Both Wills and Trusts help to ensure that the wealth you have accumulated gets passed to your family and loved ones. I imagine we all want our death bed wishes to be fulfilled. Wills and Trusts are two such vehicles to make our wishes come true. However, both have very different implications and costs. Wills can be seen as paying little upfront and then costing a ton of money later.
Trusts are more costly upfront but are worth it in the end because if set up by a Trust Specialist Attorney correctly, they can help you avoid Probate Court and all its’ fees and hassles of a yearlong process of dealing with the Courts. Unfortunately, 95% of estates will end up in Probate Court. Probate court is avoidable. If you are interested in saving your estate 2-4% in fees and a year of heartache and hassles dealing with Probate Court for an average of 12 months, then this article may be for you. If you own no property or assets of any kind, then you can stop reading now.
Wills and Trusts are both estate preparation devices. Each can help guarantee your properties and assets are protected and bequeathed to your heirs.
However, the legacy to the spouse is different because the marriage deduction provision within the estate and tax laws allows the real and personal property to be passed directly to the partner without inheritance tax obligations.
Nevertheless, the transfer procedure becomes much more involved when riches, personal and real property are passed to subsequent generations. It is feasible to have both a will as well as a Trust. Think of it this way, the more property and assets, the more relevant it is to have both a Will and a Trust.
A Will is a legal document explaining a person’s wishes after their death. Typically it covers the naming guardians of minor dependents to bestowing things and cash properties to good friends, relatives, or charities. A Will is activated only after one’s death.
On the other hand, a Trust becomes active the day you develop it, and also, a grantor might list the distribution of properties before their death in it, unlike a will. Irrevocable trusts, typically created for tax functions, can not be altered after their development.
All wills must undergo a legal process called Probate, where a licensed court administrator examines them. This procedure can be prolonged and also possibly contentious if a member of the family contest the will. Trusts do not go to Probate when the grantor dies, and if set up by a professional, are not disputable.
People generally confuse wills and living trusts. Both serve essential purposes as parts of estate planning and are documents drafted to act as the official record of an estate.
- Seek professional advisors’ advice for taxes, investments, and legal whether you consider a Will or a Trust.
- A Will defines how you want your affairs handled, and assets distributed after your death and is a legal document.
- A trust defines a fiduciary relationship, spelling out where the financial responsibility lies. A trustor is given the right for a trustee to hold title to both property and assets for the benefit of another party.
- Trusts offer more control over property and assets. Trusts are more expensive and tedious to set up and actively manage. Typically the cost is $2500 – $5000 depending on the variety of assets held and the number of heirs. A trust can save you tens of thousands of dollars in court fees and a full year of frustration and stress for your heirs.
- Both Wills and Trusts are essential parts of your estate-transfer plan. If you have failed to plan, the state and the federal government will have one for you. The government has a vested interest because taxes must be paid. Probate court is there to facilitate the paying of taxes, the settling of debts, and the distribution of assets. Probate court is the route that 95% of estates must pass thru. The process takes on average one year to complete, and with fees, the costs will consume between two and four percent of the estate’s total worth.
A trust fund Can Keep Your Beneficiaries away from Probate.
Probate Court is where your heirs could quickly lose 2% to 4% of the value of your estate, eaten up with attorney fees and court costs.
Probate court is the judicial system responsible for reviewing and validating wills. Modern-day Probate court reviews wills, trusts, conservatorships, and guardianships and refers to the entire process, not simply the review and validation anymore.
The Probate court judge will examine your testamentary will, a legal document used to transfer your estate. Once the choice is validated, the judge will assign guardians for dependent children. Executors are typically named within the will. The judge will review the fitness of the executor named and reassign the executor as needed. In some cases, the judge will set up a trust for survivors.
The executor will be responsible for sorting out the estate, which could take six to 18 months. Typically it takes one year to Probate an estate. Do you want to put your heirs thru probate court? When you are creating a will or a trust, think of it this way, pay now a little for a Trust, or pay way more later because you only had a Will.
See the chart below. In summary, a Will cost less to establish your wishes but will end up in Probate Court, where the costs and fees will consume 2-4% of the estate and take on average one year to be resolved. If you create a trust, you can avoid probate court, and it will cost $2500-$5000 typically. If you have any assets and real property, I recommend you consult with a Trust Specialist Attorney.
What is a Living Trust?
A trust is an agreement created with the help of a legal attorney that allows your assets to be transferred to another entity after your death. With a revocable living trust, you can transfer assets such as your home, bank accounts, stocks, and bonds, into the trust during your lifetime. You remain in control of the assets during your lifetime and exercise those rights much like you would before transferring them into the trust. A successor trustee takes over managing those assets upon your death, but if you specifically want to control the assets yourself until then, you can do so if you’re willing to take on all of the responsibilities that entail; hence why it’s called a revocable living trust.
What are the benefits of a Living Trust?
One of the oldest and most popular estate planning and wealth management tools is a revocable living trust. It provides a fund to be used solely for particular beneficiaries, which will avoid Probate. With this kind of trust, there are no court costs involved, and it’s more private than a will to cut down on the possibility of overbearing scrutiny. Estates managed through a trust typically have more flexibility in inheritance distribution than those not under such an arrangement. Assets can be gifted before death, unlike keeping everything to yourself or someone else entirely until passing. Finally, a revocable living trust offers one distinct advantage: it allows for succession planning for incapacity use! The living trusts help individuals plan for rising care costs, so no conservatorship issues ever need to come up!
What are the drawbacks of a Living Trust?
The problem with trusts is that they are often not under court supervision. When the trustee cannot act in your best interest, this person may try to take advantage of you. Some people might want our family members to avoid conflict and stay united; they might need a testator trust because they foresee possible disputes among themselves. The initial cost of making such financial arrangements will be more expensive than creating a simple will because you never know how much your actions might end up costing those who we love most.
Who should have a Living Trust?
If your estate value is more than the hundred thousand dollars, you may have a living trust. However, it is not the only threshold to have it. Many people who have property value less than a hundred thousand dollars also have a living trust. For example, those who want to leave the estate to a third person or charity may fulfill it thru living trust. Trusts are not only appropriate as a method of estate planning. A Living Trust also allows you to control certain assets and make charitable donations (such as gift annuities). Trusts can also be invaluable under circumstances of unforeseen injury or illness.
It can be tempting to create an inexpensive online trust. It has never been easier to prepare your living trust in our digital age. I know it’s tempting; however, you’ll save the estate and your heirs so much money, time, and stress by setting up the trust correctly with an attorney who is a Trust specialist. I would encourage you to make a list of assets and their values in advance to consult with an attorney and discuss how best to divide them between the heirs while reducing estate taxes.
What is a Will?
A will is typically a document that expresses one’s wishes about his affairs handled and assets distributed after he passes away. A will becomes effective after death. Often people create a type of will is called a testamentary will or a testament. Some states do not require a probate proceeding to validate a will. The validity of any Will can always be contested.
What are the problems with Will?
Like other legal documents, wills are only helpful after someone has died. In terms of estate transfer procedures, a Will can sometimes become part of the public record. Anything left to a Will must go through probate court. Probate attorneys can also be expensive, which includes California and other specific states. However, the bank accounts, retirement accounts, and life insurance policies with the nominee’s details pass straight to the beneficiary named as a nominee without Probate.
Living Trust vs. a Will in California.
Trusts can be more expensive than wills to create and maintain. But the distribution of your belongings is fast, and no court fees are involved.
A Will tends to be less costly than a Trust initially. However, a Trust can save you from going to Probate Court, which could cost as much as $55,000 in administration fees. The probate process is time-consuming, takes nearly a year to complete, and has heavy court fees.
In conclusion, Wills and trusts are both critical estate planning tools. In summary, a Will costs less upfront and costs much more later. On average, 2-4% of the total worth of an estate will be eaten up by Probate Court. A trust costs more money upfront but saves on average one year and mountains of heartache, stress, and money.
In general, if you own any property, a Trust is the way to go. For example, if an estate is worth 1 million dollars, it will cost about $55,000 in fees during the Probate process. Always consult a professional for tax, investment, and legal advice. I’m not a lawyer but work closely with the best Trust specialist attornies and can make a risk-free referral for a free consultation for you and your family. Call me, Kevin McClenahan – Realtor, at 858.284.7778, and let’s have a brief discussion so I can then introduce you to the best professional for your needs.
Wills and Trusts are both estate preparation devices. Each can help guarantee your properties are protected and bequeathed to your heirs. A Will states your intentions for gifting but must be validated by the courts. The probate court is a special section that handles 95% of estates and is time-consuming and costly to the estate. Creating a Trust helps you bypass the court system’s costs and hassles and does a better job of protecting your hard-earned assets in the event of your death.