Probate vs. Living Trust in California

0:00 What if your family had to pay $46,000, just to inherit your home? In California, that's not a scare tactic. It's written into state law. It's called probate.

0:11 A court process that can take a year or more, and every page of it is public.

0:16 But most California families can avoid it, with one document. A living trust.

0:23 In the next 12 minutes: what probate really costs, how a living trust works, the one mistake that makes a trust useless, and exactly what to do this week.

0:33 This is the California Attorney Registry's plain-language guide. It's legal information, not legal advice.

0:43 Start with the problem. When someone dies in California, whatever they owned in their own name has to pass to someone else. If nothing else is in place, that happens through probate: a process supervised by the court.

0:56 A judge appoints an executor. Heirs and creditors get notice, and a notice runs in the newspaper. Everything is inventoried and appraised. Creditors get at least four months to come forward. Then the court approves who gets what.

1:11 Start to finish, a typical California probate takes about a year to 18 months. A dispute in the family can stretch it into years.

1:19 Is every estate stuck with it? No. If what someone left is worth no more than $208,850, not counting certain assets, the family can usually use a simple affidavit instead.

1:34 Here's the catch. In much of California, one home is worth more than that by itself. A newer law adds a simpler court petition for a primary home worth up to $750,000. It's still a court filing, and many California homes are worth more.

1:51 And probate happens in public. Anyone can look up the file: what you owned, who inherited it, and who was left out. Real estate buyers and marketers routinely mail families straight from those filings.

2:06 Now, the money. California sets probate fees by statute, as a percentage of the estate.

2:13 The estate's attorney receives 4% of the first $100,000, 3% of the next $100,000, and 2% of the next $800,000. And the executor is entitled to the same amount again.

2:26 So on a $1 million estate, that's $23,000 to the attorney, and $23,000 to the executor. Forty-six thousand dollars.

2:36 And this isn't only about mansions. Picture a modest house in Sacramento worth six hundred thousand dollars. Fifteen thousand to the attorney, fifteen thousand to the executor. Thirty thousand dollars, for a home most people wouldn't call a fortune.

2:52 And here is the part that shocks families. The fee is based on the gross value, not what you actually own. A $1 million house with an eight hundred thousand dollar mortgage still pays fees on the full million.

3:05 That's before court filing fees, the probate referee who appraises the property, newspaper notices, and bond premiums.

3:13 Add it up, and probate can quietly take a real share of what you meant to leave your family.

3:21 Enter the living trust. Think of it as a container with instructions. You move your home and accounts into it, and you write down who gets what.

3:30 There are three roles, and while you're alive, you hold all of them. You create the trust, you control it as trustee, and you use everything in it.

3:39 Nothing about daily life changes. You can sell the house, refinance, or rewrite the whole trust whenever you want. That's what revocable means.

3:48 You also name a successor trustee, someone you trust to take over. If you ever become unable to manage your own affairs, they step in for the trust, without a court conservatorship.

3:59 And when you die, your successor trustee transfers everything to your beneficiaries privately, usually in months rather than years, without a judge, and without statutory fees.

4:11 Back to that million-dollar house. With a funded trust, your daughter, as successor trustee, notifies the family, settles the bills, and signs the deed over. No courtroom, no newspaper notice, and no fee schedule.

4:25 There are still rules. The trustee must notify beneficiaries and heirs within 60 days, and anyone who wants to challenge the trust generally has 120 days after that notice.

4:39 Now, four myths. Myth one: a will keeps you out of probate. It doesn't. A will is the instruction sheet that probate follows.

4:47 Myth two: trusts are only for the rich. In California, owning a home is often enough for a trust to pay for itself.

4:55 Myth three: a trust cuts your taxes. A revocable trust doesn't change your income taxes. The federal estate tax only reaches estates above $15 million per person, and California has no estate or inheritance tax.

5:11 Myth four: just put your kids on the deed. Joint ownership can skip probate once, but it can expose your home to someone else's debts, divorce, or lawsuit, and it can cost your children a valuable tax benefit.

5:27 Case one. Rosa owns a nine hundred thousand dollar home in her own name, and she has a will. Trust, or probate?

5:35 Probate. The will just tells the court what to do.

5:38 Case two. Dan signed a living trust, but he never moved his house into it. Trust, or probate?

5:45 Probate, most likely. An empty trust can't pass a house it never held.

5:49 Case three. Mei's only asset is a retirement account, with her daughter named as the beneficiary. Trust, or probate?

5:58 Neither! The beneficiary designation passes it directly to her daughter.

6:02 How did you do? Three out of three puts you ahead of a lot of families. And if you're enjoying the video, gently tap the like button. Also subscribe for additional amazing content like this.

6:17 Case two wasn't a trick question. It's one of the most common estate planning mistakes in California: the unfunded trust.

6:25 A trust only controls what's titled in its name. That means a new deed putting your house in the trust, recorded with the county. Bank and brokerage accounts retitled. And business interests assigned to it.

6:38 Retirement accounts and life insurance work differently. Don't retitle those. Keep their beneficiary designations current instead.

6:47 Most trusts come with a pour-over will as a safety net, but whatever it catches can still go through probate. Sometimes a court petition can move a forgotten asset into the trust, but that's a court process too.

7:00 And keep it current. A new home, a new grandchild, a divorce. And after a refinance, make sure the house is still in the trust.

7:11 Now flip it around. Say your parent dies, and the trust names you as successor trustee. What do you actually do?

7:19 Order several certified death certificates. Find the trust and any amendments. Send the required notice to beneficiaries and heirs within 60 days. List every asset and its value on the date of death. Pay final bills and taxes. Then distribute, and keep beneficiaries informed along the way.

7:38 Remember, as trustee you're a fiduciary. Keep separate records, don't mix trust money with your own, and keep beneficiaries informed. Many trustees hire an attorney just for this part, and the trust can usually pay for it.

7:55 A trust isn't the only tool. Payable on death designations on bank accounts. Transfer on death on brokerage accounts. Beneficiaries on retirement accounts and life insurance. And a surviving spouse can often use a simpler court petition.

8:11 California also allows a transfer on death deed for real estate. It's simpler than a trust, but it has limits, it does nothing if you become incapacitated, and the law that allows it is set to expire in 2032 unless lawmakers extend it.

8:27 For many California homeowners, the living trust is still the cleanest way to put everything under one plan.

8:37 So what does a trust cost? With an attorney, often a few thousand dollars for a typical family, and more for complex estates. Compare that with $46,000 in statutory fees on a $1 million estate.

8:51 It matters most if you own a home in California, have young children, a blended family, or property in more than one state, or if you simply value privacy.

9:01 And if what you own is modest, or already has beneficiaries, a simple will and good designations may be enough. That's a conversation worth having with an attorney.

9:12 What about online templates? They're cheaper, and some families use them well. The risk is in the details: a deed recorded the wrong way, an account left out, or a trust that doesn't fit your family. With a home involved, an attorney's review is usually worth it.

9:31 Here's your checklist. List what you own, and how each item is titled. Check every beneficiary designation. Decide who you'd trust as successor trustee, and as guardian for any children. Then talk to an estate planning attorney.

9:46 And ask three questions. Is the fee flat, and does it include funding the trust? Who records the new deed? And how do updates work later?

9:55 Look for experience. The State Bar certifies specialists in estate planning, trust and probate law, and every attorney's license is a public record you can check.

10:05 And don't forget two companion documents: a durable power of attorney for finances, and an advance health care directive. A trust covers what's in the trust. These cover everything else, including medical decisions.

10:22 That's where the California Attorney Registry comes in. Search every licensed attorney in California by city and practice area, including estate planning and probate. Every record links straight to the State Bar, and contact details are free.

10:37 Already dealing with a probate, or a trust dispute? Submit your case for review: seven questions, in your own words. Attorneys who handle that kind of matter can send you a proposal, and you choose one, or none. It's free.

10:52 And the registry's free Legal Answers cover probate costs, deadlines, trusts, and more, each one tied to the law it comes from.

11:00 Estate planning attorneys: your profile is already on the roll. Claim it free, and review new matters in your practice area.

11:11 So remember three things. Probate in California is public, slow, and priced by law. A living trust can avoid it, but only if you fund it. And the right time to set one up is before anyone needs it.

11:24 We're glad that you made it to the end, and please hit that Like button and Subscribe to the channel for more incredible videos! Visit CaliforniaAttorneyRegistry.com, for all of your legal needs.