On a recent radio show, a question was asked that caused the financial planner to suggest wills over a Revocable Living Trusts. An attorney whose practice focuses on estate and business planning, I was in shock that the show’s host was giving what could be considered legal advice. In addition to the fact the show’s host is not a member of the bar in the State of California or any other state, his “advice” would be contrary to the best interests of the client and their heirs.
So I did what real attorneys do, I wrote a letter…
Dear Radio Show Host,
Please stop giving what appears to be legal advice. Do your research, talk to an estate attorney before offering your opinions in regards to revocable living trusts. Your opinion may be “consumed” as advice and at least in the State of California, it would be terrible advice.
In the State of 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?
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 minimum $5,000 for the probate referee!
Of course you could save that $5,000 by doing your own probate as the personal representative! The first time you show up in court the judge is going to tell you to stop wasting his time and get a lawyer.
That $500 will just cost your client’s family $23,500 plus $500 for the will giving you a total of $24,000 in fees. Lump on more misery as the heirs get to bake a year waiting to get the estate.
At least in the State of California, a simple Revocable Living Trust (RLT) is a more efficient and less stressful way to manage the distribution of an estate. A typical fee for creating a Revocable Living Trust is $2,500, plus around $1,500 of attorney trust administration to assist the Trustee in dispersing the estate.
In California, where your content is readily accessible, the recommendation of a simple will has cost a client an additional year and a least $20,000.
About “losing control of your property”
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 WealthCounsel 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.
Radio show hosts can seem like authoritative financial advisors, but unless they are members of the bar in all the states they entertain in, don’t take their radio advice for anything but entertainment. Let your family attorney guide you on the proper way to prepare your estate for distribution to heirs.