An Interesting Trust Study!

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130 Orange County
Probate Cases

It is important for consumers to realize that there are two main categories of trusts. First, any trust contained in a person's last will and testament can be categorized as a testamentary trust. Second, all other trusts can be categorized as living trusts.

Because a testamentary trust only becomes active when the will (containing the trust provisions) is submitted to probate court, this type of trust is seldom requested by consumers. Instead, the advertising slogan, "Buy a living trust and avoid probate court, death taxes, etc.!" has prompted thousands of Californians to purchase living trusts.

There are many kinds of living trusts, but three particular types are most commonly used. First, and by far the most popular, is the revocable trust (often called the "family" trust). Next, and primarily used to save estate taxes, is the irrevocable life insurance trust. Third, and gaining popularity, is the irrevocable charitable remainder trust, which is utilized to decrease the capital gains taxes on sales of highly appreciated assets (such as stocks).

On May 16, 2000, in Costa Mesa, the Southern California Chapter of The Arthritis Foundation hosted an informative "ESTATE PLANNING DAY" for the public. Each participant received a manual containing information from numerous attorneys and other guest lecturers. The following statements (in reference to living trusts) were among those contained in the manual:

    (1) "The process of changing titles and transferring assets to the trust is called Funding the Trust."

    (2) "A funded revocable living trust avoids conservatorship, probate and guardianships."

    (3) "No probate or Conservatorship."

    (4) "Difficult to contest (Living Trusts are not public documents like Wills)."

These statements are typical of those included in estate planning literature and heard at trust seminars.

For most consumers, the primary reason for purchasing a revocable (or "family") living trust is to avoid probate court (and the related costs, time delays and public exposure). The purchasers of irrevocable life insurance trusts and irrevocable charitable remainder trusts are also not expecting any probate court dealings. Therefore, the objective of the following study was to determine the results being experienced by such consumers. That is, are living trusts AVOIDING probate court?

The following facts pertain to the study:

    (1) John M. Maag, President of Estate Conservation, Inc., personally conducted the study on May 19th, 22nd and 23rd (2000).

    (2) The study was conducted in the Clerk of The Probate Court Office at the Lamoreaux Justice Center in Orange, California.

    (3) The 1999 Orange County Superior Court Index to Probate was the "hard copy" data source used in the study (this probate court index contains a total of 437 pages with numerous case types).

    (4) On pages 182 through 258 in the probate court index, 130 of the cases were described by the words "TRUST PETITION" (these 76 pages were randomly selected).

    (5) All of the 130 case numbers (which are listed in the box at the top of this page) were hand fed into a computer document scanner in the Clerk of The Probate Court Office.

    (6) 20 of the 130 cases were not readily available for viewing, and 6 of the 130 cases were disregarded because of duplicate contents, etc. (consequently, a total of 104 cases were used in the study).

The following results were obtained by viewing (on the computer scanner) the documents for the 104 remaining trust probate cases:

    (1) Only 2 of the 104 cases had testamentary trusts.

    (2) 3 of the 104 cases had special types of irrevocable living trusts.

    (3) 4 of the 104 cases had irrevocable life insurance living trusts.

    (4) 30 of the 104 cases had irrevocable charitable remainder living trusts.

    (5) 65 of the 104 cases had revocable (or "family") living trusts.

Also, only 15 of the 65 total cases involving revocable living trusts were submitted to probate court because of trust "funding" omissions (that is, because various assets were not transferred into the trusts before the trust holders died). And none of the 37 cases concerning the various types of irrevocable living trusts involved "funding" problems.

There are several interesting (and valuable!) facts which can be derived from the study results. First, based on the 104 subject probate cases, less than 2% of them involved testamentary trusts. Therefore, more than 98% of the cases were initiated by the trustees, successor trustees or beneficiaries of living trusts!

Next, the study results reveal the fact that only 15 of the 102 total cases involving the living trusts were caused by "funding" omissions. Because of OTHER TYPES OF PROBLEMS (which are rarely mentioned at trust seminars), 87 of the living trusts did not avoid probate court! In other words, more than 85% of the subject living trust problems were not caused by leaving assets out of the trusts!

In addition to the expenses (attorneys' fees, court costs, etc.) associated with probate, each of the 102 living trust documents is now available for public review! For many surviving spouses, this exposure is far worse than the monetary losses from probate.

When serious study is devoted to trust related probate cases, certain definite patterns can be detected. A large percentage of living trusts lack various provisions or have overall designs which make them highly vulnerable to a myriad of problems. Regardless if probate court is necessary or not, these problems always increase administrative costs!

Also, there is a long history of first-time trustees causing disasters because of their lack of trust management skills. Trusts don't run on "automatic pilot" (knowledgeable people are needed!), and untrained trustees often make costly mistakes!

"Buy a QUALITY living trust, FUND it with your assets, and manage it with KNOWLEDGE to avoid probate court, certain death taxes, etc.!" This advertising slogan is what every consumer needs to hear and realize before purchasing a living trust!

A Golden Opportunity!

The above trust study used only 76 of the total 437 pages in the 1999 Orange County probate court index. The other 361 pages contain hundreds of additional cases describing living trust problems! By purchasing a "Legacy" computer disc for $50.00 (2014 price) at the Probate Clerk's Office in Santa Ana (Central Justice Center), consumers can obtain thousands of trust court case numbers. Then, public computers can be used to read (and learn from!) these interesting cases. Are living trust AVOIDING probate court? The answer is in "black and white" at ALL of the probate offices in California!

Note: Four of the probate court cases from this study can be viewed by clicking on the colored words "Why Us" near the top of this page. Then (on the "Why Us" page), click on the red box titled "Trust Court Cases."