It is always about reducing the number of steps, and the cost associated with such processes, in order to pass down to beneficiaries both movable (chattel) and immovable (real) assets. Dissolution of a trust is tricky, unless you've been through it yourself earlier. By adding beneficiaries to one's bank accounts/IRA accounts/retirement accounts, one just need to present a certified death certificate to the relevant financial institution to get those stocks/bonds/cash.
Even for homes, one doesn't need a will, nor a trust. Just make it "community property with a right of survivorship". What if both spouses die in some accident? A fix: joint tenancy with kids. Again, this creates a host of problems: what if a kid owes a lot of money to creditors? What if a kid files for bankruptcy? So, joint tenancy with kids is NOT recommended in such scenarios.
Wait, I don't follow (also I'm not American). Can't you just write a will in which you decide how the assets are split in % terms? Or perhaps that's what creates the "trust"?
Yes, but at least some US jurisdictions require an attorney (and fee) to go through probate. California even charges the fee as a percentage of the gross value of the estate, ignoring debt. So you can die with zero net worth, but your estate still has to cough up $40,000 or so to pay an attorney because you owned a single family residence with an underwater mortgage. That's doesn't happen with a trust.
California also has processes that bypass probate depending on the net worth of the diseased. You should not be paying anyone $40K just for probate in California. There is a progressive fee schedule that would limit the costs of a $1MM estate to about $20K. If you really don’t want that property, just let the bank repossess it. You’re not required to do anything with it. If for some reason the house was not foreclosed on you would eventually be able to claim it from the state. Banks also have procedures for next of kin to take over mortgages while you sort this out, should you want to.
My brother passed this year and I paid an attorney about $1000 for some very basic templated documents on a probate-less estate in CA. The key was setting everything (before passing!) to have myself or the intended recipient as a beneficiary or joint owner. I further distributed the assets per his will and used the Small Estate process for what he had left.
Items my brother placed in my name are legally a gift and I’ll be filing gift tax paperwork in his final return. Note that the Gift Tax is not a paid tax in Federal returns, but a reduction in your Estate Tax exemption. This is still a zero tax transfer since my brother’s estate was no where near that exemption.
For what I further transferred, anything over the gift tax limit will eat into the portion of my Estate Tax exemption that is set to disappear in 2026. It’s low enough that it won’t materially affect me. If it’s extended and I manage to have my own $20MM estate there will definitely be trusts and distributions before I pass.
Estate planning isn’t difficult. Find a good CFP and/or Estate Lawyer and speak with them.
This law is brutal and completely illogical. It's the kind of shit I'd expect from a very recent mess-turned-democracy country. I wonder if it has been challenged in the SCOTUS.
Yes, but maybe it's your family's home, where your now-orphaned kids have lived all their lives, and they might not want to have to move and change schools just to pay an attorney whose services they didn't want. Their guardian might be able to figure out a way to pay the mortgage and maintain their stability, if it weren't for the irrationally calculated probate fee.
Imagine one leaves bunch of jewelry and antiques. Does a family member need a will/trust to sell them? Obviously not. You buy a lot of stuff on craigslist, Facebook marketplace, offerup, without having any proof whatsoever. Does this logic extend to immovable property (say, land or home)? Imagine I buy a home from one of the kids(say, X) with cash, without any financing whatsoever, as the will states that upon death, this home goes to X. Another kid disputes this will, saying that (a) there is another will, which supersedes; or (b) that will in the question is fake; or (c) that will in the question was written under duress; etc. That's why buyers want a proof that the will is proper/proved through the court system, before he/she buys such a home. That's why it is called "probate the will". 'Probare' in latin = to prove; probating the will is very important step for buyers of immovable property (land, homes).
In India, often times, multiple kids sell the same inherited property to different parties. Then, this property ends up in legal disputes. Often times, thugs buy such disputed properties, then kicking out other buyers who don't have the political/thug backing. Why such disputes arise in the first place? Dumb buyers, who don't demand the probate.
Probating a will takes time and money: you need to hire a lawyer; these lawyers want 10 percent of the estate or even more; and it takes some time. How to avoid this nonsense? Create another legal person/entity, called trust(treat trusts like companies with assets, stock holders, etc). Have the trust, transfer the ownership of land and real estate to that legal entity, establish trustee and beneficiaries. Dissolve the trust and distribute assets to beneficiaries, without involving the court or even lawyers.
IANAL but my understanding is the contains your wishes about the distribution of your assets. However, the process of actually operating the will (ie probate) can take a while. Hence, you are better off moving your assets into a trust so that in the event of your passing, the trustee gets to distribute your assets according to your wishes immediately.
It does seem complicated. User sowbug has commented above that in California the trust can actually get you out of significant taxation. I would even call it unreasonable taxation (why would you tax the assets, instead of assets - liabilities, that doesn't make any sense).
Even for homes, one doesn't need a will, nor a trust. Just make it "community property with a right of survivorship". What if both spouses die in some accident? A fix: joint tenancy with kids. Again, this creates a host of problems: what if a kid owes a lot of money to creditors? What if a kid files for bankruptcy? So, joint tenancy with kids is NOT recommended in such scenarios.