Every adult should have an estate plan that directs the disposition of his or her assets upon death. The key element of any estate plan is either a will or a living trust. What is the difference between the two, and which one best suits the circumstances of you and your family?
A will is usually a relatively simple document that directs, in general terms, the disposition of a person's property on death. A will usually suffices for California residents who do not own any real estate, whose total assets are less than $150,000, and who do not have minor children.
However, for those who own real estate, whose assets exceed $150,000 in value, or who have young children, a living trust is usually a much better choice. Why? Because the heirs of a person who dies owning real estate, or whose assets exceed $150,000, will only be able to collect the assets through a time-consuming and expensive court proceeding known as "probate." And with respect to those survived by minor children, even if the assets are not great, a court proceeding will often be necessary to establish a guardianship for the purpose of managing the assets inherited by the minors.
Although the cost of establishing a living trust is slightly more than a will, the savings in probate filing fees and statutorily mandated legal fees can easily exceed $10,000 even in a relatively small probate estate consisting only of a home and a small savings account. Consider the following example:
Ms. Smith, a widow, passes away at the age of 80, survived by three children. She owns a home valued at $350,000 and a savings account with a balance of $50,000. She has a will that leaves her estate to her three children, in equal shares. Her estate will need to be probated. The costs of probate are as follows:
Court filing fee $435
Publication fee $300
Appraisal fees $400
Statutory attorneys fees, computed as a percentage of the estate $11,000
Total costs and fees $12,135
In contrast, Ms. Smith could have avoided probate if she had created a living trust, which typically costs between $1,500 and $3,000. Thus, there would have been a net savings of $8,000 to $10,000.
Simply put, a living trust will likely save your loved ones thousands of dollars, as well as greatly simplify and speed the process of collecting and distributing your assets among your intended beneficiaries.
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The information in this blog is intended only as general information, and under no circumstances constitutes legal advice, nor does it create an attorney-client relationship. The information should not be relied upon as a substitute for specific legal advice concerning your particular situation.
For advice specific to your situation, contact us to schedule an appointment.
About the Koons & Riswold Law Office
Koons & Riswold maintains an office in Davis, CA and Auburn, CA to provide clients with legal services in Auburn, Davis, and the surrounding areas. Our Auburn and Davis lawyers provide legal services, which include: Living Trust and Estate Planning services, Probate, Elder Planning, and Trust and Estate Administration. Our lawyers have deep roots in Northern California, having strong familial, community, and professional ties to the region.