Why should I make a trust? This is a common question. In this series of posts, here’s twenty great reasons to have a trust!
Part B: Trusts Avoid Probate When You Die.
5. California probate is time consuming and a tremendous hassle.
If you die without a trust, unless your estate is very small, it will have to pass through the probate court. In some states, probate is a minor process. In California, it takes a minimum of about 6 months to finish a probate, and usually closer to a year (sometimes several years!) During that time, your heirs have to wait to receive their inheritance. It is sometimes possible to get an early distribution of up to half of the assets, but the other half remain frozen until the probate is finished.
If you have a trust, your Will does need to be deposited with the court but that is a minor, ministerial act. A probate is not necessary. Your successor trustee takes charge of the trust assets immediately and can pay your debts, provide support to your loved ones, make distributions, and carryout all of your instructions without a long waiting period. The only thing the successor trustee needs is your death certificate.
6. California probate can be a tremendous hassle.
During the California probate process, the executor (usually another loved one) must account for every penny, get court approval or follow special steps before taking any actions, and keep returning to court for status updates, to seek instructions, or when heirs disagree with particular actions. This can be very wearying on your loved ones — fatigue that is only compounded by the grief of your loss. It is possible for the excecutor to be given “independent authority” to take certain actions without need of prior court approval, but those powers are not always given and still require adherence to multiple procedures and court approval after the fact. Being the executor is a lot of work, with little thanks.
7. California probate is very expensive.
The probate court filing fees and court appraiser fees are usually about $2,000 minimum. Attorneys fees and executor fees are set by law according to a formula and the value of the estate. The value used for calculating fees is the gross value, not the net value after deducting liens or expenses. On an estate valued at $1 million, attorney and executor fees are $48,000, split evenly between the attorney and the executor. Fees and expenses can be even higher if contested litigation is involved, such as creditor disputes or lawsuits to recover property.
Those expenses can be avoided if you have a trust. Most trusts cost only a few thousand dollars to create. Contrast that with $50,000 for the probate process! And that’s just for a $1 million estate. The expenses are higher as the estate value increases. Even average people can easily exceed a million dollars with the value of their home, cars, a few bank accounts, and life insurance payable to their estate.
8. California probate is a very public process.
Even if you have a trust, your Will still needs to be deposited with the court and is a public document for all to see. But if you have a trust, then your Will is only going to nominate guardians for your minor children, and direct that your assets pass to your trust. Your Will need not itemize those assets, nor give any indication at all as to their value. Anyone nosing around the courthouse is not going to learn anything about you except that you died and you have a trust.
The probate process, on the other hand, is very public. A petition is filed that includes your last known address, the names and addresses of all of your loved ones, and an estimate of the value of your property. Later, an inventory and appraisal is filed that itemizes all of your assets and sets out the value of each item. If property is sold during the probate, that gets reported as well. If the probate is not completed within a year, an itemized accounting will probably be filed, further itemizing every asset down to the last penny.
If you think no one bothers to look at public court filings, think again! There are all manner of predators out there, trawling the court filings in search of heirs to scam, property to “case out” for potential theft, or folks to pursue with unwanted solicitations. If you want to maintain privacy, make a trust. Plain and simple.