Both a will and a trust designate who you want to have receive your property when you pass away, how they will receive it, and who will be in charge of distributing the property. You can leave your entire estate to a single individual, split your estate between your children, or designate particular items for particular people. Generally speaking, you have a great amount of freedom in making such designations.
Living trusts are generally preferred when you own real property, or if you have a large estate. Almost anyone who owns real property should have a living trust. If you simply had a will, your real property would still need to be transferred out of your name on death. Naming a beneficiary in a will would advise the court who you wanted to have receive the real property, but you would still have to go through probate or a probate procedure in order to effect that transfer of ownership.
Probate cases can be expensive and can sometimes take over a year to complete. In probate cases, statutory probate fees are based off of the gross value of the estate:
- 4% of first $100,000 of estate.
- 3% of second $100,000 of estate.
- 2% of next 800,000 of estate.
That means that if the estate is worth $400,000, the statutory fees you would pay would be $11,000. Filing fees and miscellaneous costs (publication in a legal newspaper, etc.) would bring the total probate fees and costs up to around $13,000. When considering the amount of money and time that loved ones would have to put into a probate case, a living trust is a much preferred and easier alternative.
When you create a living trust, you transfer any real property you own into the trust which you want the trust to control. While you are alive, you control and manage the living trust. You can amend it, modify terms, or revoke it. You can sell or refinance any real property owned by the trust, you simply sign documents as trustee of the trust.
When creating the trust, you also name a successor trustee. That individual then takes over control of the trust and trust property when you pass away, allowing them to sell and manage trust property without having to go through probate or any court process. They are responsible, of course, to manage and distribute the trust according to your wishes as set forth in the trust.
With a living trust, you also have a lot more freedom to control your property after you pass away. For example, if you have minor children, you can set up the trust so that they receive property when they reach a certain age, or even have multiple distributions when they reach certain ages. Instead of receiving assets outright at age 18, a trust can call that they would receive 1/3 of their share at age 22, 1/3 at age 25, and 1/3 at age 30.
Werner Law Firm’s estate planning attorneys are dedicated to representing clients who wish to create a smooth succession plan. If you have any questions or would like an overview of the process, feel free to contact us for a free telephone consultation. We will explain the legal process in creating these documents, determine what would be most beneficial to you, and figure out a game plan moving forward.