Santa Clarita Living Trust Attorney
WHAT IS A LIVING TRUST?
In California, a living trust is sometimes seen as mystical document. At its core, it's nothing more than an enforceable legal contract between a Settlor and Trustee. A trust is basically a legal arrangement where a person (known as the "Trustor", "Grantor" or "Settlor") transfers ownership of their assets into a trust during their lifetime. They usually maintains control over the trust and can amend or revoke it as they see fit. They often appoint themselves as the initial trustee, managing the assets in the trust. The document will typically contain "successor Trustees" who take over if the acting Trustee becomes incapacitated or passes away.
There are many reason people might create a living trust. One of the primary reasons is to avoid probate, the legal court-supervised process of administering a deceased person's estate. Unlike assets that pass through a will, assets held in a living trust typically pass directly to the beneficiaries named in the trust without the need for probate. This can save time and money and keep the distribution of assets private. You see, the living trust is like a container. This container doesn't get sick. It doesn't die. It doesn't get dimentia. It doesn't get cancer. It just keeps on going and a new Trustee steps in and manages the contents of said container (the trust assets)
Living trusts can also provide for the management of assets in case the grantor becomes incapacitated, as they can name a successor trustee to take over management of the trust in such situations.
It's essential to consult with an attorney or estate planning professional to determine if a living trust is appropriate for your specific circumstances and to ensure it is properly drafted and executed according to California law.
WHAT ARE SOME ADVANTAGES OF HAVING A LIVING TRUST?
Having a living trust in California offers several advantages:
- Avoidance of Probate: One of the primary advantages is that assets held in a living trust bypass the probate process. This means that the transfer of assets to beneficiaries can occur more quickly and with fewer expenses, as probate can be time-consuming and costly. On average, probate can cost about 5% of the gross estate (not the net). Also, in addition to attorney fees, there are fees paid to the executor and lots of filing and administrative fees.
- Privacy: Unlike the probate process, which is a matter of public record, the distribution of assets through a living trust remains private. This can be advantageous for those who value confidentiality regarding their estate matters. Since it's not private, the matter is typically public and information is easily available to curious folks and family members. It's much easier to contest since it's not private.
- Incapacity Planning: A living trust allows for the seamless management of assets in the event of the grantor's incapacity. Since the trust typically appoints a successor trustee to take over management when the grantor can no longer do so, this can prevent the need for court-appointed conservatorship, which can be expensive and invasive.
- Flexibility: Living trusts are highly customizable documents. They can be tailored to meet the specific needs and goals of the grantor and their beneficiaries. This flexibility allows for various provisions to be included, such as conditions for distributions or special instructions for certain assets.
- Asset Management: The Settlor (aka Grantor or Trustor) retains control over the assets placed in the trust during their lifetime. They can buy, sell, or otherwise manage these assets as they see fit. Also, the trust can continue to manage assets for the benefit of beneficiaries after the grantor's death, which can be particularly advantageous for minor children or beneficiaries who may need ongoing financial support.
- Reduced Estate Taxes: While estate taxes may not be a concern for most clients (very few people have estate tax problems), a well-structured living trust can help minimize estate taxes for larger estates. By utilizing various estate planning strategies within the trust, such as marital deduction or generation-skipping transfer tax planning, the grantor can potentially reduce the tax burden on their estate. Estate taxes are imposed if you have more than a certain amount of money (known as the exemption amount). That amount changes every year but is usually north of several million dollars.
These advantages make living trusts an attractive option for many individuals and families in California who wish to streamline the transfer of assets, maintain privacy, and plan for future incapacity or tax considerations. However, it's crucial to consult with a qualified estate planning attorney to determine if a living trust is suitable for your specific circumstances.
Ultimately, the choice between a living trust and a will depends on individual circumstances, including the size of the estate, the desire for privacy, the need for incapacity planning, and personal preferences regarding asset management and distribution. It's essential to consult with a qualified estate planning attorney to determine which option best meets your needs and objectives.
What Property Can Go Into a Living Trust?
A living trust, also known as a revocable trust, allows you to transfer ownership of your assets into the trust during your lifetime. Virtually any type of property can be placed into a living trust, including real estate, bank accounts, investments, vehicles, business interests, and personal belongings. By transferring assets into the trust, you retain control over them as the trustee while specifying how they should be managed and distributed both during your lifetime and after your death.
Who Should Be My Trustee?
As the creator of the living trust, you will typically serve as the initial trustee, maintaining control over the trust assets and making decisions about how they are managed. However, you'll also need to designate a successor trustee to take over management of the trust in the event of your incapacity or death. The successor trustee can be a trusted family member, friend, or professional fiduciary. It's essential to choose someone who is responsible, trustworthy, and capable of handling the responsibilities of trustee.
Does a Living Trust Avoid Estate and Probate Taxes?
One of the primary benefits of a living trust is that it can help avoid the probate process, which can be lengthy, costly, and public. Assets held in a living trust pass directly to beneficiaries outside of probate, which means they may avoid probate fees, attorney's fees, and court costs. However, it's important to note that a living trust does not necessarily provide estate tax savings. While assets transferred into the trust during your lifetime are generally not subject to probate, they are still included in your taxable estate for estate tax purposes. Proper estate planning strategies may be needed to minimize estate taxes. Keep in mind that most people don't need to worry about estate taxes unless they are worth several million dollars.
What Are the Drawbacks of a Living Trust?
While living trusts offer numerous benefits, they may not be the best option for everyone.
Some potential drawbacks include:
- Cost: Establishing a living trust typically involves upfront costs, including attorney's fees and filing fees. However, these costs may be offset by savings in probate-related expenses.
- Complexity: Creating and managing a living trust requires careful attention to detail and ongoing administrative tasks, such as funding the trust and updating beneficiary designations.
- No Tax Advantage: While a living trust can help avoid probate, it does not provide any inherent tax benefits. Additional estate planning strategies may be necessary to minimize estate and inheritance taxes.
- Limited Control: While you retain control over the trust assets as the trustee, you may lose some degree of flexibility compared to direct ownership of assets outside of the trust.
Do I Still Need a Power of Attorney?
Yes, even if you have a living trust, it's still advisable to have a durable power of attorney in place. A power of attorney allows you to appoint someone to make financial and legal decisions on your behalf if you become incapacitated and are unable to manage your affairs. While a living trust can address many aspects of incapacity planning, a power of attorney provides an additional layer of protection and flexibility.
What Is the Difference Between a Living Trust and a Will?
Both living trusts and wills are essential components of an estate plan, but they serve different purposes. A will is a legal document that specifies how your assets should be distributed after your death and appoints an executor to oversee the probate process. In contrast, a living trust allows you to transfer ownership of your assets into the trust during your lifetime, bypassing probate and providing for the management and distribution of assets both during your lifetime and after your death. While a will is subject to probate and becomes a matter of public record, the terms of a living trust remain private.
How Do I Create a Living Trust?
Creating a living trust typically involves the following steps:
- Consultation: Meet with an experienced estate planning attorney to discuss your goals and objectives.
- Drafting: Your attorney will draft the necessary legal documents, including the trust agreement and any related documents, such as a pour-over will and powers of attorney.
- Funding: Transfer ownership of your assets into the trust by re-titling them in the name of the trust or designating the trust as the beneficiary.
- Execution: Sign the trust agreement in the presence of a notary public, and ensure that it complies with all legal requirements.
- Administration: Once the trust is established, you'll need to manage the trust assets, keep accurate records, and update the trust as needed over time.
Should I Also Have a Will?
While a living trust can serve as the primary estate planning document for many individuals, it's still advisable to have a will as a backup or "pour-over" document. A pour-over will ensures that any assets not included in the trust at the time of your death are transferred into the trust and distributed according to its terms. Additionally, a will allows you to appoint guardians for minor children and specify your funeral and burial wishes. Having both a living trust and a will can provide comprehensive coverage for your estate planning needs.
