate planning, taxes and the consequences of not preparing properly for what lies ahead.