Living Trusts - What You Need To Know
Why should you know all about living trusts? Whether we like it or not, we all have to face the fact that at some point in our lives, we will pass away. As parents, grandparents, matriarchs, patriarchs, and breadwinners of our families, we need to make sure that we have a plan for the future of our family when that time comes.
However, this is something we all dread and put off. No one wants to think and talk about dying. And worse yet, estate plans, wills, etc, usually involve working with a lawyer, and we pretty much all dread this as well, because it is costly and hard to understand what they are saying or put in documents.
Well, I am here to say, I am different. But before we get into that - let’s talk about living trusts, what they are, and why you need one- even if you don’t think you do.
And, more importantly, how a living trust as part of an estate plan can help your family.
The Difference Between An Estate Plan, Will, And Living Trust
What is Estate Planning?
Situationally speaking, if a person dies within the state of California with assets that are at least worth $150,000, the family is eligible to inherit the assets of the person whether that person has a will or not.
However, the majority of the time, even if there is a will, these assets, referred to as the estate will have to go through a probate process for the asset distribution. This process usually is a minimum of eight months and can be even longer. This delays the asset distribution and might be quite costly.
This is where a living trust comes in. Assets in a living trust do not have to go through the probate process. So, let’s look at a living trust in more detail to understand how they work, and what types of assets can be placed in a trust.
What Is A Living Trust
A living trust is a written legal document through which your assets are placed into a trust for your benefit during your lifetime and then transferred to designated beneficiaries at your death by your chosen representative, called a "successor trustee."
A living trust is a trust that is created during your lifetime. In other words, while you are still alive, you transfer title to your property from your name to that of the trustee of the living trust (which is usually you).
When you execute the living trust declaration and then properly fund the trust (with your assets), what you have done is that you have created a legal entity separate and apart from yourself that is now fully functioning doing whatever it is that you told it to do.
In other words, when you fund your trust you change the name of the owner of your assets from you individually to you as Trustee of your trust. So at that time, you are still in complete control of your assets because you are the Trustee of the trust and whoever is Trustee is who manages the assets that the trust owns.
You are still the BENEFICIAL owner of your assets and the assets are yours to do with whatever you please, but you (as an individual) are no longer the “LEGAL” owner of record.
To explain further, now you have your trust and are buying and selling things just like before except that now instead of signing the contract as “your name”, you now sign everything as “your name, Trustee”.
Legally speaking, you, as an individual, now own nothing, and your trust owns everything. So when you die, since you don’t own anything, there is nothing to go into Probate.
When you originally set up your trust, you made yourself the trustee who controls and manages the assets of the trust. At that time, you also choose whom you wanted to take over for you when you can no longer manage the trust.
That person is called a Successor Trustee and once you can no longer manage the trust, the Successor Trustee has the same legal powers that you did. This means they can sign any documents necessary to carry out the management and disposition of your assets in the manner that you specified in the original trust documents.
The successor trustee follows your specific directives on what to do. However, it is all completely private, requires no court supervision, and can be administered much more quickly.
Types of Assets to Include in A Living Trust
You don’t have to place your car in a living trust unless it is very valuable and will increase your estate significantly. You may discuss this arrangement with your attorney in cases of car accidents and your vehicle is included in a trust.
2. IRAs and Other Retirement Plans That Are Tax-Deferred
It is best to retain the ownership of your retirement accounts under your name and make the trust as a beneficiary instead if this is where you prefer your funds to go. Another option you may consider is leaving the funds to your family i.e. spouse, children, grandchildren, etc.
Why Choose A Living Trust
Compared to all the tedious and emotionally-exhausting bureaucratic processes that the family has to go through when a loved one dies, having a living trust is one of the most optimal and stress-free choices when it comes to forming a plan for the future of the family. Here are some of the advantages of a living trust:
Living trusts avoid probate. By placing your property in a living trust, you can avoid probate because the successor trustee distributes assets according to the trust creator's instructions without court intervention. This can mean a faster distribution to your heirs—shortening the time frame from months or years to just weeks—without any additional expenses to the estate.
You may be able to save money. As described above, a living trust can save money by avoiding probate expenses at your death.
Living trusts are also likely to hold up better than a will in the event that someone comes forward to contest the distribution, which can also save your estate money.
Living trusts provide you with security and privacy. In contrast to other legal documents like a will, a living trust is not made public. This means that your assets and your estate can be distributed in private without the knowledge of the public. When it comes to wills, transactions and distributions are made public through public records.
Your successor can schedule your affairs without judicial intervention.
In case the creator of the trust is incapacitated or passes away, it has instructions to let a successor trustee gain initiative. Typically, the deceased will be the original trustee, but once he or she passes away, or is incapacitated, then the power and responsibility will transfer to the person or the trustees (if there’s more than one) named as successor trustee(s) and in whom the original creator designated to carry out his or her wishes.
A Living Trust Provides Certainty and Peace of Mind. When drawn up correctly, a living trust sets out a clear plan to deal with all of your assets. This can help prevent you from unintentionally disinheriting someone, can help you provide care for a loved one with special needs into the future, and even protect assets from certain people.
All of these things can give you peace of mind now, knowing that your estate will be handled exactly as you wish. The existence of the trust can also provide certainty and comfort to your loved ones during an already stressful time because you've laid everything out for them.
Living Trusts - Contact Us Now
My name is Andrea Aston and I have been a practicing attorney since 1997. I started out learning about the legal system from the ground up. I first started out as an assistant before I worked my way up to becoming an estate-planning attorney. My areas of practice include trust and estate planning, as well as asset protection, business formation, trust administration, and probate.
I pride myself with following a strong sense of duty to my clients while also treating them with professionalism, care, compassion, and respect. I am a long-time specialist when it comes to trust and estate planning and want to take the stress out of end-of-life planning.
Tags: living trust, revocable trust, avoiding probate, living trust advantages