What is A Will?
A will is a legal document that allows you, the testator, to declare who will manage your estate and to designate individuals or charities to receive your property when you pass away. These individuals and charities are referred to as beneficiaries.
A will also allow you to designate a guardian to care for your children if you and the other parent, if any, become terminally ill or die before your children reach the age of 18 years. This person can also be responsible for managing the minor’s assets.
Not having a valid will means that you’ll have no say over who receives your property and possessions once you’ve passed. If you have minor children, a judge will decide who will care for them and the situation may not be ideal.
What Is A Trust?
The main goal of a trust is to avoid probate, provide financial support to loved ones and pass on family wealth to the next generation. A trust is created when an individual (settlor) or a married couple (settlors), declare in writing that there exists a trust over their property. This property typically includes real estate property, business interests, investments accounts, and other major assets.
There are two basic types of trusts: revocable and irrevocable. A trust is a revocable trust when the settlor who creates the trust retains the power to revoke the trust. The power to revoke a trust includes the power to amend the trust. An irrevocable trust is created by a declaration that the trust is irrevocable and it cannot be revoked or modified except under certain conditions.
Trusts are a popular alternative to wills because they avoid post-death probate court administration of a decedent’s property. The probate process usually takes 6 to 12 months to complete, although it may take longer in complicated cases. Having a proper trust set up means that the administration of your trust is handled privately and without court involvement. This makes for a faster, less expensive administration process.
Probate fees are set by California’s Probate Code §10800 and §10810 and are based on the gross (not net) value of the assets in the estate, as determined during the probate process.
Statutory probate fees under §10810 are as follows:
- 4% of the first $100,000 of the estate
- 3% of the next $100,000
- 2% of the next $800,000
- 1% of the next $9,000,000
- 5% of the next $15,000,000
For example, if your estate has a gross value of $800,000, the statutory fee for the probate administration would be $19,000. If an executor is appointed by the judge, then it would cost an additional $19,000.
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It is important to note that these fees may be applied twice – once to cover legal costs related to probate and a second time to cover executor fees.
The bottom line is a trust often results in time savings of months and cost savings of 50 to 90 percent. With a complete estate plan, you can avoid the hardships and costs associated with probate.