Discover the Benefits of a Living Trust.
Our experienced estate-planning attorneys help clients develop a personalized living trust that keeps them in control of their estate, safeguards their financial legacy, and provides a number of important advantages:
- Avoiding probate. Without a living trust (unless all property is left to the surviving spouse), an estate will go through an expensive, time-consuming, and public probate process.
- Privacy. Probate court will publicly expose the details of one’s estate and financial relationships. A living trust is administered privately by a chosen trustee and his or her attorney.
- Rapid resolution. Probate can take one year or more to settle a modest-sized estate. Depending on the size and complexity of the estate, a living trust can be administered in as little as a few weeks.
- Lower cost. Statutory fees for probating a $1 million estate are $23,000 to the executor and $23,000 to the attorney. These fees increase with the estate value or if substantial real estate is involved. In comparison, fees for administering a living trust after death are typically $5,000–$20,000.
- Control of assets. Trustees do not lose any rights or control over their assets as long as they remain trustee. If another person (or professional) is appointed to manage the estate, he or she must act according to the trust instrument, usually under fiduciary principles.
- Control over disposition of property. Successor trustees can be instructed to set up successor trusts to administer an estate for the benefit of heirs and favored charities, on flexible or fixed terms that are determined in advance.
- Peace of mind. Surviving spouses will already have an estate plan in place.
- Flexibility. A living trust can be revised at any point during a client’s lifetime to reflect his or her wishes.
- No increase in taxes or change in filing status. The IRS considers a taxpayer and his or her living trust to be the same person, so all income and expenses for the trust are reported on a regular tax return with no additional paperwork.
- No annual administration costs. Only upon death, when the trust becomes irrevocable, will expenses be incurred to settle the estate.
- A pre-appointed trustee to manage property in the case of incapacitation. Clients can pre-designate someone to take care of them and their estate according to explicit instructions if they are incapacitated by injury or illness.
Our experienced attorneys will take the time to discuss all the details and benefits of creating a living trust, including:
Keeping Control of Your Assets
A living trust is a vehicle for holding and managing property during one’s life and for distributing it upon death. Living trusts are popular because property put into a living trust avoids the often long and expensive probate process, especially for estates over $150,000 in value (in California).
When you set up a living trust, you become the trustee over all property transferred into the trust. As trustee, you maintain full control over every aspect of the property during your lifetime. You pay taxes on the income in your living trust under your social security number, at the same tax rates and with the same tax forms that you use now. You can change or revoke the trust (or your portion of the trust) at any time. You can sell or transfer the property to anyone you wish. You do not breach your mortgage or loan agreement by transferring your home into a living trust; nor do you pay more in real estate taxes.
Protecting Your Financial Legacy
A living trust is a great way to transfer a family residence to subsequent generations without going through the probate courts. Yes, there are other, less-costly alternatives to a living trust that, under certain circumstances, can achieve similar results. But if you want the convenience of a smooth, private, and organized distribution of your estate outside of the probate courts, the advantages of a living trust are truly remarkable. It provides a means for protecting and preserving your family financial legacy in the years to come and a built-in mechanism to minimize estate and generation-skipping taxes.
Be advised, there is very limited creditor protection inside a living trust. You cannot avoid bank foreclosure or debt collection by transferring property into a living trust. And a living trust does not protect your assets in any way from your creditors. However, a properly designed trust can shield those assets from the creditors of your surviving heirs.
Setting up Your Living Trust
A living trust consists of three basic steps: a declaration of the terms of the trust, a transfer of assets, and an acceptance of fiduciary responsibility by the trustee. All three steps can be accomplished in one trust declaration, signed and notarized by the trustees. The trust declaration and accompanying transfer documents should be prepared by an experienced attorney after a thorough client interview in which the various options are explained and explored.
Updating Your Living Trust
Your living trust should be updated from time to time as your life and family circumstances change. Amending a living trust involves preparing a trust amendment document-signed and notarized either by the original party, a person with durable power of attorney, or a conservator with court approval. Amendments should be prepared by an experienced attorney familiar with the changing laws and regulations.
Funding Your Living Trust
All living trust property is held in the name of the trustee(s). Jewelry, furnishings, and other personal property in your residence is transferred into the living trust simply by signing the trust document declaring yourself “trustee” over this property. Real property must be transferred by means of a recorded deed naming the trustee as the new owner. Strange as it may seem, the simple name change from “John Smith” to “John Smith, trustee of the John Smith Living Trust” has important legal significance that could save an estate enormous time and expense.
Frequently Asked Questions
- Why is a living trust so important?
- What does an estate plan consist of?
- When should I revisit my estate plan from many years ago?