By Tanya Dennis
Money matters. Home, possessions, bank savings and investments dictate the quality of life, and many people live with an intent to leave a legacy to loved ones.
Unfortunately, poor planning can decimate an estate. Some individuals leave a will, believing that their children or spouse will be taken care of.
Instead, children or the spouse face many months or years in probate court, watching estate assets dwindle away to pay attorney fees and court appointed examiners.
Too many families walk away with nothing after going through probate.
The reason may be poor planning. Another reason is that for decades, if not centuries, lawmakers in California have favored court and banking interests.
A will is not sufficient.
To avoid poor planning the next step after a will is to execute a revocable living trust. A will without a trust attached will be “probated” by the state to assure that the will is legal.
This leads to thousands of dollars in probate cost. For example, the average cost of probating a will for a $500,000 estate is approximately $23,000 in attorney and court fees, money that should go to the trustee’s beneficiaries.
The beauty of a revocable living trust is its flexibility and the protection it provides to the person who is the trustee of the trust and the person’s beneficiaries.
When a revocable living trust is executed, all transference of wealth to the trust occurs to the person now designated as the trustee. Although assets have been relinquished to the trust, the trustee as beneficial owner can sell, manage or give away assets and have the option at any point to change terms of the trust, change beneficiaries or even revoke the trust.
Once the trustee die, the revocable living trust becomes irrevocable, meaning what has been written is now etched in stone and cannot be changed.
Unfortunately, having a will and revocable living trust does not protect the trustee’s estate one hundred percent from probate court. Heirs will lose protection from probate court if the will or trust is contested, meaning that a family member fails to honor the wishes of the deceased and challenges the validity of the will or trust.
The majority of the time the will and trust are upheld in court, but meanwhile thousands of dollars or more are lost to the court. To avoid this from happening, it is imperative that family members sit down together and final wishes clarified.
This is the time to settle any dispute.
It is also helpful that family members have a copy of the will and trust, so that each item in the will and trust is discussed.
To discourage family members determined to contest the trust, insert a clause that anyone contesting the will and trust will receive one dollar for their efforts and lose any other benefits previously written in the will and trust.
An ounce of prevention can head off problems. When executing a will and revocable living trust, it is imperative that wishes of the deceased are honored and loved ones effectively avoid probate court.
A will and revocable living trust protects loved ones when they are most vulnerable.
Next week: Probate Court Drains Assets