Creating a living trust in California is a prudent step for those looking to manage their estate efficiently and ensure their assets are distributed according to their wishes. A living trust not only helps in avoiding the often lengthy and costly probate process but also provides privacy and flexibility in estate management. However, understanding the costs involved is crucial for anyone considering this estate planning tool. The expenses can vary significantly based on several factors, including the complexity of the estate, the professional fees of attorneys or estate planners and any additional services required.
If you’re considering using a living trust as part of your estate plan, a financial advisor can help you determine whether and how it fits your situation.
California Living Trusts in Brief
Living trusts are basic tools of estate planning in every state because they allow assets in the estate to go directly to beneficiaries without the delay and cost of going through the probate process. As one of the states that don’t follow the Uniform Probate Code, California’s probate process is longer and more costly than most. State-mandated probate fees consume 4% of the first $100,000 of an estate, and executor and attorney fees add costs. The process generally requires at least eight months and can go two years or longer.
Setting up and funding a living trust as part of your estate plan lets you avoid probate. This means your beneficiaries will receive the support you intend them to have much sooner, and the site of your estate won’t be reduced by probate costs. It does cost money to set up and fund a living trust, but it is likely to be a bargain when compared with probate.
The least costly way to create and transfer assets into a living trust is to do it yourself for free. You can download templates for living trusts for free and fill them out yourself. Online trust-creating tools such as FreeWill can walk you through generating trust documents tailored for California, again without having to pay anything. You will, however, have to pay recording fees to transfer real estate assets into the trust, but there is no cost to transferring most financial assets.
Do-it-yourself estate planning is not necessarily the right approach for everyone. Hiring an attorney may be appropriate if you’re unsure of how to do it yourself or have a large or complicated estate. An attorney specializing in estate law will charge from about $900 to as much as several thousand dollars to set up and fund a trust.
California Living Trust Cost Considerations
The legal bill for establishing and funding a California living trust can vary due to several factors, including where you are located, the complexity of the trust and your marital status. A revocable trust may cost less than a more complicated irrevocable trust.
A major factor is the rate charged by the attorney, which may be between $200 and $400 per hour depending on the attorney’s expertise, experience and business practices. There’s no set hourly rate or cost for a living trust. However, an average California attorney may charge about $2,000 for the job.
In exchange, your lawyer will first take some time to hear your situation and explain your options when it comes to living trusts. Next, they will draft the paperwork establishing the trust. An attorney will likely have you sign the trust documents in front of a notary, which may involve a fee of $15 or so. However, notarizing signatures is not required for living trusts in the state.
Transferring assets into the trust is a required step and could take significant additional time. The process of transferring bank accounts and similar financial assets varies by institution but may be as simple as listing the name of the trust as a beneficiary of the accounts. Transferring real estate is more complicated and involves filling out, signing, notarizing and filing a new deed for the property along with a document reporting the change of ownership with the county clerk. Filing fees for this task vary by county but may be $50 for a primary residence and $150 for a vacation home or similar property.
California Living Trust Caveats
Attorneys set their fees and you may be able to find one who will do the work for significantly less than most. If you can, it may be worth getting paid help compared to doing it yourself for free, because an attorney can ensure that forms are filled out and recorded properly. An attorney can also help you address complicated scenarios, such as transferring oil and gas interests or ownership in a business into the trust. If your situation changes, an attorney can advise you on updating or revising your trust.
Not everyone needs a living trust, even in California. State law allows a small estate worth less than $184,500 to bypass probate without a living trust, eliminating one of the main advantages of a living trust. The California attorney general suggests being alert for living trust mills that sell people living trusts they don’t need and may also attempt to sell other products that are inappropriate.
Bottom Line
Creating a living trust in California is a strategic move for many individuals looking to manage their assets efficiently and ensure a smooth transfer to beneficiaries. The cost of establishing a living trust can vary significantly based on several factors, including the complexity of your estate and whether you choose to hire a professional or use a DIY approach. Ultimately, investing in a living trust can offer peace of mind, knowing that your estate will be handled according to your wishes, potentially avoiding the lengthy and costly probate process. As you consider your options, remember that the initial cost is an investment in the future security and clarity for your loved ones.
Tips for Estate Planning
- A financial advisor can help you understand the costs involved in creating a California living trust and develop a plan that fits your budget and priorities. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Making your estate plan can be very straightforward. Here are five steps you should take to make sure that you have a competent and complete estate plan.
Photo credit: ©iStock.com/MixMedia, ©iStock.com/adamkaz, ©iStock.com/Fly View Productions