If you live in California, you should consider setting up a trust. A trust is organized to help protect assets and allows you to have more control over your property than would be possible with other types of estate planning tools. A trust can help you avoid probate, minimize or eliminate the federal estate tax and provide more privacy to your beneficiaries. Here’s everything you need to know about setting up a trust in California.
A trust is an important estate planning document. It is a legal arrangement in which one person (“the trustee”) holds assets for the benefit of another person or entity (“the beneficiary”). Trusts have many benefits, including avoiding probate, protecting assets from creditors, and expediting asset transfers after death.
Several types of trusts may be beneficial to your estate, including:
A trust is an important legal document. It will serve as the guiding north star in settling your estate after your death. You should take great care in preparing this document.
Here’s a step-by-step guide to setting up a trust in California.
Setting up a trust fund is important for your family’s financial well-being. A trust can help you avoid probate and protect your estate from creditors. Your heirs may be able to reduce or eliminate their tax liability for estate taxes, inheritance taxes, and capital gains tax. Upon your death, a trustee will receive trust funds and property and distribute them according to instructions in your trust document.
Suppose you didn’t set up a trust. Instead, you left a will appointing an Executor and named the beneficiaries of your estate. In that case, when you die, your loved ones would need to settle your estate in probate court. The details of your estate would be public knowledge, your family members would have the opportunity to contest your wishes in court, and the court would take money from the estate to oversee the process.
California has some of the most expensive probate fees. Probate fees are set by California probate code § 10810, which caps the maximum fees that attorneys and executors can charge for a probate. There are filing fees and a fee percentage (4%,3%,2%,1%, and .5% based on the gross value of the probate estate), and can have other extraordinary fees like appraisals. The following is a breakdown of fees involved:
|Probate Fees Chart: (Gross Estate)|
|4% of the first $100,000.00|
|3% of the next $100,000.00|
|2% of the next $800,000.00|
|1% of the next $9,000,000.00|
|.5% of the next $15,000.00|
|Above $25,000,000.00, the court will determine|
On top of that, the probate process can take months to conclude, dragging your family members back and forth to the court during their grieving process. Setting up a trust ensures more money stays in the hands of the ones you love and may reduce family conflict.
Setting up a trust does not eliminate the need for a will in your estate plan. Why? Because a trust rarely ever includes all of your assets, and a will serves other purposes outside of asset transfer. Even if, you do transfer all of your assets into your trust, there’s still the possibility that you will acquire additional property before your death. If so, that property will not be subject to the terms of the trust. A will allows you to transfer ownership of property that you did not specifically name in your trust document. Additionally, a will can allow you to appoint guardians for minor children and leave details about your wishes for funeral arrangements, etc. An attorney can discuss the different types of wills available and how they can benefit your estate plan.
If you’re considering setting up a trust in California, an estate planning attorney can help you. Estate planning attorneys understand state law and can help you draft an airtight estate plan to avoid hiccups in the administration of your estate. They’ll ensure that your trust document is drafted clearly and legally, help you name a trustee, and tend to other facets of your estate plan, like a will or advance health care directive. When you need comprehensive estate planning in California, look no further than Santa Barbara Estate Planning & Elder Law. Book a free planning session with our attorneys today to discuss your goals.