Estate Planning 104: Do I Need a Trust?

(Editor's Note: This is Part 4 of a 5-Part Q & A addressing commonly asked questions regarding end-of-life planning written by blogger and resident . These blogs are intended to educate you about the differences between Trusts, Wills, & Living Wills, and help you determine which is right for you.)

Do I Need a Trust?

In "Estate Planning 103: What is a Trust?" we discussed that having a Will does not avoid Probate, but having a Trust does. Therefore, the answer to whether or not you need a Trust depends on how much you have and who your beneficiaries will be.  These answers will in turn dictate how expensive and complicated the Probate process will be after you pass away, and whether your property will pass as you intend.  Also, you should consider whether or not you want to protect your family from dealing with the stress that’s involved with Probate.

More specifically, if you have few assets and you don’t own a home, then the Probate process should be relatively straight forward and inexpensive. However, if you own a home or you have property valued in excess of $150,000 then you should have a Trust.  This is because Probate can become expensive and the fees are calculated on the gross value of your assets, not the net value.  The table below illustrates the minimum statutory Probate fees charged in Probate cases.

Example:  If you have a house that's worth $600,000; $100,000 in checking, savings, and investment accounts; and $50,000 in miscellaneous other assets when you pass away (total $750,000), and you have an outstanding mortgage debt of $500,000, your heirs will still need to pay a minimum of $18,000 in Probate fees.  Again, the Probate fees are calculated on the gross value of your assets, and any debt is not taken into consideration when calculating these fees.

A frequent complaint about Trusts is that many people feel that they are too expensive.  However, as you can see from this example, the expenses of Probate are considerably more than the cost to prepare a Revocable Living Trust.  This example should also dispel the belief that Trusts are only for "the wealthy".

See Probate Code Section 10810 for a calculation of the minimum statutory Probate fees charged in Probate cases.

Disclaimer: This information is provided by estate planning attorney Stephanie D. Winstead, with offices in Laguna Niguel.  Mrs. Winstead practices exclusively in the areas of tax, asset protection, and estate planning.  She is licensed to practice law in the State of California ONLY.  This information does not create an attorney-client relationship, and is only intended to provide general advice.  If you wish to create an attorney-client relationship for specific legal advice, it will be necessary to enter into an engagement for legal services.