East Bay Market Update - May 2023 | Blog | The Calia Group [Active]

Is Your House in a Living Trust?

Many of us postpone putting our houses in a trust because a) we are busy, b) we do not like to think about death and dying, and c) we do not fully understand the consequences of not having our assets in a living trust.

California is a probate state. The probate process is lengthy, expensive, and complex; especially if there are disputes among beneficiaries. By placing our homes in trust, we can control the distribution of funds from our estate, and ensure that our estate does not unnecessarily spend money on attorneys, court fees, appraisal fees, and other professional fees which can greatly reduce the estate’s overall value.

If an Estate Goes Through Probate, Here Is the Schedule of Attorney Fees for “Ordinary Services:”

Four percent on the first $100,000
Three percent on the next $100,000
Two percent on the next $800,000
One percent on the next $9,000,000
One-half of one percent on the next $15,000,000
Above $25,000,000, a reasonable amount will be determined by the court

(Source: Probate Code, https://leginfo.legislature.ca.gov/)

We calculated the base amount an estate would likely pay in probate attorney fees if we had a $1,000,000 estate and a $5,000,000 estate:

1,000,000 estate would pay $23,000
5,000,000 estate would pay $63,000

Yet, the cost to the estate goes well beyond the basic probate attorney fees. The cost also includes months of lost time dealing with the probate court system, appraisals, and professional service fees that may be required.

Further, an estate may be assigned a real estate agent who is more inclined to turn properties quickly than ensure that heirs receive the maximum sales price. This could lead to a loss of hundreds of thousands of dollars for the estate.

The cost of putting property and assets into a revocable trust typically runs from $2,000 to $4,000. The process often takes 2 - 4 weeks and includes 2 - 3 attorney meetings.

“Death is the ultimate surprise, but it shouldn’t be a surprise that it’s a surprise.” - Michael Altshuler

“The importance of holding assets, including real property, in a trust, is significant,” says Kenneth Hecht, an attorney with Knox Ricksen, LLP. “In addition to the savings in avoiding the time, expense, and inconvenience of probate proceedings, a revocable estate planning trust allows the trustee to manage, and if needed, sell the trust assets both during the lives of, and upon the death of, the creators (or Grantors) without court involvement.”

There was notably less housing inventory sold in our market this year than last year. Our team looked at the number of properties sold in Berkeley, Oakland, and Piedmont in April, year over year, and found sales to be down as much as 67%.