By ES (17)
Some out-of-state attorneys prefer wills as the primary estate planning vehicle. California attorneys prefer Trusts. Why?
When wills are used, Decedent’s assets must usually go through the probate process to reach the intended beneficiaries.
- The probate process is cumbersome.
- Probate is a very public process. Many clients would prefer a private disposition of their finances after death.
- Wills “speak” only at death and do nothing during lifetime incapacity.
- Wills need a built-in testamentary trust to do tax planning.
Trusts, by comparison:
- Bypass the court system unless a litigious family member sues.
- Trusts are not public documents and lend greater privacy.
- Trusts are effective immediately and may be utilized for incapacity planning.
- With a trust-based plan, a simple “pour-over” will is used to supplement the trust.
- Trusts can do tax planning for a credit shelter trust or for descendants.
In Los Angeles County, where an ordinary probate matter takes 18 months, the advantages of a trust are self-evident. In jurisdictions without a cumbersome probate process, the strongest points in favor of trusts are privacy and their ability to be used during incapacity. True, powers of attorney provide some protection during incapacity. However, powers of attorney are not as readily accepted by financial institutions. A local bank drove a client of mine crazy insisting that the principal (his decrepit mother) appear in person at the bank to vouch for the power of attorney that she had signed days before in the presence of a notary public. Stale powers of attorney are especially prone to being ignored. I have heard that some title companies will not accept powers of attorney for real estate transactions, unless the power was created within the preceding year.
As Americans live longer, the chance of a client encountering a period of incapacity is ever-increasing. So, having a solution for the problem of incapacity is rather important.
Above, I wrote that wills are “usually” probated. It depends on the size of the “probatable” estate. In California, the threshold value of decedent’s estate $150,000. Below that, summary procedures can be used. Above that amount, a full-blown probate proceeding is required.
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