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Why Should a San Diego Estate Plan Include a Trust?

What is the Purpose of Trust Planning as Part of Your Marital Estate?

Why should a San Diego or California estate plan include a trust? Presently, there is no estate tax for most individuals in California. The national estate tax exemption is $11.18 Million for an individual and $22.36 Million for a married couple.

The purpose of Estate Planning and any trust within an estate plan is to protect assets, provide an easy transition and avoid the heavy expenses and time delays associated with probate. Generally speaking, when a person passes away with a well-conceived and executed estate plan the trust(s) protect assets and immediately pass them to a surviving spouse and/or heirs and beneficiaries.

When a person passes away without a trust and with or without a will, the probate court will appoint a personal representative to “marshall” (identify and organize) all of their assets and debts.

Assets are used to retire appropriate debts, taxes as well as the expenses of the probate process under the management of the court through the executor of the will or an administrator if no will is present. The probate process will identify all appropriate heirs and beneficiaries and distribute any remaining assets.

The costs of probate are substantial, and much less than the expenses associated with the vast majority of marital estates here in California. For example, here in San Diego, the median value of a house is presently $640,000 though many homes are worth much more.

It is important to note probate costs are based upon the value of the assets at hand, and have nothing to do with the remaining equity in those assets.  Why should an estate plan include a trust?  To reduce costs, taxation and protect assets.

How Much Will Probate Really Cost My Estate?

Does your estate plan include a trust? If not, what will it cost to pass your intentions on to heirs and beneficiaries? If we use the relatively low median price of $640,000 the basic costs of probate are:

4% on the first $100,000 or $4,000

3% on the next $100,000 or $3,000

2% on the remaining assets from $200,001 to $1,000,000

The attorney and executor or personal representative will each receive these amount for their fees.

Therefore on a $640,000 home the executor/personal representative and legal fees alone are $32,000 plus the cost of Probate Court fees which are usually an additional $1,500 to $2,500.

The fee on an $850,000 home in probate would therefore be $40,000 plus Court fees. It’s not hard to see how quickly the costs associated with probate add up when you consider the additional assets outside of simply the house of the decedent.

It can take more than a year to move through the probate process, meaning your heirs and beneficiaries will not enjoy the benefit of these assets for a substantial period of time.

Protecting Your Spouse Heirs and Beneficiaries

When and why should a San Diego estate plan include a trust? When a person dies, The appropriate selection of a trust allows spouses to transfer assets between each other in without creating a taxable transaction. A trust allows the couple to protect one another as well as their heirs and beneficiaries. In most cases, one spouse will survive the other. Your trust provides a seamless transition of all assets while providing for your present and future needs. In essence, the trust will shield your assets (as much as possible) from taxation and the delays and costs of probate while providing easier and more timely access to those assets.

Does your estate plan include a trust?

Contact Us To Learn More About Allen Barron's Services

Does your estate plan include a trust?  Has it been reviewed in the past 2 to 3 years to ensure it is up to date?

For more information or to discuss your tax, legal and accounting needs contact Allen Barron or call 866-631-3470 for a free and confidential initial consultation. Learn about the importance of integrated business strategy and coordination across legal, tax and accounting systems.

Offices of Allen Barron, Inc.

Main Office

16745 West Bernardo Drive, Suite 260
San Diego, CA 92127
Phone: 858-304-0947
Phone: 866-631-3470
Fax: 858-376-1410

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San Diego, CA 92121
Phone: 866-631-3470
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Las Vegas, NV 89101
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San Diego, CA 92101
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San Francisco, CA 94101
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40 North Central Avenue
Phoenix, AZ 85004
Phone: 602-903-7018
Fax: 602-357-1655