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You need to talk to an estate attorney before you continue to write about revocable living trusts

Dear Dave,

You need to talk to an estate attorney before you continue to write about revocable living trusts.  In California, wills are disfavored by the courts; trust are the preferred testamentary document.  If you have a will, you will have a very long time for probate (usually a year give or take a couple of months) and the cost of will be considerable.  The statutory fees to probate a million-dollar estate is $23,000 to the attorney, plus several hundred or even thousands of dollars for the court’s probate referee.  So just for example let’s say the referee charges $5,000, plus the attorney fees of $23,000 for a total of $23,500 in statutory fees to probate your million-dollar estate.  But wait, you have $200,000 in cars, furniture, and bank accounts; your house is worth $800,000, but there is a $500,000 mortgage on it leaving you with $300,000 in equity.  So your estate is only $300,000 in equity and $200,000 in cash and other assets for a total of $500,000, right?  Wrong.  The value of your house is $800,000 and you have $200,000 in cash and assets so you have a $1,000,000 estate (with $500,000 in debt), for a statutory probate cost of $23,000 for an attorney and $5,000 for the probate referee (could be a lot more.) But you say you can do your own probate if you’re the personal representative, right? Well you can do your own hair transplant too, but I wouldn’t recommend it. The first time you show up in court the judge is going to tell you to stop wasting his time and get a lawyer.

So Dave, as for a financial plan (just getting a will for only $500) you just cost your client’s family $23,500 plus $500 for the will giving you a total of $24,000 in fees and your heirs will have to wait a year to get the estate. Now if you had a simple revocable living trust (RLT) your clients would have paid an attorney about $2,500 for the Trust and maybe another $1,500 of attorney trust administration to assist the Trustee in dispersing your property when you’re gone. So your recommendation of a simple will has cost your client at least $20,000 and delayed their heirs taking possession of the assets

You also say that you lose control of your property when you put it in a trust. Really? Do you lose control of your money when you put it in your wallet, or your safe? It’s basically the same thing. You build a legal container with instructions on how you want the contents distributed when you are gone. This is designed to save taxes (in some cases) and to insure that your assets are given to the right people and at the right time and under what conditions. Then you put your assets into this fictitious container by Granting to the container the legal possession of your assets. You, the grantor (now settlor/trustor-and beneficiary), still have equitable title to the assets as beneficiary and legal title to them as trustor. If you have a checking account in the trust you simply sign the check with your name as trustee of the trust.

As far as simplicity, the Trusts we create, and most WealthCousel estate attorneys create, have a property memorandum that lists the property you have such as bank accounts, cars, stamp collections etc. These items are added and deleted by writing in the memo (lined list of property) new assets added by writing them in, old assets are deleted by crossing them out and initialing next to the change. No witnessing is required, unlike a will or codicil which require all changes to be witnessed by two people who are generally not in the will and who witness each other’s signature at the same time and in front of each other. Gee that sounds easy. As for real property (aka your house) getting the house deeded to the trust is cheap, it only takes a couple of days by mail or 15-minuntes at the recorder’s office. But what about cars? You can title your cars in the name of the trust, or you can put a notation in the property memo that you intended these items to be held by the trust.

As for the timing of distributions from a trust, there is a 120-day notice period for any family member or other interested parties to challenge the trust. After that you can distribute the assets in conformity with the instrument (the Trust.)

If you have a Will, there must be a probate in open court and on the record. Strangers in the general public get to know your business. When you leave your property to your wife in a Will, every gigolo is going to know exacting how much money she will be getting from your estate. Whereas with a trust, the public has no access to what is in the estate or who takes what.

Dave Ramsey is a terrific financial advisor, but when he starts practicing estate law without a license, he is out of his depth.

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