One of the most common questions I’m asked is “Should I have a Will or a Trust?”
An old adage states that the only certainties in life are death and taxes. When a person dies in the State of California, his or her estate is valuated, and if he or she owns any real estate appraised above $20,000 or has liquid assets in excess of $100,000, their estate must go through the probate process. This process is a court proceeding that looks at their will, determines their assets, and their creditors (debts owed at time of death), settles the debts through the liquidation of their property, and distributes the remaining assets to the named heirs according to the provisions of the will. This is a lengthy process, taking in excess of 20 months on average, costly to the estate, the statutory attorney and executor fees alone start at 8%, and do not include the actual court fees. Many times the total cost is between 8 and 10% of their entire estate. For example, in California, a person who owns a house appraised at $500,000 with additional assets of $100,000 (total estate of $600,000) dies, the cost to probate his/her estate would exceed $50,000, take nearly two years to finalize, and be public record. Wills are also used to name custodians of minor children if any, but the final determination is subject to approval of the probate court.
Everyone in California has a will! Either, an individual has written one (usually through the help of an attorney), or, the State of California has written one for you. In the latter case, you may or may not like the provisions stated in the California statues regarding persons who die “intestate”. This simply means people who have not written their own wills. Luckily, there is an alternative. An individual, or husband and wife, may through an Attorney, create a living trust.
According to the California State Bar Association, “A living trust is a written legal document, that partially substitutes for a will. With a living trust, your assets (your home, bank accounts and stocks, for example) are put into the trust, administered for your benefit during your lifetime, and then transferred to your beneficiaries when you die."
Most people name themselves as the trustee in charge of managing their trust’s assets. This way, even though your assets have been put into the trust, you can remain in control of your assets during your lifetime. You can also name a successor trustee (a person or an institution) who will manage the trust’s assets if you ever become unable or unwilling to do so yourself.
“The living trust is a revocable .trust (sometimes referred to as a revocable inter vivos trust, revocable trust or a grantor trust). Such a trust may be amended or revoked at any time by the person or persons who created it (commonly known as the trustor(s), grantor(s) or settlor(s)) as long as he, she, or they are still competent.
Your living trust agreement:
For more information on estate planning, please contact Russ Morris.
Russ Morris, LUTCF
In 1995, I became a licensed financial advisor and Life Underwriter Training Council Fellow (LUTCF) because I believe that next to our physical health, our financial health is the most important factor in our lives. For over twenty years, my goal has been to be a "financial doctor" that my clients can trust.