By Jeremy Liem
For most individuals, a Trust has considerable benefits over a Will, or no estate plan at all. This is because a Trust avoids the probate process which can result in substantial legal fees. Generally, legal fees to probate an estate are set at a certain percentage of the overall value of the estate. As of the writing of this article, the statutory fees are as follows:
4% of the 1st $100,000
3% of the next $100,000.
2% of the next $800,000.
1% of the next $9,000,000.
This fee structure means that an estate worth $500,000 will incur $13,000 in probate fees. It doesn't matter if there is a mortgage on a home, or other outstanding loans. Statutory fees are based on the total value of the estate without accounting for debts.
On the contrary, the cost of preparing a Trust will be significantly less than those statutory fees. Depending on the size of the estate, preparing a Trust may cost less than one tenth of the statutory probate fees.
For high-net-worth couples that expect to own over $5,450,000 in assets with they pass away, perparing a Trust also helps to avoid estate taxes by taking advantage of each individual's $5.45 million estate tax exemption, for a total of $10,900,000 that is exempt from estate taxes.
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