Living Trust

What is a living trust?

A living trust—also called an inter vivos trust or revocable trust—is a legal entity that you create to hold property. Like a will, it contains instructions about how to distribute the property when you die.

Once you transfer property into the trust, the trust owns the property.

Do I control the property after it is transferred to the trust?

Yes. When you create the trust, you name yourself as the initial trustee with power to control the trust property just as you did when it was owned in your name. You can sell real property, spend money, or do anything you did with your wealth before you created the trust. You also personally pay income taxes on any money the property earns and you can deduct mortgage interest from real property held in the trust.

What happens to the trust and the trust property after I die?

After your death, the trust property goes to the people or entities you’ve named as beneficiaries without triggering probate.

Once you die, the trust cannot be changed. The successor trustee takes control of the trust and sees to it that the property is distributed to the trust’s named beneficiaries, your heirs.

After distribution of the property, the trust ends.

If I have a will, do I need a living trust?

Yes. There are two reasons.

First, for California estates worth more than $100,000, living trusts generally save heirs money and time. Without a living trust, estate property passes through an expensive and time consuming process called probate. Probate fees are paid out of the estate.

Second, a living trust can help your family avoid the need to apply to a court for a conservatorship should you become incapacitated. The living trust sets up a successor trustee to take control of your property for your benefit without court intervention if you become unable to manage the property yourself.

What is probate?

Probate is a court proceeding, the purpose of which is to make sure a will is valid. The will is filed with the probate court, an inventory is made of the deceased person’s property, debts and taxes are paid, the will is proved valid, and the remaining assets are distributed.

Why do I want to avoid probate?

The problems with probate are that it is (1) expensive and (2) time consuming.

Probate Expenses. In most cases, the executor of a will hires a probate lawyer because the process involves complicated paperwork required by law. In California, a probate lawyer’s maximum fees are set by statute. (California Probate Code, Section 10810). A court may order higher fees for complicated cases. In general, the statutory fees are four percent of the first $100,000, two percent of the next $100,000, three percent of the next $100,000, two percent of the next $800,000, one percent of the next $900,000, and one half a percent of the next $15 million. For the amount of an estate that exceeds $25 million, the court determines the fee.

In California, the executor of the will generally is entitled to the same fees. But often an executor will decline payment, either because he or she is a family member or friend who would feel uncomfortable accepting the fee or because of adverse tax consequences.

For determining lawyer and executor fees, the value of the estate is determined by the inventory for the estate. The inventory does not include debts. So if a house is appraised at $500,000, that is the value counted in the inventory, regardless of the amount due on the mortgage.

So, for example, the statutory attorney's fees for an estate with a house valued at $500,000 and nothing else would be $13,000. This would be true even if equity in the house were far less than $500,000.

Probate also involves court costs. For example, the fee for the initial court petition is $395 and the fee for the final petition for distribution is also $395.

Probate Time. With a straightforward case, probate usually takes at least nine months before property may be distributed to heirs. It usually takes six to eight weeks from filing the opening petition until the court appoints and executor or administrator. Even if the will nominates an executor, the court must formally appoint that person before he or she may act on behalf of the estate. The executor then gives creditors four months to file claims against the estate. Finally, the court then takes about six to eight weeks to issue an order of distribution.

If the case is less straightforward, if mistakes are made, or if the executor does not act as quickly as possible, probate will take longer. Some reasons for delay include an improperly filed original petition, a dispute about who should serve as executor or personal representative, inability to quickly sell real estate, a dispute about distribution of assets, the need to pay estate taxes, or a relatively large number of assets the process.

Does joint ownership avoid probate?

Not ultimately. It just postpones it.

When the first joint owner dies, full ownership does transfer to the surviving owner without probate. But if the surviving owner then dies without adding a new joint owner, or if both owners die at the same time, the asset must be probated.

There are other problems with joint ownership as well. When you have a co-owner, you can be named in a lawsuit along with your joint owner. You can also lose the asset to your joint owner's creditor. And, from an estate planning perspective, since a will does not control most jointly owned assets, you could inadvertently disinherit your family from the asset.

Healthy diet can help you achieving longer health benefits with no longer use of medicines that may not be able to offer cialis 100mg pills the same quality. Very few supplements https://www.unica-web.com/archive/2000/2000.html cheap viagra have shown positive results. These are just a few of the many advantages of taking this ED generic viagra cheapest drug. Since the time desktop computers have been released in the market before the release of this Kamagra drug but many men prefer purchase cialis online natural options.

What happens if I become incapacitated and I don't have a living trust (or power of attorney)?

If you can't manage your finances because of mental or physical incapacity only a court appointee can sign for you (unless, of course, you have a living trust or power of attorney). A will does not address this problem because it only goes into effect after you die.

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

What happens if I become incapacitated and I have a living trust?

If you and your partner or spouse are co-trustees, either can act and have instant control if one becomes incapacitated or dies. If something happens to both of you, or if you are the only trustee, the successor trustee you selected will take over. If a corporate trustee is already your trustee or co-trustee, the corporate trustee will continue to manage your trust for you.

What is a corporate trustee and why would I consider one?

Corporate trustees are usually a bank or trust company, and they are experienced investment managers. Like any trustee, they owe a fiduciary duty to act in the best interests of the trust's beneficiaries. The are objective and reliable, and their fees are usually reasonable. Some people decide to use a corporate trustee to act as trustee or co-trustee while they are living, especially if they don't have the time, ability, or desire to manage their trusts, or if one or both spouses are ill.

Can I share a living trust with my spouse or partner?

Yes. Two people, married or not, may share one living trust. This is particularly desirable for couples who own property together. For such couples, separate living trusts would require splitting the jointly owned property, which can be quite difficult.