Do You Need a Living Trust?

More About Living Trusts

Did You Know - if you own a home in California (even if the bank owns most of it!) you could probably benefit from a living trust?  if your estate goes through probate without one,  a lawyer might become one of your largest beneficiaries. Who wants that?

Some lawyers do, actually. 

We spoke to our attorney and friend Adam Eberts at Eberts & Brockway about the fees involved in probate. Here is what he told us -

In most states, lawyers charge by the hour or collect a flat fee for probate work. Not so in California. It’s one of only a few states that let lawyers charge a “statutory fee”—an amount that is a percentage of the value of the assets that go through probate. The percentages are set out in state statutes. (Cal. Probate Code §§ 10810, 10811.)

Here are the current rates:

  • 4% of the first $100,000 of the gross value of the probate estate
  • 3% of the next $100,000
  • 2% of the next $800,000
  • 1% of the next $9 million
  • .5% of the next $15 million

In practice, this means that probate lawyers’ fees can be very high in relation to the amount of actual work done. Probate is usually a matter of filing papers; there’s no trial and there may be no court appearances at all. So let’s say your probate estate contains a $600,000 house you own in your name alone, plus some bank and brokerage accounts and a car. The total value is $900,000. The attorney’s statutory fee would be $21,000—for very little paperwork. Those fees are based on the gross amount.

In the example above of a $900,000 estate, the heirs would pay off any debts by selling the home.  But guess what? There would be somewhere in the neighborhood of $30,000 in real estate selling fees. And they have to pay the lawyer $21,000.  Your kids just inherited nothing but a $60,000 bill and a pain in the rear.  Is that really your intention for your legacy? To leave big gifts to lawyers and real estate brokers?

Or you could get a living trust and spell out your intentions legally and clearly.  A $2,000 trust saves your kids $21,000, months of headaches, avoids end of life drama as all your final wishes are in writing, and allows you to handle your affairs while alive and also pass on your estate efficiently when you die.

There are so many ways a living trust can be handy, we can’t see a reason not to have one if your estate is over that probate threshold. Do you have an ex-spouse? How about kids from different marriages? Do you know when you’ll get Alzheimer’s and be unable to handle your own affairs? Want to be sure your second husband doesn’t spend your savings and leave nothing for your kids from a previous husband?

Have we advised you to speak to an attorney about a living trust in the past but you haven’t done it? We know of several attorneys in Santa Rosa who can competently advise you.  Personally, we just had our trust done by Mr. Eberts, mentioned above.  We highly recommend their firm as we've seen first hand how they handle their clients when they took us through their process. However, there are many competent local attorneys. We can help you find one with whom you'd be comfortable working. We can even attend the first meeting to help you clarify your goals with the lawyer.  We just want to nudge you to get this done now. There may not be a more important and impactful estate planning document.