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Creating a Living Trust Makes (Dollars and) Sense


by Robert A. Hull

“How much will it cost?"

For estate planning attorneys, this is usually the follow-up question we’re asked after “Do I need a Trust or Will?" After discussing a prospective client’s estate planning needs, some are surprised and a bit bothered at the approximate cost.  

Rightfully so. It is a fair amount of money for most of us. But, when you actually break down the potential costs to the beneficiaries of your estate without having a trust in place, that amount becomes much less daunting (also, the cost includes so much more than a trust – namely, a complete estate plan including wills, financial powers of attorney, health care powers of attorney, an assignment, deed, document summaries, etc.).

Why Do You Need an Estate Plan?

Some background: If you die with only a will – including those cheapies you can get online, or without any will at all – your assets can pass to beneficiaries in generally two ways: 

1. Via non-probate or probate transfers (more on “probate” in a minute). Non-probate assets include assets in a living trust, proceeds from life insurance, assets held in joint tenancy/community property with a survivorship right, payable/transferable on death accounts or retirement accounts with beneficiary designations.

Non-probate assets can generally be transferred without court supervision and approval. Contact the bank, insurance company, etc. and provide the death certificate/fill out a short form and bingo, assets transferred.

2. Your other assets are generally probate assets. Transferring probate assets requires Court confirmation that the correct assets are to be transferred to the correct beneficiaries (i.e., those named in the will or those listed in the intestacy statutes, if there was no will).

But, before those assets can be transferred, you must first open a “probate” with the Court, publish the probate with a newspaper of record, appraise the assets, send notice to the decedent’s creditors and pay any outstanding debts, file one or more accountings of the assets subject to probate, etc. ALL of these actions are performed under scrutiny by the court.


The Costs of Probate in California


Probate attorney’s fees are statutory, meaning they are set by California law. Absent any unusual circumstances, the normal fees paid by the decedent’s estate for the probate will be a pre-set percentage of the assets probated. This percentage is 4% of the first $100,000 of the value of the probate assets; 3% of the next $100,000; 2% of the next $800,000; 1% of the next $9 million (we’ll stop at the $10 million estate, for now).

So, if you die with probate assets worth $1,000,000, which is easier to reach than one might think given Southern California home values, your estate would pay $23,000 in statutory attorney’s fees to probate those assets – and all with the extra hassle of being supervised by the court, on the court’s timetable.   If your home is being probated and has a mortgage, the mortgage balance will not be considered when calculating statutory attorney’s fees (such fees for a home valued at $500,000 with a $400,000 mortgage will be calculated using the full $500,000 value).

The cost of an average estate plan is NOWHERE NEAR this amount – not in the same ballpark or even in the same universe. And, as mentioned, you can generally administer the estate generally without court supervision if your assets are in a trust.

Also, in a probate the Executor of the estate may claim an additional $23,000 in statutory fees, leaving that much less to the beneficiaries.  If you die with probate assets worth $500,000, your estate would incur $13,000 in statutory attorney’s fees plus, another potential $13,000 in executor fees (the executor may choose to waive those fees).

If you had your assets in a trust, the trustee could handle all of the property transfers per the terms of the trust, without court supervision, and perhaps with only some small attorney’s fees for assisting with deeds or other transfers, if desired.

If there’s a legal dispute, that could increase the attorney fees significantly, but would also increase the statutory fees in a probate significantly because such fees would be “extraordinary”, and the attorneys are entitled to such fees as long as they’re reasonable. Attorneys are also entitled to extraordinary fees in probate for activities not in the normal course of a probate, such as buying/selling real property or running a business.

So, is the cost of a trust and estate plan money well spent? Significantly smaller out-of-pocket costs now and perhaps some small attorney’s fees at your death.  Versus, a percentage of your entire probate estate (cash out of your beneficiaries’ pockets) later?

Seen in this light, getting a complete estate plan sure makes dollars and sense. How much will your estate plan cost, and what else can having an estate plan do for you? It all depends on how you want your estate handled, and the complexity of what you want done. 



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