Revocable Living Trust
1. Avoid Probate Court on Death
2. Avoid Probate Court on Disability
3. Privacy Protection
4. Fast Transfer of Assets on Death
5. Reduce Estate Taxes
6. Keep Assets in the Family
7. Protect Assets from Predator's, Creditor's, Divorcing Spouses, and Lawsuits
8. Save Money
9. A Wise Investment
10. Peace of Mind
Avoid Probate Court on Death
In California, if the total gross value of your Real Estate and Personal Property is over $166,625.00 when you die, then formal Probate Court Proceedings are necessary to transfer assets.
Probate Court is Expensive
The lawyer in a probate gets paid by statue as follows:
4% on the first $100,000.00;
3% of the next $100,000.00;
2% of the next $800,000.00;
1% of the next $9,000,000.00
1/2 of 1% of the next $15,000,000.00;
Above $25,000,000.00, a reasonable amount as determined by the court.
The Personal Representative or "Executor" of the will is entitled to the same fee as the lawyer, so, multiply the lawyer fee by two. Also, there are filing fees, appraisal fees, and other costs associated with managing the case. A probate is quite expensive indeed.
Probate Court is Time Consuming
A fast probate takes nine months to complete. A typical probate takes 18 months. It is very common to have a probate last for many years. The size of the estate and "will contests" usually cause delays. A trust can help you avoid these lengthy delays. They typical trust administration takes about 3 months.
Probate Court is a Public Process
Anyone can go down to the courthouse and ask to see the probate file. They can see the names of your children and what you owned when you died. The system allows the general public, including "predators", to hunt for opportunities to deprive your family of their inheritance. Also, it would be easy for someone to copy your file and publish it on the internet, YIKES! A Revocable Living Trust is private and is not available to the public. You control who can see your trust. I always recommend my client's to keep it as private as possible. If you want privacy, the trust is the way to go.
Probate Court's are Busy
Probate Court calendar's are notoriously busy. After meeting with a lawyer to hire him to help with the probate, he needs time to complete the paperwork to file with the court. Once ready, it is common for the court calendar to be booked up for six weeks before a hearing can be scheduled. This applies several times during the probate process. If a mistake is made, it could cause even more delay. It is very easy to avoid these delays with a Living Trust.
Probate Court Trigger
In General, when the gross value of a decedent's property is above $166,625.00, a formal Probate Court proceeding will be required in order to transfer the decedent's assets to his heirs. "Gross value" means the fair market value of the asset regardless of whether there is money owed (i.e., mortgage amount due). You can own a house worth $200,000.00 and owe a mortgage of $195,000.00. If you die, a probate would still be required, even though you only actually own $5,000.00 in equity in the house. When the decedent was married, the surviving spouse usually does not need to file a probate proceeding. It depends on whether the surviving spouse was a joint owner of the assets. There may be other legal needs for a surviving spouse that need a lawyer's assistance.
How a Living Trust Avoids Probate
A Revocable Living Trust is a legally created "entity" that can own property. It is like a human being, but it will never die. Each trust you create has a name, just like each human has a name. We call the trust name the "trust title". Each asset you own (i.e., your house, bank account, brokerage account...) needs to be re-titled into the name of the trust. That way your trust owns the asset. The process of transferring asset titles into the name of the trust is called "Funding" the trust. Although your trust will own your assets, you still own and control the trust while you are alive. When you die, you don't own your assets for Probate Court purposes, your trust owns them. Therefore, the Probate Court system is not triggered and Probate Court is avoided.
The only thing worse than going through a probate court proceeding after death is having to go through a probate court proceeding while you are still alive. The Living Probate is known as a "Conservatorship". A conservatorship is necessary when a person is disabled and can no longer make financial or health care decisions for themselves. A Probate Court judge will appoint a "Conservator" over the finances and health care decisions of the "Conservatee" (disabled person). In addition to the process being a time consuming, expensive, public process that requires a lawyer, the conservatorship process requires at least two lawyers. The person trying to help the disabled person gets one lawyer and the disabled person gets their own lawyer to defend them against the conservatorship. Generally, everyone works together for the good of the disabled person unless that person does not want to be helped. Once a Conservatorship is granted, anytime a conservator wants to do anything for the Conservatee, they have to go to court to get the judges permission. The Conservatee must attend each hearing if he/she is able. Also, the Conservator must file accountings with the court once per year. The conservatorship will last until the Conservatee dies or no longer requires a conservatorship. The nightmare of conservatorship is easily avoidable with a Revocable Living Trust, Financial Powers of Attorney, and an Advance Health Care Directive. These documents are very inexpensive alternatives to the Conservatorship proceedings when considering all the factors.