Given that trusts are more expensive than a will, many people want to know what the difference is, and if they really “need” a trust. After all, who wants to spend money if they don’t have to?
In California, where I practice, the dividing line for the usefulness of a trust is defined by what can pass to your heirs directly without having to go through probate. That number is currently $150,000 now in combined real estate and liquid assets.
One of the key functions of a trust is to avoid the time and expense of probate. A small sized estate of $200,000 – just $50,000 over the break-point – will cost over $14,000 in statutory attorney fees and executor fees. A probate case will take a minimum of four to five months to finalize the distribution. There are other problems with letting your estate pass through probate, but that is a topic for another time.
A will “speaks at death” to use a lawyerly colloquialism. It doesn’t do anything until the court receives it and orders its instructions carried out. A will is required to go through probate, which is a bad thing if you missed that part. A probate case is public record, meaning that anyone can see exactly what you had, and what your heirs are receiving.
A living trust takes effect while you are alive, and holds your property for your benefit. If something happens and you are unable to manage your property the person you chose as the “successor trustee” can step in to manage them for your benefit. The successor trustee steps in immediately after death and won’t have to wait for any court orders. A trust administration is private; typically the only public record will be the change in property titles.
So, which is better for you? The correct answer is, it depends – on your individual goals and on the size of your estate.