Dear Clients and Colleagues,

In my last newsletter I reviewed some Estate, Will and Trust basics, and why a Trust is preferable to a Will. To reiterate, a Will must go through Probate, that is, a judge must rule that everything is in order before your assets are distributed to your heirs. Until that is done, the judge controls your assets and nothing can be distributed without court approval. Probate in California generally takes from one year to two years to complete, but can take longer.

While a Will may be less expensive to prepare than a Trust, it may be much more expensive in the long run. A typical cost for preparation of a complete Trust package from Hornstein Law Offices is approximately $2,000 (including a “Pourover” Will to fund the Trust with property inadvertently left outside of the Trust).

The cost to prepare a Will is approximately $500. However probating a Will can be expensive, and the Court sets the fees so there is little wiggle room. For example, to Probate a Will for an Estate worth $400,000 will cost $11,000 in Probate Attorney fees, $11,000 in Executor fees and $1,000 to $2,000 in Court and publishing fees. A Trust does not incur any of these expenses.

Finally, Probate is a very public process. Creditors must be notified and the date of the court hearing must be published in a newspaper. Anyone may attend the hearing to challenge your plans, and creditors can submit their payment requests to the court.

On the other hand, a Trust can transfer property to your heirs quickly, privately and with relatively minimal expenses. If the same $400,000 estate were in a Trust, the property could be transferred to the proper beneficiaries, with minimal paperwork and delay, and cost approximately $500 to $1,500 if we need to prepare deeds, write letters to financial institutions, or give proper notice to heirs and beneficiaries.

What Is a Trust? A Trust is a legal entity in which one party holds property for the benefit of another party. It is part of a three-part agreement in which the owner of the assets, called the “grantor,” “settlor” or “trustor,” transfers legal ownership to the trust to benefit one or more people, called “beneficiaries.” The person who manages these assets is called the “trustee.” The trustee has what is called a “fiduciary” responsibility to manage the assets in the best interests of the beneficiaries.

Two Types of Trusts. There are two types of Trusts, Revocable and Irrevocable. A Revocable Trust can be changed or revoked at any time, assets may be added or removed at will and the Grantor pays any taxes on the Trust’s earnings. An Irrevocable Trust cannot be changed or revoked. Any assets placed in an Irrevocable Trust are permanently transferred to the Trust and removed from the Grantor’s Estate. The Trust itself instead of the Grantor pays any taxes on the earnings of those assets.

What Type of Trust Best Replaces a Will? A Revocable Living Trust is generally the best substitute for a Will. It can be changed easily as your circumstances change, and assets may be added or removed quickly and easily. With a Revocable Living Trust, your assets will go directly to your beneficiaries after your death. There will be no delays while the judge decides if everything is in order. And all of your instructions will generally be private. Finally, as we showed above, it is much less expensive than probating a Will.

Setting Up a Revocable Living Trust. Setting up a Revocable Living Trust is not difficult. Hornstein Law Offices can send you a basic questionnaire that you complete and return to us. We then prepare the Trust and all accompanying documents. When everything is ready, you just come into the office for an hour to review, sign and notarize your new Trust. Alternatively, we can send the Trust book directly to you along with instructions and you can take to your notary, or if you prefer, we can have a notary bring the Trust book directly to you to notarize in your home or office. Our goal is to make the process as simple and stress-free for you as possible.

Transferring Assets into a Trust. Once your Trust is “official” you will need to transfer assets into it. This is not hard to do. For example, you go to your bank with a copy of your Trust to open an account in the name of the trust or you contact your mutual funds to do the same. We prepare the Grant Deed to transfer your house and any other Real Estate into the Trust. If there are any assets for which transferring ownership would trigger a penalty, you simply make your Trust the beneficiary rather than the owner. We will review with you how to properly title your assets or designate the proper beneficiaries; for example, a spouse must be the primary beneficiary of an IRA unless they sign a written consent. In the future, when you purchase a new car or make a new investment, you just title the asset in the name of your Trust.

But Don’t I Give Up Control of My Assets? No. In a Revocable Living Trust, you may be the Settlor, the Trustee, as well as the Beneficiary. This means that you decide what to put in the Trust, who manages those assets and who benefits from their earnings and use. Moreover, you decide who gets what after your death. In fact, a Trust gives you much more control of how your assets are distributed than does a Will. This can be very important if you have a Special Needs child or a spouse.

I think that I will stop here before your head starts to spin. Just let me reiterate that a Trust has many benefits over a Will. It gives you more control of your assets after your death, costs much less to implement and is private.

If you know of someone who does not have a Trust or just would like a FREE review of your Trust to see if it is up-to-date, please contact Evan Press, at 818.887.9401 or by Email at evan@hornsteinlawoffices.com 

If you have any questions about your estate, tax or financial situation, please contact us. Also, if you know someone who could benefit from our services, for example, a friend or family member who has yet to do any estate planning or your son or daughter, who should start saving for retirement, please contact us. We would love an introduction. Remember to always think a generation up and a generation down. Do you know where your parents’ Trust is or where your adult son’s or daughter’s Trust is? If not, they probably don’t have one!

We are a full-service financial firm, with experts in estate planning, taxes and financial strategy, and offer a free initial consultation.

Thank you,
Steve Hornstein

We are a full-service financial firm, with experts in estate planning, taxes and investments.

Steve H. Hornstein, CPA, Esq., LL.M., CFP™
Hornstein Financial
20335 Ventura Blvd., Suite 203
Woodland Hills, CA 91364
Office: (818) 887-9401
Fax: (818) 887-7173
Toll-free: (888) 280-8100
www.hornsteinfinancial.com