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Wills vs Trusts by David Philipson, Esq.

Wills vs Trusts

If There is a Will is There a Way?
Or, Do You Trust Your Trust?

At the Law Office of David Philipson, we do a lot of will writing and a lot of trust preparation.  Many people are confused as to the difference between wills and trusts.  This is a short note to explain the differences.

A will is a written document that tells the world what you want done with your stuff after you die.  Once you die the will is filed with the clerk of the court of the county in which you lived, presumably San Bernardino County if you lived in Big Bear.  Thereafter, the person you named as the executor of your will would file a petition for probate with the court and a judge would be assigned to oversee your estate.  It would be the judge’s job, along with the executor, to make sure that your wishes are carried out.  For example, if Aunt Molly is to get the blue teacup, the executor is instructed to give the blue teacup to Aunt Molly and to report that he has done so to the judge.  Aunt Molly would then sign a receipt that would also be submitted to the judge stating that she received the blue teacup.  Because a judge is overseeing the entire process, everybody gets what they are supposed to get according to the terms of the will.

A trust on the other hand does not involve any judges or courts.  When you create a trust, all of your assets are transferred into the trust and you are named the trustee of the trust.  During your life, while you do not technically “own” your assets, you are in control of them and can use them how you wish.  You can buy, sell, or transfer assets into and out of your trust as you wish.  Once you die, however, your designated successor trustee would take over the trust and disburse your assets according to the terms of the trust.  Because there is no judge overseeing the disbursement of your assets, it is necessary that you trust your trustee.  If you name someone in whom you have complete faith as the trustee of your trust, that trustee will probably carry out your wishes completely.  However, there is no judicial oversight unless a lawsuit is filed by one of the beneficiaries of the trust claiming that the trustee has ripped them off.

A will is cheap to write and expensive to probate.  A trust is more expensive to write but significantly cheap to administer.

The Law Office of David Philipson will probably be able to write a simple will for you for $400.00-$500.00.  However, the costs of probating the will are rather considerable.  Attorney’s fees are set by the Probate Code and consist of four percent (4%) of the first $100,000.00 value of the estate, three percent (3%) of the next $100,000.00, two percent (2%) of the next $800,000.00, etc.  Thus, if you have a house worth $250,000.00 and $50,000.00 in assets, you have an estate worth $300,000.00.  The statutory attorney’s fees would be $4,000.00, $3,000.00, and $2,000.00, for a total attorney’s fees of $9,000.00.  Furthermore, the executor of your will gets an equal fee, another $9,000.00.  The court costs will be about $1,500.00, bringing the total cost of probating a will of an estate worth $300,000.00 to $19,500.00.

A trust will probably cost you between $1,500.00 to $2,500.00.  However, because there are minimal court and publication costs, and because attorneys generally charge by the hour to administer a trust, as do the successor trustees, the cost of administering a trust valued at $300,000.00 would probably be around $3,500.00.

So there you have it.  Wills are cheap to prepare but expensive to probate.  Trusts are more expensive to prepare but cheap to administer.  You should discuss the best estate plan for you with your attorney.  We offer a free consultation and will be happy to discuss your estate planning needs with you at no charge.  You would be able to make a choice as to whether you want a will or a trust, as well as a choice concerning any collateral documents such as Powers of Attorney for financial purposes, Advanced Healthcare Directives, etc., and we will be happy to assist you with those as well.

Contact the Law Office of David Philipson today to schedule your free estate planning consultation.