The two main question estate planning attorneys are asked is:

  1. “Will the government automatically take away all of my assets after I die?” And
  2. “If not, what will happen to my assets?”

The answer to the first question is simple: no.
The answer to the second question is a little more complicated.

In California, if you pass away without a will or a trust, the distribution of your assets will be according to the specific default rules of the Probate Code. For the most part, spouses receive 100% of the community property belonging to the person who passed away (also known as the “decedent”) and either 100%, 50% or 33.3% of the decedent’s separate property, depending on whether the decedent had any other relatives.

If you pass away with a will or a trust, however, then you get to decide exactly who will get your assets.

So what is the difference between a Will and a Trust?
A will is simply a written document that tells the world what you want done with your assets after you die. While it does not have to be created by an attorney, there are specific rules about how it should be drafted and how it must be witnessed that an attorney can ensure are done properly. After you die, the will is filed with the court clerk of the county in which you lived. Thereafter, the person you named as the executor of your will would file a Petition for Probate with the court and a judge would be assigned to oversee your estate. It would then be the judge’s job, along with the executor, to make sure that your wishes are carried out properly. For example, if your best friend Jim is to get the red convertible, the executor is instructed to give the red convertible to Jim and to report to the judge when he has done so, along with a signed receipt from Jim stating that he received the red convertible. Because a judge is overseeing the entire process, everybody gets what they are supposed to get according to the terms of the will. The significant disadvantage to creating a will, rather than a trust, is the extensive statutory executor, attorney, and court fees involved with the probate system.

A trust does not involve any judges or courts. You can think of a trust as a safe deposit box, into which you transfer all of your assets. As long as you name yourself “trustee” of the trust, you will retain control over your assets during your lifetime and can use them however you would like, even though you will not technically “own” the assets anymore. You can still buy, sell, or transfer assets into and out of your trust as you wish. Once you die, however, your designated successor trustee would then take over the trust and distribute your assets according to the terms of the trust. Just remember that there is no judicial oversight unless a lawsuit is filed by one of the beneficiaries of the trust claiming that the trustee has ripped them off. Therefore, it is imperative that you trust your trustee. Because no judge is generally involved with a trust, they are significantly less expensive to administer than to probate a will. However, trusts are more expensive to draft and create than a will.

The Palm Desert Law Group would be happy to prepare a simple will, including one revision, for you for a flat-rate fee of $750.00. However, the statutory costs of probating the will are rather considerable. Mandatory attorney’s fees and executor fees set by the Probate Code consist of four percent (4%) of the first $100,000.00 value of the estate, three percent (3%) of the next $100,000.00, two percent (2%) of the next $800,000.00, etc. Thus, if you have a house worth $250,000.00 and $50,000.00 in assets, you would have an estate worth a total of $300,000.00; thus, the attorney’s fees would be $9,000.00 ($4,000.00, $3,000.00, and $2,000.00), the executor’s fees would be another $9,000.00, and court costs would approximate $1,500.00. Therefore, it would cost approximately $19,500.00 to probate an estate worth $300,000.00.

On the other hand, the Palm Desert Law Group would be happy to prepare a simple trust estate plan, including one revision, for a flat-rate fee of $1,500.00 or a comprehensive trust estate plan, with one revision, for a flat-rate fee of $2,500.00. However, because there are minimal court and publication costs, and because attorneys generally charge by the hour to administer a trust, as do the successor trustees, the cost of administering a trust valued at $300,000.00 would probably be around $3,500.00.

To summarize, wills are cheap to prepare but expensive to probate while trusts are slightly more expensive to prepare but very cheap to administer.
Contact the Palm Desert Law Group today to discuss your estate and wealth planning needs today.