- Wills Require Probate: Assets left through a will must go through probate court, a time-consuming and expensive process.
- Probate Takes Time: California probate proceedings average 9 months to 2 years to complete, even for modest estates.
- Probate is Costly: Attorney fees, executor fees, court costs can eat up 5-10% of an estate’s value in probate.
- Probate is Public: Will filings and proceedings are public record, exposing details you may want to keep private.
- Living Trusts Bypass Probate: Assets properly funded into a living trust pass directly to heirs, avoiding probate entirely.
Example:
- Tom left a $1.2 million estate through a will. Probate took 14 months and cost $85,000. Details became public.
- Beth’s similar estate in a living trust passed to heirs in just 6 weeks with minimal cost and total privacy.
Action Steps:
- Set up a living trust to keep your estate out of probate court.
- Properly “fund” assets into the trust – titles, deeds must be transferred.
- Coordinate beneficiary designations on accounts with your trust terms.
FAQs:
- How long does trust administration take vs. probate? Typically 6-8 weeks vs. 9-24 months.
- What is the cost of a living trust vs. probate? 1-2% of estate value vs. 5-10%.
- Isn’t trust administration still required after death? Yes, but it is much simpler and faster than probate proceedings.
2. Living Trusts Provide More Control & Protection
- Manage Assets If Incapacitated: A trust lets your chosen representative manage assets seamlessly if you become incapacitated.
- Protect Minor Children: Appoint guardians and provide instructions for how and when children receive inheritances.
- Blended Family Provisions: Specify asset distribution among children and stepchildren to minimize disputes.
- Spendthrift & Special Needs Protection: Preserve eligibility for benefits and shield assets from creditors or reckless spending.
- Reducing Estate Tax: Maximize estate tax exemptions through AB trusts and other vehicles for high-value estates.
Examples:
- A stroke left Ed unable to manage his rental properties. His trust let his daughter step in seamlessly to handle things.
- Sheila’s trust holds money for her son until he’s 25 and finishes college. It can also provide for a special needs niece without disrupting benefits.
- Sam and Ann use an AB trust to double their estate tax exemption to pass on more assets tax-free.
Action Steps:
- Name trusted successors to manage assets if you become incapacitated.
- Include specific provisions for minor children, blended families, and those with special situations.
- Work with an estate attorney to minimize estate taxes if you have a high net worth.
FAQs:
- Can a trust protect assets from creditors? Certain spendthrift trusts can. Consult an attorney for your specific needs.
- How can I provide for a child with special needs? A special needs trust can help without jeopardizing government benefits.
- What is an AB Trust? A tool for married couples to maximize estate tax exemptions. Talk to an estate lawyer to see if it fits your situation.
3. Handling Digital Assets in a Modern Trust
- Online Account Inventory: Document all important online accounts, login IDs, passwords for your trustee.
- Digital Asset Provisions: Include language that grants your trustee legal authority to access and manage digital assets.
- Cryptocurrency & NFTs: Provide detailed instructions on how to access, manage, and distribute cryptocurrencies and non-fungible tokens (NFTs), including information about private keys, wallets, and exchanges.
- Social Media Accounts: Leave instructions on what to do with your social media profiles – memorialize, delete, etc.
- Online Business Assets: Document important files, account access, and succession plans for digital businesses.
Examples:
- Jason keeps a secure file for his trustee with all his passwords to important online accounts like email, banking, social media, crypto wallets.
- Olivia includes provisions giving her successor trustee authority to deal with her digital real estate business and related online assets.
- Amir provides the seed phrases and instructions to distribute his Bitcoin and NFT collections to his beneficiaries.
Action Steps:
- Inventory all important digital accounts & assets. Update regularly.
- Integrate digital asset provisions into your living trust documents.
- Provide trustee with access information in a secure but accessible method.
FAQs:
- What digital assets should I include in my trust? Any online accounts or files with monetary or sentimental value. When in doubt, include it.
- How do I safely store & share passwords? Consider secure digital vaults like LastPass or 1Password.
- Are social media accounts really “assets”? Some have value as business or influencer accounts. For personal ones, think about privacy and memorial legacy.
4. Selecting & Supervising Trustees
- Choose Wisely: Name a trustee who is organized, responsible with money, and shares your values.
- Consider a Professional: For complex situations, a professional fiduciary may be a prudent choice.
- Name Successors: Designate backup trustees in case your first choice is unable to serve or continue.
- Build in Oversight: Consider naming a trust protector, an independent party with the authority to review the trustee’s actions, resolve disputes, and even remove and replace trustees if necessary.
- Set Reasonable Fees: Provide fair compensation for your trustee’s time and effort. Too high or low can cause issues.
Examples:
- Jorge chose his CPA sister Rosa as successor trustee, with a trusted cousin as backup. An estate lawyer friend serves as trust protector.
- With an $8 million estate and dysunctional family, Melanie opted for a professional fiduciary firm to act as impartial trustee.
- When son Leo struggled with addiction, Ava named a bank trust department to manage his inheritance and make payments for his care.
Action Steps:
- Carefully consider who has the time, skills and integrity to serve as successor trustee. Have candid discussions with them.
- Name at least one backup trustee in case the primary can’t serve. Consider a professional for complex situations.
- Set clear, reasonable fees for trustee duties. Consider a trust protector to add checks and balances.
FAQs:
- What if my trustee proves unfit or dishonest? A trust protector or court can remove them if proper proof is shown. Naming good successors is key.
- How much should I pay a trustee? It varies by duties, but 1% of assets/year is common. Get professional guidance for your situation.
- Can I replace a trustee while I’m alive? Yes, as long as you’re mentally competent you can change trustees anytime.
5. Keep Costs Contained
- Avoid the Probate Ripoff: Setting up a trust may cost a bit up front, but will save big by avoiding probate later.
- Be Wary of Online Options: While online trust forms and will-makers exist, it’s strongly recommended to consult with an estate planning attorney for properly drafted and customized trust documents.
- But Don’t Skimp on Advice: Complex situations require expert legal guidance – money well spent to avoid problems later.
- Title Assets Properly: Spend the time and modest fees to title assets in the trust. It’s cheaper than probate!
- Keep It Updated: An outdated trust can lead to conflicts, unintended consequences, and unnecessary legal fees. Review and update your trust regularly, especially after major life events (marriage, divorce, birth, death) or changes in the law.
Examples:
- With vacation homes, a family business and special needs son, Julia spent $6K with an estate attorney to set up and fund her custom living trust – far less than probate costs.
- When Kate died with an unfunded, outdated trust, her family spent thousands in legal fees and months in court to resolve issues. A little effort in life would have saved a lot after.
Action Steps:
- Don’t fear the cost of a living trust – it’s far less than the cost of probate. Quality online options make it affordable for simple estates.
- For complex situations, spend the money for bespoke legal advice – it’s an investment that will save heirs even more.
- Once the trust is created, take the crucial next steps to properly title assets into it. This modest effort avoids major problems later.
FAQs:
- How much should a basic living trust cost? Online forms (not recommended) can cost under $1,000. Attorney-drafted trusts average $2,000-4,000. Complex ones can be $5,000+.
- What if I spend money on a trust but my family fights anyway? That’s always a risk, but having a clear, legally-valid trust gives them less to fight about than dying without one!
- How often should I update my trust? Review it every few years and after major life changes – births, deaths, divorces, etc. Expect to make updates a few times a decade.
Conclusion
A living trust is a powerful tool to avoid probate, minimize taxes and protect assets for your loved ones. Work with an experienced estate planning attorney to tailor one to your needs.
A California living trust offers compelling advantages over a simple will for nearly everyone. It helps your estate avoid probate, better protects your assets and heirs, minimizes taxes, and grants you greater control over your legacy.
While the upfront costs of establishing a living trust may be a bit more than a basic will, the long-term savings and security are substantial. Your heirs will receive more of your estate, faster and with less expense. Just be sure to title assets properly and keep it updated as life unfolds.
Whether your estate is large or modest, simple or complex, a living trust is a tool to consider. Consult an experienced estate planning professional to discuss your goals and create a custom plan. No one wants to think about death, but preparing thoughtfully in life is a final gift to those you love.
Get Professional Guidance on Your California Living Trust
Setting up a living trust involves important legal and financial decisions.
An estate planning attorney can assess your unique needs, provide custom recommendations, and properly draft and execute your living trust documents.
Need help setting up a living trust in California? Contact Us.
Living Trust Quiz: Test Your Estate Planning Knowledge!
Questions:
- What’s the main advantage of a living trust vs. a will in California?
- A) Avoiding probate
- B) Saving on taxes
- C) Nothing – they’re the same
- D) Trusts are easier to set up
- How long does California probate typically take?
- A) 2-4 months
- B) 6-12 months
- C) 12-24 months
- D) 3+ years
- What happens if you die without a will or trust in place?
- A) The state decides who gets your assets
- B) Everything goes to your spouse
- C) Your oldest child inherits all
- D) Your assets go to the government
- Which of these is NOT a benefit of a living trust?
- A) Avoiding conservatorship if incapacitated
- B) Shielding assets from estate taxes
- C) Eliminating the need for a will
- D) Maintaining privacy
- What’s the MOST important thing after creating a living trust?
- A) Telling your family about it
- B) Properly funding the trust
- C) Naming guardians for kids
- D) Signing the documents
Answers:
- A) Avoiding probate. Assets in a living trust bypass lengthy, costly probate.
- C) 12-24 months. Probate averages 1-2 years even for modest estates.
- A) The state decides. Without a valid will or trust, intestate succession laws determine inheritance.
- C) Eliminating the need for a will. You still need a “pour-over” will for guardianship & assets outside the trust.
- B) Properly funding the trust. Failing to title assets correctly negates the main benefits. Consult a lawyer for guidance.
Disclaimer
The information in this article on California living trusts is general in nature and not a substitute for personalized legal advice. Estate planning laws and options vary based on individual circumstances and may change over time.
Examples, action steps and answers provided are for illustrative purposes only and may not apply to or be appropriate for every situation. Seeking counsel from a qualified California estate planning attorney is strongly advised to assess your specific needs and create a custom solution tailored to your unique goals and circumstances.
While we strive to provide accurate and useful information, this article is not intended to be an exhaustive guide to California living trusts. Additional steps, considerations and exceptions may apply in certain situations. Use this as a starting point for exploring your estate planning options and consult professional advisors for personalized guidance.
