Some Reasons to Create a Living Trust in California
A trust is is an important part of the plan to protect your assets for yourself as well as your family. Preparing an estate plan, which includes a trust has several advantages. Among these advantages are cost savings, control, and protection. The following is a quick outline of each advantage:
Estate Planning Helps to Avoid the Cost of California Probate
Probate is the process by which a court makes sure that a deceased person’s assets are distributed in accordance with the decedent’s wishes or state law. Unfortunately, this process is slow and expensive. For example, if a decedent’s only asset was a home worth $600,000.00, the cost to probate that one asset would be at least $9,000. If your loved ones do not have enough money to pay for this process, the home will have to be sold. Unfortunately, the sale of the home will increase the cost and lengthen the process. With sales commissions, fees, and court costs, your estate could be diminished by tens of thousands of dollars before it ever reaches your loved ones.
By putting your home in a trust, your home will avoid probate and the costs associated with that process. With proper planning, upon your death, the person of your choosing will quickly take ownership of your assets and distribute them to your friends and family in accordance with your wishes. Most importantly, administering a trust is much cheaper than the probate process leaving more assets for your loved ones.
Estate Planning Provides Control
An estate plan is roadmap on how you want your assets distributed upon your death. Without this map, the default instructions outlined by the California Legislature will determine how your assets are distributed. Sometimes these default rules lead to some unexpected results. For instance, most people would assume that all of their separate property assets would go to their spouse when they die. This may not be true. If you have two children, your spouse will only receive one-third of your separate property assets. The remaining two-thirds would go to your children. Portions can even go to your parents in some instances. Without your income, this may be detrimental your spouse’s finances.
By drafting an estate plan, you avoid the unexpected consequences of the default distribution rules. You decide who will receive your assets and when they will receive them. This can be helpful if you have a child that may not be very responsible with money. A trust would allow you to distribute smaller amounts to that child over a longer period of time. You are even able to put conditions on distributions or create milestones for your children. Graduate college and receive X amount of dollars or get married and receive Y amount of dollars. You are in the driver’s seat when you leave an estate plan.
Planning Provides Protection
If you incapacitated tomorrow, who would make financial decisions for you? Who would make your mortgage payment? Who would take care of your children? For married individuals, your spouse would most likely step into this role. However, our spouses are usually with us and if our incapacity is due to an accident, there is a good likelihood that our spouse will be incapacitated or worse.
If there is no estate plan, someone would have to ask a court for the power to step into these important roles. Unfortunately, this process is slow and expensive. Worse still, the court does not know you or your family, therefore, it does not always appoint the person you would have picked to serve in these capacities. With an estate plan, you are able to choose the people that will make medical and financial decisions for you, and decide who will take care of your children.
Estate planning provides numerous other advantages. I would love to sit down with you and your family for a 30-minute free consultation to discuss your options.
Carl L. Jones
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