Trust Lawyers Helping Families Throughout California Plan for their Futures

A trust is a legal entity that you create to hold your assets during your lifetime. When you create a trust, you are known as the trustor, settlor, and grantor. It may be helpful to think of the trust as a bucket. Once you create the bucket, you must put your assets, such as your house and your bank accounts, in the bucket. While you are alive, you are the beneficiary of that bucket, so the assets are still essentially yours. You are also initially the trustee, which means you are the one in charge of the bucket. You will be the trustee until you can no longer serve because of death, incapacitation, or resignation, and you will name the person who takes over when you can no longer serve (known as a successor trustee). You will also designate the beneficiaries who inherit your assets (or bucket) upon your death.

The trust is revocable during your lifetime, which means it can be amended. You can change any of the provisions in the trust, such as your successor trustees or beneficiaries, simply by making an amendment to your trust. You have ultimate control of the bucket. While there are other components that make up an estate plan (which can also be amended), we generally use the terms “trust” and “estate plan” interchangeably.

Do I Need a Trust?

The answer to this question really depends on your specific circumstances. Essentially everyone who has a probable estate (an estate that is subject to probate) needs to have a trust. Probate is a formal court proceeding that occurs when someone dies without a trust if the gross value of their estate is over the probate threshold (currently $166,250). Therefore, if you own a house, you need a trust. This is true even if there is a mortgage. Even if you don’t own a house, if you have total assets worth over $166,250, you may still need a trust. Again, whether you need a trust is very fact-specific and will vary depending on your situation.

I Thought a Will Was Sufficient, Is That True?

A Will is very different from a Trust. A Trust will avoid probate because it gives power to someone (your successor trustee) to transfer your assets (in the bucket) when you pass away. A Will does not avoid probate. It is simply a letter you write to a probate court judge that tells the court where you want your assets to go and who you want to be in charge of the probate process, but it’s still up to the judge to decide all those details. The probate process is expensive and lengthy, even with a Will. On average, probate court takes one to two years and can cost tens of thousands of dollars.

Why Is It Beneficial to Hire an Attorney?

The process of creating a properly funded trust can be extremely complicated. Going through the process without legal counsel is not advisable. A common misconception is that all trusts are the same. This is false. The provisions and features contained in trusts can vary greatly, and a trust that does not have all the features you need for your situation will not do you much good. An experienced estate planning attorney has handled thousands of estate plans and witnessed how they work with real-life scenarios. That attorney can use those experiences to give you the best advice for your particular situation.

Most people have never created a trust before, and even those that have, they never really understood all of the provisions. An experienced estate planning attorney can guide you through the process, recommend all of the features you need, show you where the pitfalls are, and guide your estate safely around those dangers, such as incapacity, taxes, blended family, asset protection for your children, and the list goes on.

Aren’t All Trusts Basically the Same?

Not even close. In fact, we did a study where we reviewed over 10,000 trusts from other attorneys. What we found was that the trusts were all different from attorney to attorney. Each trust was unique, which shouldn’t come as a surprise because there is no standard version of a trust. Every attorney has their own template, their own version that they use, and when you hire the attorney to help you, they give you their version. Some trusts are very bare-bones and almost useless, while others have lots of benefits and protections that can save a lot of headaches and a lot of money.

How Do I Choose the Right Attorney?

This is probably the most important decision you will make in your estate plan. If you choose the right attorney, you will end up with the right documents, with the right features, for your situation, and the process will go incredibly smoothly because the attorney that is guiding you through the process knows what they are doing. Unfortunately, it can be tricky to choose the right attorney. What do you look for? Most people have never shopped for an estate plan in their life, and so they do not know what to look for. They will often default to simple things, like the cost, what the attorney charges, and whether they like the attorney.

The problem with choosing an estate planning attorney based on those limiting factors is that it is a lot like shopping for a home-based on the cost of the home and whether you like the real estate agent. Obviously, those are important considerations, but they should not be the only deciding factors. If you were shopping for a home for a family of 7 and your agent called you and said they found a great house for a really low price, would you buy it? What if it only had one bedroom? Your answer probably changed. The cost is irrelevant if the home (or trust)is not suited for your needs.

We recommend that when you are selecting an attorney, you focus on the features. Compare the features of the estate plan, and then you’ll know if you are getting the right one. It’s like comparing the features of a house. When you shop for a house, you look for things like how many bedrooms it has, whether it’s updated or needs work, whether it’s one story or two, whether the yard requires a lot of maintenance, etc. We all know how to shop for a house by comparing features, but most people don’t know what features to compare in an estate plan, so they default back to the ones that they do understand, which is the fee, and whether they like the attorney.

Unfortunately, many attorneys don’t explain all of the features, so it is important that you ask about them. Most features for an estate plan can be boiled down into three main categories:

1. Does your estate plan protect you from incapacity, like dementia or a stroke?
2. Does your estate plan reduce your taxes, like income taxes, capital gains taxes, estate taxes?
3. Does your estate plan protect your children when you’re gone? Does it protect them from their liabilities, like a divorce or a lawsuit?

Those are the features you should be looking for when you shop for an attorney.

How Much Does the Trust Cost?

It’s no secret that the cost to create or revise an estate plan is important to you. However, the fee to create the documents is truly not the most important expense to consider. In fact, that is usually the least important expense. Let me explain. If you get a really good deal on an estate plan, but down the road that estate plan triggers additional fees and costs, like court fees or taxes, it really wasn’t that great of a deal in the long run because it ended up costing you and your family more money. We’ve seen this happen countless times. In those cases, the true cost of the estate plan was very high, sometimes as much as hundreds of thousands of dollars. To assess the true cost of an estate plan without waiting to see if something goes wrong, you need to understand whether the estate plan includes all the features necessary to address all of your current and forceable needs based on your particular situation. With that in mind, a better question to ask is, can I afford it? Does it fit my budget? Will it save me money? Can I afford not to do this correctly?

What Are the Next Steps?

The process of setting up a trust can generally be broken down into three parts.
Part One is called the design. This is an appointment during which we discuss the specifics of your situation and what your estate plan should contain. We will gently guide you through the discussion as we gather information and provide you with education and advice based on your specific needs. We will inform you about which features we recommend in order to meet your goals while protecting you and saving you money. During the design, you will make informed decisions about the details of your estate plan.

Part Two is creating the legal documents based on the design in Part One. We will draft the documents thenlet you know as soon as the documents are complete so that you can review them and let us know if you have any questions or revisions. Once everything looks perfect, you will sign the documents to make them official.

Part Three is called Funding. Funding is the process of putting your assets into your trust. To bring back our original example of the bucket, the bucket is useless if it just sits there empty. Creating a trust isn’t enough to avoid probate. You still need to put your house, your bank accounts, your investment accounts, etc., in your trust. Additionally, there are certain assets, such as retirement accounts, that require proper beneficiary designations. If the funding process is done correctly, all of your assets will go to the proper beneficiaries upon your death without having to go through probate.

What Do I Do After My Estate Plan Is Set Up?

Many people think (or hope) that once they create a trust, they never need to look at it again. As wonderful as that would be, it simply isn’t true. If you set up your estate plan and you do nothing else with it, over the years, it will likely become out of date. Laws change. Family circumstances change. Financial situations change. People pass away. People are born. If your estate plan doesn’t keep up with those changes, it will be very difficult to use it when the time comes. Therefore, one of the most important parts of an estate plan is keeping it current. This is called maintaining your documents.

We have a system called The Life Plan that keeps your estate plan current over the years, and it is incredibly cost efficient. Most people’s estate plans get out of date very quickly because they are using the old way of maintaining the trust, which means the attorney is relying on the client to keep it up to date. That is a very reactive system. It requires the client to know when a revision is needed and to initiate the change. That is an outdated way of maintaining the documents. The new way is The Life Plan. With The Life Plan, we take on the task of keeping you up to date of changes to the law. We let you know if those changes impact your documents. We also contact you every year to find out whether there have been any changes to your personal situation that could impact your estate plan. This allows you to keep your documents current in an easy, cost-efficient manner.