Except under unusual circumstances, almost everyone who owns a home should have a trust.

Dear Len & Rosie,

I am a widow, my husband Richard having passed away four years ago. I own a modest home, all paid off, and nearly three hundred thousand dollars in savings. My old will leaves everything to my husband, and then to my three children, share and share alike.

I recently visited an attorney to get a living trust. He told me that I did not need a trust, and that all I needed was a will. He made a new will for me, and a durable power of attorney.

I’m not sure he did the right thing. I have heard you talk about how living trusts avoid probate. I do not want the state to take my money away from my children after I go. I spoke to my children last week, and they all agree that I ought to have a trust. What should I do?

Rebecca

Dear Rebecca,

Except under unusual circumstances, almost everyone who owns a home should have a trust. Let’s say that your home is worth $450,000. Including your savings, your entire estate is worth about $750,000. The statutory attorney’s fee for probating an estate of that size is $18,000. That’s $18,000 that won’t pass to your children. Probate also takes a long time to do. Most estates take anywhere from 9-15 months to pass through probate, assuming there are no complications.

If you have a trust, it will be much easier for your children to divide your assets after your death, as long as they get along with one another. Your home could be transferred to your children with an affidavit of death and a single deed, and your trustee can divide your bank accounts and investments after paying off your bills. While there are still legal documents to prepare, and tax issues to address, nobody would have to go to court, and your children will spend much less than $18,000 in legal fees.

Even if your trust is complicated - let’s say your children don’t get along so well and someone refuses to waive the trust accounting, it will still be cheaper to administer a trust than it would to probate your estate in the courts.

Why did your attorney say you did not need a trust? Is your home a modular home in a mobile home park? If so, then your ownership is registered with the California Department of Housing, not the County Recorder. If this is the case, then you can avoid probate without a will if you name your children as pay-on-death beneficiaries on your accounts. That way, your estate won’t be subject to probate in the courts, and your children may collect the mobile home forty days are more after your death using a Small Estate Affidavit under Probate Code section 13101.

Otherwise, the lawyer’s advice doesn’t make much sense. He may have a very good reason to not to make a trust, but it cannot hurt for you to have a second opinion. See another estate planning attorney, and find out what he or she thinks.

Len & Rosie

The easiest way to handle the issue of incapacity

Dear Len & Rosie,

Last year my wife and I bought a revocable living trust. We own a modest home, some stocks and bonds, three bank Certificates of Deposit, and two insurance policies that are payable to the trust.

I am the only trustee, because my wife, Gloria, was never all that good with handling money. When I die, my eldest son, Josh, will be the successor trustee. He has promised to take care of his mother after I am gone.

I want to know how it is supposed to work. How does Josh become trustee when I am gone? What if I lose my mind and wind up in a Nursing Home? How do my stock broker and the banks know that Josh is supposed to be the trustee. They might think he was some punk coming in off the street to rip us off.

Reuben

Dear Reuben,

Most of the time when clients who already have a trust come into our office with questions such as yours, we learn that they purchased their trust from a trust mill that didn’t even bother to explain how their trust is supposed to work.

According to your letter, you are the sole trustee and your son is the successor trustee. He will become the trustee upon your death, resignation or incapacity as directed by the language of your trust. Because we do not have a copy of your trust, I cannot tell you exactly how this is supposed to happen. This, however, is the way most revocable living trusts work:

If you die or resign, Josh would become trustee automatically. All he would need to prove he was trustee is your death certificate or your letter of resignation as trustee. There will be other documents needed to transfer specific assets such as your home and accounts to Josh as trustee.

But if you become incapacitated, it can get sticky. Who decides whether or not the trustee has become incapacitated? Many trusts are written with provisions that one or two doctors can determine that the trustee is no longer able to handle the job. Other trusts may require the successor trustee to petition the Court for a determination of incapacity. Some trusts have no provision for the removal of a trustee, which means the successor trustee or the beneficiaries may have to ask the court to intervene. In any event, your son will have to talk to doctors and lawyers if you become incapacitated.

The easiest way to handle the issue of incapacity is to avoid it. Ideally, you should resign as trustee before you become incapacitated. Or, you and your wife could amend your trust to appoint your son as co-trustee and give him the authority to act alone. This way, if anything happens to you, he already has the ability to take care of things for you and Gloria. Of course, you must really trust your son to give him that kind of power over your property while you are still alive.

What you should do is contact the trust mill that wrote the trust for you and request an explanation. If they are not much help, and they probably won’t be, then you should consult with a local elder law attorney to review your trust.


Len & Rosie