Did you know?

Probate fees are based on the assessed value of your house, no matter how much of it you own? If you go to probate court, you'll pay a fee based on the appraised value of your property. While you may live in a $500,000 house, it's not unusual that you may have a $400,000 mortgage on that house.

Your estate could end up paying 4% on the half million dollar appraised value ($20,000!) even if you only have $100,000 in equity in the house.

questions and answers

Quick answers to your questions

WHAT IS A REVOCABLE LIVING TRUST?

A Revocable Living Trust is a legal document used to plan and organize your estate. The Trust is created by a written document and is funded when you change the title of your assets from your individual name to the name of your Trust. For example, the title on the deed to your house would be changed from "Joe and Mary Smith" to "Joe and Mary Smith, Trustees of the Joe and Mary Smith Revocable Trust".

WHAT DOES "REVOCABLE" MEAN?

A Living Trust can be either revocable or irrevocable. Revocable means you can change the Trust or cancel it. Irrevocable means a Trust cannot be changed or canceled.

WHAT DOES "LIVING" MEAN?

"Living" means the Trust was created and is effective while you are living. Some Trusts are effective only after your death, such as a Testamentary Trust.

WHAT DOES "TRUST" MEAN?

A Trust is a right to property held by one party for the benefit of another party. It is a legal document holding your assets in Trust for yourselves during your lifetimes and for your children or other beneficiaries after your deaths.

IS THE LIVING TRUST SOMETHING NEW?

No. Trusts have existed for hundreds of years. However, until recently trusts were used mainly only by the very wealthy.

WHY WOULD I WANT A LIVING TRUST?

The main reasons to have a Living Trust are to avoid probate and to avoid estate taxes to the maximum extent allowable. A Living Trust could save thousands of dollars in probate fees and hundreds of thousands of dollars in estate taxes.

WHAT IS PROBATE AND WHY DO I WANT TO AVOID IT?

Probate is a mandatory process whereby a deceased person's estate is placed into the court system. The court makes sure that debts are paid and property is distributed according to the Will. People seek to avoid probate because it is costly, lengthy, and public. A Living Trust avoids probate and is normally much less expensive, quicker, and private. A properly structured and funded Living Trust completely eliminates the court process and the associated costs and delays.

HOW MUCH ARE PROBATE FEES?

Probate fees in California include fees for both the personal representative and the attorney for the estate. Each fee is calculated on a sliding scale based upon the gross value of the estate of the decedent, commencing at 8%.

In addition to the statutory fees, both the personal representative and the estate attorney could also receive fees for extraordinary services based upon a just and reasonable standard.

For example, the statutory fee for a $400,000 estate would be $22,000, which is 5.5% of the estate!  This does not include fees for extraordinary services, expenses and court costs.

HOW LONG DOES PROBATE TAKE?

The average probate takes about two years to complete in California.

CAN A LIVING TRUST SAVE ESTATE TAXES?

Yes. For married couples with estate over $3,500,000, a properly structured Living Trust will allow you to pass up to $7 million estate tax free to your beneficiaries. This can result in a savings of hundreds of thousands in Estate Taxes. Currently, the maximum allowable amount in 2011 is $1 million, so you will need a trust to pass $2 million tax free.

DOES MY WILL AVOID PROBATE?

No. A will cannot and does not avoid probate.

WHICH ESTATES ARE NOT SUBJECT TO PROBATE?

In California, an estate with personal property assets subject to probate of less than $100,000 (gross value) and real property of $15,000 (fair market value) is not subject to probate.

DO I HAVE TO TRANSFER ALL MY ASSETS TO THE TRUST?

No. But you must transfer all your major assets into the Trust to avoid probate. Assets normally not transferred to the Trust are small checking accounts and automobiles of lesser value.

DO SPECIAL INCOME TAX RETURNS HAVE TO BE FILED FOR THE TRUST?

No. During your lifetimes, the Trust uses your Social Security numbers. All income from the Trust will be reported on your Form 1040's.

WILL THE TRUST AVOID PROBATE IN OTHER STATES WHERE I OWN REAL ESTATE?

Yes. All real estate titled in the name of your Living Trust will avoid probate. Without a Living Trust, your family may have to hire an attorney and repeat the probate process in each state where you own real estate.

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