Trusts and Wills FAQ

Frequently Asked Questions about Trusts and Wills

Trusts and Wills FAQ

Below is an informative article based on Frequently Asked Questions that may provide you with some basic information about Estate Planning.

The referral to these sites is not intended to be legal advice and you should consult with an attorney if you are seeking legal advice.

Benjamin Franklin famously said, “In this world, nothing is certain but death and taxes.”

Unfortunately, you can’t avoid death. But a carefully-drafted estate plan can help avoid taxes, family conflicts and a lot of unnecessary heartache. The following provides a general overview of the estate planning process, and what to expect.

Why do I need an Estate Plan?

Many of us spend our earthly lives accumulating assets which, unfortunately, upon our death, will not go with us. The top 2 reasons for having an estate plan:

    1. So you can transfer your wealth to your chosen heirs, in your
      chosen manner;
    2. So you can plan for and effectively limit the taxation of your estate;
What if I don’t have an Estate Plan?

Here is the thing: You already have an estate plan.  Just like a prenup – if you get married without drafting your ow, the state default prenup applies (the law).  If you die without drafting your own estate plan, the default estate plan (the law) kicks in.

Dying Intestate

If you die “intestate” (without a will) or without an estate plan, lots of things can happen, such as:

  1. Intestate Succession: When someone dies without a will, the government will step in and decide who gets what.
  2. Probate: Currently in 2024, in California, if you die with more than $184,500 in assets, your estate will be go to probate, a costly and very public process. (See below: What is Probate?)
  3. Guardianship of Minor Children: If both spouses pass away, it is a good idea to list who they want as a guardian.
  4. Higher Estate Taxes. Higher estate taxes = less for beneficiaries.
What is Probate?

Probate refers to process of legally validating a person’s will.  Such a procedure takes approximately 12 -18 months. (or longer). The court appoints a person designated as an “executor” to handle the assets and to administer the estate. The fees that the executor and attorney receive are set by law (a percentage of the value of the assets which go through probate.). The total fees can be approximately 5-6% of the estate assets. (sometimes more).

How Do I Avoid Probate?

Get a trust.

Please note that wills DO NOT avoid probate. (See Below: Wills v. Trusts).

Currently, in California, the first $184,500 of an estate is exempt from probate, meaning that the first $184,500 can be collected without a formal Probate procedure. All else is subject.

Some common probate-avoidance techniques are:
    1. Revocable Living Trusts;
    2. Joint Tenancy;
    3. Life insurance and retirements accounts which name a beneficiary;
    4. “Pay-on-death” accounts
    5. In California, “spousal confirmation proceeding”, where a petition is filed with the court, notice is given to certain parties, and if no one objects, the court approves the assets as going to the spouse. This procedure can only be used for husband and wife.
Is Probate Always Bad?

Nowadays, people tend to associate “probate” with the bad and ugly.

However, there are some instances that probate can provide benefits. For example, if your estate owes a lot of debts, to a lot of creditors; or if you believe someone may challenge your estate in court. You should discuss these issues with a qualified estate planning attorney.

Wills v. Trusts

As explained above, wills do not avoid probate. Even if you have a will, upon your death, the will becomes a public document. A will is subject to probate, which can be a painful, drawn-out process that most people would want to avoid.

A living trust, however, avoids probate. The principle behind a Revocable Living Trust is this: When you establish a Living Trust, you transfer all your property into the Trust, and then name yourself as trustee (or spouse as co-trustee). You will also name “successor trustees”, who will take over your assets and handle them pursuant to your instructions. The trustees maintain complete control over the property, the same control you had before your property was placed in trust. You can even discontinue the Trust if you choose. Since the “successor trustee” will be following your decisions, the probate courts need not be involved.

Another important difference between a trust and a will is that a will is not effective until you die. A trust, however, is effective as soon as you make it, and can offer protection if you become disabled or incapacitated.

How Do I Transfer My Assets to a Trust?

In order to fulfill the purpose of your estate plan, you should fund the revocable trust you have by transferring your assets to the trust. For all transfers, title should be transferred to the trust. For example, if I were to set up a trust, I would transfer title to my property to “Kelly Chang, as Trustee, or the acting successor Trustee, of the Kelly Chang Revocable Trust Dated March 1, 2006”.

The following describes the transfer process for basic types of assets. For assets not listed, please consult with a qualified estate planning attorney.

Transfer Process
Real Property In California

It will be necessary to prepare and record a new deed in order to transfer title of real property to your trust. It is also necessary to submit a Preliminary Change of Ownership Report with the deed notifying the local county assessor as to whether the property is subject to reassessment. A transfer to a revocable living trust is exempt from reassessment.

Please note that if there is a mortgage, you should contact your lender and request a waiver of enforcement of any due-on-sale clauses contained in the loan documents.

Real Property Outside of California

Laws vary from state to state regarding transfer s of real estate. Best to consult with an attorney located in that state who is familiar with local rules regarding property taxation, income taxation, and law regarding mortgages as it affects such property. We can help you find such an attorney who will assist you.

Cash Accounts

You should contact all banks and let them know that you have a living a trust and wish to transfer assets to it.  You should change the name on the bank accounts and CD’s by completing new signature cards as the Trustee.

Stocks and Bonds

Contact your brokerage firm.

Life Insurance

The beneficiary should be changed to the trust; however, if it’s a small policy, you may wish to continue the designation of your original beneficiary.

New Assets

All new assets should be acquired in the name of the trust.

If I Have a Living Trust, Do I Need a Will?

Yes, most trusts will have a “pour over” will, which simply provides that any assets held in your name alone at death, which were not in your living trust, will be transferred to your living trust.

However, these assets not originally in the trust will not avoid probate.

Should I Change or Update My Will?

Congratulations, you’ve made your estate plan!

Now, when should you make changes or update the documents?

It truly depends. Generally, if something major happens, such as a death of spouse or beneficiary, divorce, adoption of new child, or winning the lottery.