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Why a Trust and Not a Will in California?


A frequent question that comes up when doing estate planning in my Newport Beach, California office is why should one pay for a trust, when a will is so much cheaper.  My response is are you thinking long-term or short-term?

If you are thinking short-term, a will is always going to be cheaper than a trust.  The cost, however, comes at the end, because you have virtually guarantied that there will be a probate of that will.  Probate fees will far exceed the cost of any trust.

Probate fees in California are set by statute.  As an example, if you have an estate valued at $500,000.00 that is subject to probate, the statutory fees for the attorney are $13,000.00.  That is a number of times more expensive than the cost of establishing a trust.

The added benefit of a trust is that it is private; a trust, unlike a will, is not filed with the court and does not become a public record.

Of course the next question usually is “if I have a trust, do I need a will”.  The answer is yes.

To be fully functional, trusts need to be funded before a death occurs.  By funding, I mean transferring ownership of an item of property (e.g. bank account, residence) to the trust by actually changing the item’s record ownership.  An example of this would be recording a trust transfer deed, changing ownership of the residence from you as an individual to you as trustee of your trust.

But what if you forgot an asset?  Or acquire an asset and forget to take title to that asset in the name of the trust?  Or refinance your residence and the bank insists that you take the residence out of the trust first, and then you forget to put it back into the trust.

That is when a will is necessary.  These kinds of wills are referred to as “pour-0ver” wills, as in after the property goes through probate (it’s a will after all), it will pour-over into the trust where it belonged in the first place.  This doesn’t save probate fees, but at least the trust will ultimately control the property.

So in actuality, in a proper estate plan in California, you will have both a trust and a will.  Together they will still cost much less than the cost of a probate.

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