When is a living trust and/or will appropriate?

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sliu
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When is a living trust and/or will appropriate?

Post by sliu »

Hi, I am wondering under what conditions would a living trust and/or a will be appropriate? Factors which I have thought of thus far are:

1) Investment accounts -- beneficiaries
2) Bank accounts -- unaware of any method to assign beneficiaries
3) House/car/jewelry/personal belongings -- are secondary beneficiaries possible?
4) Children custodian
5) Insurance policies?
6) Size of overall estate

State of residence is CA, but would state laws trump federal laws if any areas of ambiguity arise?

Thanks in advance.
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Cal Aggie
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Re: When is a living trust and/or will appropriate?

Post by Cal Aggie »

sliu:

I suspect you will get a lot of responses to your question. Once you read them all, please go see an estate planning attorney. Look for a certified specialist.
What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience? Adam Smith
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Re: When is a living trust and/or will appropriate?

Post by placeholder »

California is a prime state for a trust because the probate there has statutory fees for attorney and executor that can be quite high and as I recall you can't pass real estate though TOD there.
chaz
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Re: When is a living trust and/or will appropriate?

Post by chaz »

Cal Aggie wrote:sliu:

I suspect you will get a lot of responses to your question. Once you read them all, please go see an estate planning attorney. Look for a certified specialist.
Very good advice.
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page
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CABob
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Re: When is a living trust and/or will appropriate?

Post by CABob »

I think that a will is always in order. The question that remains is whether a trust is needed in addition to the will.
Most if not all of the assets you listed can be addressed by transfer on death, payable on death, or listed beneficiary designations so they would not necessarily require a trust. The size of the estate might have a consideration in that estate taxes and probate costs are often a consideration.
As others have suggested, self educate as best you can an then see an estate lawyer for advice.
Bob
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Re: When is a living trust and/or will appropriate?

Post by placeholder »

CABob wrote:Most if not all of the assets you listed can be addressed by transfer on death, payable on death, or listed beneficiary designations so they would not necessarily require a trust.
The tough one in CA is the house since (as I understand it) TOD is not available for real estate and houses tend to be expensive there.
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sliu
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Re: When is a living trust and/or will appropriate?

Post by sliu »

Thanks for the responses as I am mostly interested in what scenarios would a living trust avoid probate. I will look into seeing up POD for bank accounts.

For home ownership, I researched that CA allows community property with right of survivorship, which avoids probate for spouses, but doesn't handle passing property to children. Does anyone have any experience with that aspect?

I've heard from discussions that a will in CA doesn't really avoid the hassle of probate in CA whereas a living trust for a house property helps with that albeit with a costlier setup.
southlooprunning
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Re: When is a living trust and/or will appropriate?

Post by southlooprunning »

You should strongly consider a will. A will doesn't avoid probate, but it should make clear to your executor/heirs what you would like done. You can create a living trust that will do the same thing as a will, but assets owned by the trust would avoid probate. Many will name assets that don't easily pass to another owner into a trust and will create a "pour-over will." Meaning, anything that isn't already held in the trust will be poured-over into the trust at death.

Investment and bank accounts if not held jointly will be probated unless you title them as transfer on death. You could also have the living trust named as the owner. This doesn't change anything for you or your ability to manage the assets. Retirement accounts with named beneficiaries will not be probated and will go directly to the beneficiary. There is usually not a need to hold these in trust unless you want spendthrift provisions for your beneficiaries. The same is true for insurance policies.

Overall estate? What do you mean exactly?
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Re: When is a living trust and/or will appropriate?

Post by placeholder »

You can look over this information about joint tenancy (and search for other sources):
http://homeguides.sfgate.com/pros-cons- ... -2723.html
Note that doing so might open yourself to liabilities of the other tenants but I really would just get a trust for the real estate at least because it won't cost much will avoid probate and the associated costs won't give away any rights while you're alive and will do what you want at death.
smackboy1
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Re: When is a living trust and/or will appropriate?

Post by smackboy1 »

sliu wrote:Hi, I am wondering under what conditions would a living trust and/or a will be appropriate. . .

State of residence is CA. . .
The basic estate planning package almost every adult with dependents should have include following 3 things:

1) Will
2) Durable Power of Attorney
3) Advanced Health Care Directive (a.k.a. Living Will, Medical Power of Attorney)

Trusts are optional. Trusts are not replacements for a will, they can serve a different function, so would be in addition to a will.

There are many many different situations where a living trust (a.k.a. inter vivos trust) may be beneficial e.g. protecting the surviving spouse; protecting the children/grandchildren; reducing taxes; avoiding probate; protecting children in blended families; asset protection etc. etc.. Too many to list. Books are written on the subject. The best way is to do some research and then go see an experienced CA estates and trusts lawyer.

Read about living trusts here: http://www.calbar.ca.gov/Public/Pamphle ... ust.aspx#9

Also "Beyond the Grave" by Jeffrey Condon is a very good primer for estate planning.

http://www.amazon.com/Beyond-Grave-Revi ... ave+condon

I am not that familiar with CA law but IIRC the CA probate process has statutory % lawyer fees which can make it expensive for certain estates, which is why revocable living trusts are popular in CA. Another advantage of bypassing probate is the terms and conditions of a trust can be kept private. Probate makes the contents of a will public.
Disclaimer: nothing written here should be taken as legal advice, but I did stay at a Holiday Inn Express last night.
Topic Author
sliu
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Re: When is a living trust and/or will appropriate?

Post by sliu »

southlooprunning wrote:You should strongly consider a will. A will doesn't avoid probate, but it should make clear to your executor/heirs what you would like done. You can create a living trust that will do the same thing as a will, but assets owned by the trust would avoid probate. Many will name assets that don't easily pass to another owner into a trust and will create a "pour-over will." Meaning, anything that isn't already held in the trust will be poured-over into the trust at death.

Investment and bank accounts if not held jointly will be probated unless you title them as transfer on death. You could also have the living trust named as the owner. This doesn't change anything for you or your ability to manage the assets. Retirement accounts with named beneficiaries will not be probated and will go directly to the beneficiary. There is usually not a need to hold these in trust unless you want spendthrift provisions for your beneficiaries. The same is true for insurance policies.

Overall estate? What do you mean exactly?
Yes, I've heard advise of creating a pour-over will in conjunction with a trust. Overall estate was referring to the size of it and whether it is worth the cost of setting up a trust to avoid probate on the assets likely to go into probate -- house seems like the largest assets since investment and bank accounts could be setup to have beneficiaries and TOD/POD.
placeholder wrote:You can look over this information about joint tenancy (and search for other sources):
http://homeguides.sfgate.com/pros-cons- ... -2723.html
Note that doing so might open yourself to liabilities of the other tenants but I really would just get a trust for the real estate at least because it won't cost much will avoid probate and the associated costs won't give away any rights while you're alive and will do what you want at death.
Agree about joint tenancy with right of survivorship as an option, but it doesn't allow for a full step-up in cost basis IIRC. A trust would allow for that in addition to avoiding probate.
smackboy1 wrote:I am not that familiar with CA law but IIRC the CA probate process has statutory % lawyer fees which can make it expensive for certain estates, which is why revocable living trusts are popular in CA. Another advantage of bypassing probate is the terms and conditions of a trust can be kept private. Probate makes the contents of a will public.
placeholder mentioned that also and I looked up a quick search on google: http://www.nolo.com/legal-encyclopedia/ ... rview.html
Is that a reliable source of information?

"Probate Attorney Fees in California
In most states, lawyers charge by the hour or collect a flat fee for probate work. Not so in California. It’s one of only a few states that let lawyers charge a “statutory fee”—an amount that is a percentage of the value of the assets that go through probate. The percentages are set out in state statutes. (Cal. Probate Code §§ 10810, 10811.)
Here are the current rates:
4% of the first $100,000 of the gross value of the probate estate
3% of the next $100,000
2% of the next $800,000
1% of the next $9 million
.5% of the next $15 million
In practice, this means that probate lawyers’ fees can be very high in relation to the amount of actual work done. Probate is usually a matter of filing papers; there’s no trial and there may be no court appearances at all. So let’s say your probate estate contains a $600,000 house you own in your name alone, plus some bank and brokerage accounts and a car. The total value is $900,000. The attorney’s statutory fee would be $21,000—for very little paperwork.
But wait, what if there’s still $200,000 to pay on the mortgage, reducing your equity to $400,000? The attorney’s fee would still be $21,000—it’s based on the gross amount of the probate assets, not what you actually own.
California lawyers don’t have to charge this way—they can bill by the hour or charge a flat fee. They do it because the statutory fees are such a good deal for them. And the fees are only for ordinary work—if there’s something “extraordinary,” the lawyer can ask for a bigger fee."
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Re: When is a living trust and/or will appropriate?

Post by placeholder »

Missouri has similar statutory fees and I could not find an attorney that would accept anything else.
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