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Living Trusts

California estate planning attorney thoughts on handwritten (holographic) willsWhat is a Living Trust?

A Living Trust is a legal document that, just like a will, contains your instructions for what you want to happen to your assets when you die. But, unlike a will, a living trust avoids probate at death, can control all of your assets, and prevents the court from controlling your assets if you become incapacitated. Living trusts are nothing new. They have existed for hundred of years.

I have a will.  Why do I need a Living Trust?

A will may not be the best plan for you and your family, primarily because a will does not avoid probate when you die. A will must be verified by the probate court before it can be enforced.

Also, because a will can only go into effect after you die, it provides no protection if you become physically or mentally incapacitated. So the court could easily take control of your assets before you die.

The superior estate planning method is to create a revocable living trust. It avoids probate and lets you keep control of your assets while you are living – even if you become incapacitated – and after you die.

Keep Control of Assets During Life

When you set up a living trust, you you transfer your assets from your name to your trust, which you control. For example, your ownership would transfer from “Joe and Jen Doe, husband and wife” to “Joe and Jen Doe, trustees under the trust.” You keep complete control of your assets held in trust.

As trustee of your trust, you can do anything you could before before – buy/sell assets, change or cancel your trust (that’s why it’s called a “revocable” living trust). You can even file the same tax returns. Nothing changes but the names on title.

Legally, you no longer own anything. Don’t panic – you still keep control. Everything now belongs to your trust, so there is nothing for the courts to control when you die or become incapacitated. Setting a living trust is what keeps you and your family out of the courts by avoiding probate on death and court intervention on incapacity.

Prevent Court Control at incapacity

If you cannot conduct business due to mental or physical incapacity (Alzheimers, dementia, stroke, heart attack, etc)., only a court appointee can sign for you, even if you have a will. Remember, a will only goes into effect after you die.

Once the court gets involved, it usually stays involved until you recover or die. The court, not your family, controls how your assets are used to care for you. This public process can be expensive, embarrassing, time consuming and difficult to end if you recover. It does not replace probate at death, so your family may have to go through probate court twice!

What is ProbateIt may be wise for some people to strategically walk away from their under water real properties under California foreclosure real estate law

Probate is a legal process through which the court sees that, when you die, your debts are paid and your assets are distributed according to your will. If you don’t have a valid will, your assets are distributed according to state law.

What’s so Bad About Probate

  • It is expensive.  Legal/executor fees and other costs must be paid before your assets can be fully distributed to your heirs. If you own property in other states, your family could face multiple probates, each one according to the laws in that state. Because these costs can vary widely, be sure to get an estimate.
    • For instance, Probate Fees (attorney and executor) for $1million dollar estate would be approximately $46,000.00. There are also court costs.
  • It takes time. The timeline varies. It can be as short as nine months. A two year probate is not uncommon, and oftentimes, it lasts even longer.
  • No privacy. Probate is a public process, so any “interested party” can see what you owned and who you owed. The process “invites” disgruntled heirs to contest your will and can expose your family to unscrupulous solicitors.
  • Family Loses Control.  The probate process determines how much it will cost, how long it will take, and what information is made public.

Difficulty of Transferring Assets into Trust

It is very simple to create a trust and transfer your assets into trust. You need to change title on real estate (in and out of state) and other tiled assets (stocks, CD’s, bank accounts, other investments, insurance, etc). Most living trusts also include jewelry, clothes, art, furniture, and other assets that do not have titles.

It takes some times but you can do it now, or you can pay the courts and attorneys to do it for you later.  One of the benefits of a living trust is that all of your assets are brought together under one plan. Don’t delay “funding” your trust. It can only protect assets that have been transferred into it.