Do I Really Need a Living Trust?

Dear Mr. Miller:

My Dad has a really small estate and does have a Will.  He lives in one of the rural counties of California.  But my brother is telling me that if he doesn’t have a Living Trust we will have to go through Probate and will lose all our inheritance to the courts.  I don’t usually take what my brother says as the gospel as he is a big mouth who thinks he knows everything.  But I have heard this before and wanted to check.

My Dad has a mobile home worth $100,000 and bank accounts totaling $30,000.

Frantic Daughter

Proper Advice from the Proper Professional
Where Does the Money Go In Small Probates
Small Estates Procedures Act
Mobile Home
Conclusion

Dear Frantic:

Proper Advice from the Proper Professional:  We all know people like your brother.  And I have always said, don’t get your legal information from the CPA, don’t get your medical advice from the notary public, and don’t get your tax recommendations from the Real Estate Broker.  The proper professional for the appropriate issues.  If your brother isn’t an attorney specialized in this field, then he’s probably not the person to get advice from about living trusts.

Where Does the Money Go In Small Probates:  Living Trusts are a wonderful device, but they are not for everyone, all the time.  Here’s an article I wrote a while ago about the myths of Living Trusts.  So what about the need for a Living Trust in your Dad’s estate? And let’s straighten out one myth at the outset.  The court does not get the inheritance.  Court fees (and using a rather broad definition of that) are generally not going to exceed $1000.  There could be bond fees, newspaper publication fees, and Probate Referee fees but those fees, too, are generally not going to eat up any sizable amount of the estate. The big fees are the executor’s fees (probably you or your brother), if charged, and the attorney’s fees.  But on a small estate such as your Dad’s those executor and attorney fees would rarely be more than, $5000 each.  Nevertheless, rarely would any of those fees have to be paid because of the Small Estates Procedures Act.

Small Estates Procedures Act:  Most, if not all, states have a Small Estates Procedures Act.  Each one is different, particularly on the maximum amount involved, so it depends on what state the decedent lives.  California’s version says that for the transfer on death of personal property (the bank accounts), the value of that property and any real property shall not exceed $184,500 (that number gets adjusted every 3 years).  It would appear that your Dad’s estate is well within that limit.  And for our other readers, there are many types of property that just aren’t even counted to determine whether the estate is within the required value.

Mobile Home:  As to the mobile home, most mobile homes are registered with the Department of Housing & Community Development (HCD).  And those type of assets are not counted and are handled directly with HCD.  If his mobile home is not registered with HCD, or otherwise exempt, then the value limit for the mobile home is $61,500.

Conclusion:  So it is unlikely that your Dad’s estate will pass through the Probate process or that he needs a Living Trust for that purpose.  And his estate is probably too small to require a Living Trust for any of the other purposes for which Living Trusts are often used.  I would suggest that you look into a power of attorney for finances and a power of attorney for health care (sometimes called a medical proxy).  Depending on your Dad’s situation these documents could be obtained at very low cost.  And, depending on who drafted the Will and how long ago, maybe have that reviewed by an attorney, also.

If any of our readers have issues involving estate planning, death cases, Medi-Cal or Veterans Benefits, give us a call at 760-436-8832.