When planning for your estate, it is important to work with an Estate Planning Attorney in Orange County and consider whether you should leave behind a will or set up a living trust.
Though these will not affect you, they make a huge difference to the amount your beneficiaries will receive and also to when and if they even receive what you intend for them to inherit.
Probate vs. Trust Administration
Find out more about the differences between probate and trust administration by consulting with an Orange County estate planning attorney to help you decide the best course of action for the future of your estate.
What is Probate and how is it administered?
Probate is a legal process where the estate of a deceased individual is evaluated for its authenticity and legality.
Probate administration takes place when a person dies leaving behind their estate without trust. In this case, the state steps in to help divide the deceased’s assets, appointing an executor according to the will of the deceased, and an administration lawyer if there is no will.
The court-appointed executor or administrator will be responsible for collecting all of the deceased’s assets, paying any liabilities remaining on the estate, and distributing the assets to the deceased’s beneficiaries.
What is Trust and how is it administered?
A trust is a contract signed by a trustor who owns a certain set of assets, and a trustee who will have control and be held responsible for the said estate.
Often with the help of an estate planning lawyer in Orange County, a trustor determines the conditions of a trust, which dictates who will manage his estate and how the assets will be handled when he passed.
Should this happen, the person appointed to manage the trustor’s estate will be administering the trust and see to it that all assets included in the trust are collected, any liabilities are settled, and that the assets are distributed to beneficiaries according to the conditions previously established by the trustor.
The Difference between Probate and Trust Administration
A will requires probate; a trust requires administration.
Typically, when a person dies and leaves behind a will, the will is brought to the probate court where a judge evaluates the validity of the will.
Meanwhile, if a trust has been set up prior to one’s death, all assets included in the trust can bypass the probate process and go directly to trustees.
Probate involves the court while trust administration does not.
When a person dies and there’s no trust set up, the probate court gets involved with or without a will. Probate costs are expensive, it also takes months to years, and would make the entire process of estate distribution a public ordeal.
However, if a trust was set up with a help of an Orange County estate planning lawyer prior to one’s death, the assets included in the trust can immediately be managed by the person appointed by the trustor and the beneficiaries can immediately receive the assets.
Probate is public while trust administration is private.
When the probate court gets involved, the entire process of estate distribution becomes public. Anyone can access the court file which lists all assets in the estate, their respective values, and all the names and addresses of the deceased’s relatives and beneficiaries.
On the other hand, trusts are much harder to contest in court and will need the involvement of an estate planning lawyer at most. In these situations, families can keep the matter of distributing a deceased’s estate private.
Probate takes much longer than Trust administration.
If an estate was relatively small at less than $100,000, the procedure can take less than a year. However, if it is bigger, or if there are potential beneficiaries who would contest the terms of the probate, the process will be extended. On average, probate lasts a year or two.
Meanwhile, a trust can be immediately effective — when the trustor dies, the trustee gains control of the assets and can immediately distribute it amongst names beneficiaries.
Probate is more costly than a trust administration.
Since probate can take years, the estate is essentially frozen while probate is ongoing. When procedures are done, the costs reach up to 7% or more of the total estate value on top of the estate tax.
Not only will the court be taking a percentage in terms of probate fees, but the costs of paying for legal services when a lawyer gets involved in probate can further deduct from the amount beneficiaries receive.
Lawyer fees are typically priced depending on the total estate value. Though they only take a few percent of the total estate value, this could easily mean tens of thousands deducted from what beneficiaries will receive.
However, if a trust was set up prior to a person’s death, then the only amount to be deducted is probably the estate tax and other fees liable to the estate.
You have no control over probate but you have control over the trust.
Probate takes place after a person has died. Though you may leave behind a will, it will only direct the probate and does not determine how your estate will be distributed.
Because the probate involves a lengthy legal process, even if you left a will behind, your beneficiaries will not yet receive your assets.
Additionally, the terms of the probate being contested, creditors can lay claim over assets, and the validity of the will could be questioned.
These can result in an entirely different distribution of your estate than you intended in your will. Having a trust prevents this from happening and will better ensure you have control over the distribution of your estate.
Meanwhile, if you failed to leave behind a will or a testament, then your estate will pass under state intestacy laws which normally give half the estate to the living spouse and divide the rest equally amongst the children.
This may not always be an issue, but if you have children from prior marriages, it may prove a bit difficult if you wish to have your estate divided in a different way.
In such cases, trusts are better because the moment you die, titles and ownership can immediately be transferred to the trust and the trustees can have full control over the trust property already.
Choose the Right Estate Planning Attorney in Orange County
If you‘re thinking of planning for your estate and you want to understand more, it is wise to work with an estate planning attorney in Orange County.
Our team of reliable estate planning lawyer in Orange County provides the legal services you need. Contact us at McKenzie Legal & Financial today.