October 19, 2007

‘I only have a house, so why do I need a trust?’

By Robert P. Bergman
Special to the Times

Jan’s daughter Susan came to her one day after attending a seminar on living trusts, and asked her mother if she had a living trust. “Why do I need a living trust,” said Jan, “all I have is the house your father left to me after he died.”

Here are some of the reasons that Jan should strongly consider having her home put into a living trust:

1. Jan didn’t realize that ownership of a house or any other real estate in California that is valued at $20,000 or more was sufficient to require that a Probate proceeding in the Probate Court would be necessary in order for Jan to pass her home on to her daughter Susan at Jan’s death. Because Jan’s house was worth $600,000, well over $20,000, at her death Susan will have to go through a Probate proceeding that could end up costing her court filing fees, publication fee, court appraiser’s fee, and attorney’s fees of thousands of dollars, perhaps as much as $10,000 to $15,000 or more. Also, because the Probate process has many time delays, it would probably take Susan at least nine months to two years or more before she would actually own her mother’s home or receive the proceeds from the sale of the home. Owning her home in a living trust will avoid much of the lost time and expense of Probate;

2. If Jan becomes disabled and it becomes necessary for Susan to take over Jan’s finances to help her out, without a living trust owning Jan’s house, Susan will have to start a Conservatorship proceeding in the same Probate Court, incurring thousands of dollars of additional expense in attorneys fee, filing fees, Court Investigator’s fees, and accountant’s fees. With a living trust and a document called a Durable Power of Attorney, Susan can handle things for her mother without getting the Probate Court involved;

3. Additionally, if Jan becomes disabled and needs medical care, Susan will likely have to start the same Conservatorship proceeding as well to make medical and health care decisions for her mother, again incurring the lost time and expense noted above. An additional document called an Advance Health Care Directive can grant Susan the authority she needs to handle her mother’s medical and health care needs without getting the Probate Court involved.

In short, a comprehensive estate plan involving the use of a well-drafted living trust, Durable Power of Attorney, and Advance Health Care Directive is essential for Jan to make sure that her daughter Susan doesn’t have to spend thousands of dollars and countless weeks waiting to inherit Jan’s house. Unfortunately, self-help books and legal websites are inadequate to prepare a good, comprehensive estate plan. Jan needs the help of a qualified estate planning attorney who can ask the hard questions and craft a plan that is unique and suited to Jan’s needs.

Robert P. Bergman is a San Jose estate planning attorney and counselor who devotes his law practice exclusively to assisting individuals and couples plan for incapacity and the eventual transfer of their property to their heirs. Bob specializes in working with parents who have minor children. Bob has regular seminars on the use of wills and trusts in estate planning and issues for parents with minor children. Visit his website at www.lawbob.com where you can learn more, get on his mailing list, register for an upcoming seminar, schedule a consultation, and read other articles on estate planning topics that Bob has written. You can also reach him by e-mail at rpb@lawbob.com or telephone at (408) 247-0444. All inquiries are confidential. This column is intended to provide general information about estate planning ideas, concepts, and laws, and is not to be relied upon as rendering legal advice about your particular situation. No attorney-client relationship is created by these articles. The laws concerning estate planning, wills, trusts, and estate taxes are very complex, often state-specific, and change on a regular basis. Consult with an experienced attorney before taking any action that would affect your personal or business matters.