Overview a cost of setting up a trust and related issues.
In this page we intended to provide a comprehensive overview of prices for different options for setting up a trust and issues related to the cost of setting up a trust.
When we are looking into the cost of setting up a trust, we should compare that to the cost of probate.
The cost of setting up a trust depends on which type of services you choose. We explained the options in detail in a video on the web page titled: “what is estate planning and what are your options?”
Reviewing the market.
The cost of setting up a trust online programs:
$249 basic (LegalZoom)
The cost of setting up a trust done by LDAs (Legal Document Assistants)
The cost of setting up a trust by LDA is cheaper than the cost of setting up a trust by an attorney. It varies from $700 to $1000 for individuals and $9000 to $1,300 for married couples.
You can read an article about the Pros and Cons using LDAs and paralegal services at:
If your trust involves complex issues like planning for a special needs child, the cost of setting up a trust made by an attorney can range from $1100 to $2,800 for individuals and $1,600 to $4000 for married couples.
The cost of setting up trust done either by paralegal and by an attorney may include not only trust itself, but following additional components:
- The trust itself
- Advanced Health Care Directives
- Burial Instructions
- General Power of Attorney
- Pour-over will
Also when you are considering the cost of setting up a trust using an attorney be sure to ask your attorney for general info regarding administration of the trust. Be sure you understand that: Most successor trustees require professional help to carry out their fiduciary responsibilities. Even if a fully funded revocable trust is in place, trust administration requires structure and formality, with some accounting fees.
COST TO SET UP A TRUST AND GROUNDS FOR SETTING ASIDE TRUSTS
The reason why the cost of setting up a trust done by attorney is higher than all other options mentioned above is that attorney is taking hiigh responsibility to be sure that when you passes away your trust would not be set aside.
An attack on a trust often involve the issue of whether the settlor had the proper mental capacity at the time the trust was executed.
In many cases, the court applies the standard for testamentary capacity to trusts. Testamentary Capacity is established in Prob Code 6100. The main provisions are the testator must be at least 18 years of age and of sound mind. More specifically, a person is not mentally competent if he/she does not
(1) understand the nature of the act, or
(2) understand and recollect the nature and situation of his or her property,or
(3) remember and understand his or her relations to living descendants, spouse, parents, and others whose interests are affected by the will; or
(4) suffers from a mental disorder with symptoms including delusions or hallucinations that result in his or her devising property in a way that, except for the delusions or hallucinations, he or she would not have done.
It is important to understand that the for most people the primary reason to create a trust is to avoid probate (an expensive and time-consuming court proceeding.)
If you are interested in knowing the specific costs of probate and why it is so expensive; read on.
The reason for high Cost of probate is called “statutory probate attorney fees”.
For most legal services you pay an attorney by the hour or on a contingency basis, but for some legal services, the attorney fee is set by state statute or federal statute. In California if you hire an attorney to handle a probaAte case, you don’t pay the attorney by the hour, instead you pay fees set by state statute.
Under Cal. Probate ARTICLE 2 , Code § § 10810 ,
for ordinary services the attorney fees for a personal representative are as follows:
- 4% of the 1st $100K of the gross value of the probate estate
- 3% of the next $100K of the gross value of the probate estate
- 2% of the next $800,000 of the gross value of the probate estate
- 1% of the next $9 million of the gross value of the probate estate
- 0.5% of the next $15 million of the gross value of the probate estate
- A reasonable amount for any amount higher than $25 million of the gross value of the probate estate, it can be determined by the court
The value of the estate is the total of the appraisal of property, gains over the appraisal value on sales and receipts less than losses from the appraisal value on sales
Under Cal. Probate ARTICLE 2 , Code § § 10811, in addition to the compensation provided by the above Section, the court may allow additional compensation for extraordinary services by the attorney in an amount the court determines is reasonable.
In addition to the attorney’s compensation the executor is entitled to receive the same amount of money as a statutory attorney’s fees appraisal fees and publication fees which will usually cost in average $3K.
As an example of real numbers – to probate $400,000 estate will costs around $22,000 and $800,000 estate will cost around $38,000.
In discussing the topic “Cost of setting up a trust vs. cost of probate”, we should address that there are some positive sides regarding your money saving in having probate which must be placed into consideration.
If you have many creditors you might want to know that there is a much stricter timeline for the creditors to assert their claims on your estate during probate than during administering your trust.
The executor of your estate shall give notice to your creditors and give them the opportunity to file claims to receive payment of money you owe before closing estate. If creditors receive notice by mail, they have until the later of four months from the time the estate was opened, or 60 days from the date of the notice to file the claim.
After the creditors file claims against an estate, the executor will either pay the debt or dispute it in whole or in part. If the executor provides notice to the creditors that the estate is disputing the debt, the creditor should file suit within 90 days of the rejection.
Another advantage is if family and friends do not agree how the estate should be distributed and there is disagreement about whether or not the deceased was of sound mind when she or he made a decision in their will, probate court gives an opportunity to settle disagreements.
The last comment regarding the cost of setting up a trust is that when are setting up a revocable living trust just to avoid planing your real property into probate you might consider some other alternatives of probate avoidance. For example, transfer on death deed or other forms of deed, which are less expensive than trust. However, if you are concern about your special needs child future or assets protection from potential law suit and creditors, the cost of setting up a trust should play a very little role in a big picture of prospective benefit or potential lost.
Call today 714-390-3766 to discuss your options.