Why Use a Trust?

By: Joe Morgan

Jan 26, 2023 | TrustHeirsAssetsEstate PlanInvestment Strategy

Prefer to listen rather than read? Pair this post with Deliberate Money Moves Podcast: Why Use a Trust?

A revocable living trust is a legal method of passing assets from one owner to the next without going through probate.

In California, the first and most important reason to use a revocable living trust is probate costs. If your gross estate (don’t subtract your debt!) is over just $100,000, your probate costs will be around 4% based on this gross value. Debts still have to be paid, but they provide no relief from your probate fees.

Avoid the Fees

A simple trust can avoid these fees entirely. Assets passed through a trust are simply retitled with the help of an attorney who, yes, may charge $400 per hour. But the total costs will be far less than probate costs which, for example would be about $45,000 for a $1 million estate.

Also, if you have assets in multiple states, they may have to go through the probate process for each individual state. This can be a paperwork and expense nightmare. Again, assets passed through trust avoid probate entirely.

Keep Your Privacy

A second reason is the privacy trusts provide. Any assets that go through the regular probate process become publicly knowable while assets passed through a trust are entirely private. Disclosures made during probate could place a target on the back of your heirs from fraudsters and scammers.

Greater Protection for Your Heirs

A third reason is trusts provide a stronger legal footing for passing assets the way you intend.

Anyone can contest a will and many wills are written poorly enough to open themselves up for a lengthy and costly series of lawsuits. Trusts, on the other hand, typically provide much greater protection for your wishes.

One note of caution when using a revocable trust: you may want to update your trust as things change. Each time you do, you may have to pay a fee and might even need to create an entirely new trust. However, you’ll have the peace of mind that your trust is structured for current laws and considers your ever-changing and growing asset base.

So, what do you think? Are you willing to invest time and money today to protect your heirs from the costs and inconveniences of probate? If you’ve already created a trust, has it been updated in the last 5 years?
To share your comments, send me a direct email at joe@bestfinlife.com.
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