Understanding Living Trusts Basics

The many benefits that you will experience with a living trust should not be ignored or put off; they are too valuable to you and to your beneficiaries.

Unlocking the Power of Living Trusts

Revocable Living Trusts: A Comprehensive Guide

Article Contents

The Benefits:

Control your assets with a Living Trust: Flexible, private, and tax-efficient estate planning at your fingertips!

A revocable living trust is created during your lifetime and is funded with most or all your assets by simply re-titling the assets to yourself as trustee.  A revocable living trust is living in the sense that it takes effect immediately. You continue to enjoy all the present benefits of your assets without any changes in your ability to control them. A revocable living trust is revocable during your lifetime, which means that its terms are changeable, and assets in the trust can be re-transferred to your name if desired without adverse tax consequences.

A revocable living trust is a private agreement where the distribution of assets under the terms of the trust is not subject to publicity given to wills in probate proceedings. The complete flexibility of a revocable living trust means that one can be drafted to suit your individual needs and family situation.

When you create a revocable living trust, you can act as your own trustee, so there are no management fees or loss of control. You can change or modify the trust terms at any time, change beneficiaries, or add or delete assets held by the trust without tax consequences.

Simple Trust Management

A revocable living trust does not complicate the management of your assets. While protecting your property within a revocable living trust, you can do whatever you can now with your assets and property. You can buy, sell, borrow, make gifts, etc. With a revocable living trust, you retain control over all your property and assets during your lifetime, and you determine the distribution of your estate after your death. Since a revocable living trust is revocable, it has no
income tax consequences during your lifetime; no separate tax return is even filed, and all trust income is reported under your social security number.

Additionally, with a revocable living trust, you are also appointing someone else (a professional, a trusted friend, or a family member) to manage the assets in your trust for your benefit in the event of your incapacity (e.g., Alzheimer’s, a stroke, an accident, etc.) and, because the assets are in a trust, no court-administered conservatorship will be required. Under a living trust, you have the successor trustee of your choice, ready to step in and take over your affairs until you recover, or for the remainder of your lifetime.

Minimize or Eleminate Estate Taxes:

Effective Strategies for Wealth Preservation

For married couples, the estate tax liability that would otherwise be due at the death of the survivor can be greatly reduced or completely eliminated by proper planning. This is particularly important in states that impose their own estate tax, and do not provide the “portability” currently available under federal law. This planning can be accomplished in a living trust (although it can also be accomplished through wills, this would require a separate probate at the death of each spouse). 

How much can be saved depends on the size of the estate and the estate tax laws at the time of the surviving spouse’s death. At the same time, the trust can also ensure that the estate of the first spouse to die will ultimately go to his or her children (or heirs), even though the surviving spouse is provided the lifetime economic benefit of all assets and has complete management and control over the entire trust.

Bypass Probate Delays and Expenses:

Streamlined Solutions for Estate Planning Success

A living trust allows you to AVOID PROBATE.

Probate is a court procedure that is required if your assets are distributed without a will,
under a simple will or under a will with a testamentary trust. In court probate proceedings, the
court changes the legal ownership of your property when you die. During probate the court must
determine the validity of your will and supervise the payment of all your debts and taxes as well
as the distribution of your probate estate to the people you name in your will. This process may
take six months to a year or longer and is a matter of public record.

Assets that you leave to your heirs by a will goes through probate, but property passed
through a living trust does not. With a living trust you can avoid the delay in the distribution of
your estate entirely; the assets of your estate can be distributed to your designated beneficiaries
immediately upon your death.

Seize Control: Eliminate Guardianship Challenges and Gain Autonomy

With a trust, minor beneficiaries can have a trustee manage and invest the trust funds, free of the costs and restrictions that arise when a court must appoint and supervise a guardian of the property until the beneficiary comes of age. 

Additionally, with a trust, you can continue the management of a beneficiary’s assets to whatever age you desire, certainly, beyond age 18 (the age at which ALL guardianships must terminate). The management of a beneficiary’s assets can include disbursement of assets and/or funds in increments, according to the directions you put in the trust (e.g., 1/3 distribution at age 25, 1/3 distribution at age 30, and the balance at age 35). Of course, the trustee can use any or all of the trust principal for the benefit of the beneficiary during this period.

Furthermore, if there is any question about the management skills or capacity of the beneficiary, or to ensure that your estate does not go to a son-in-law or a daughter-in-law, the trust can continue for the child’s lifetime and then pass to the child’s issue at his or her death. This will also keep your assets in your family rather than having them subjected to attachment by the state for medical treatment. While meeting the beneficiary’s needs as you determine them, you can safeguard the assets from any potential estate dispersal. With a living trust, these trusts are already in place at the time of your death and will begin immediately for the benefit and protection of your beneficiaries.

Avoid Probate Costs

When property passes through probate, you incur executor’s fees, attorney’s fees, and court costs, all of which can be quite substantial depending on the size of your estate. There may also be additional extraordinary expenses of probate (i.e., tax returns, life insurance, etc.) set by state law and are usually based on the size of the estate being probated rather than on the amount of time and work involved.

All of these fees and expenses can significantly reduce the estate to be distributed to your beneficiaries. With a living trust, these fees and costs can be greatly reduced. Additionally, your assets are transferred immediately to your designated beneficiaries outside the court system and in accordance with the directions specified by you in the trust agreement. The costs of administering a living trust are minimal and are generally based on the actual time and/or services required.

Create a “Pour-Over” Provision

With a living trust, you should create a “pour-over” provision in your will that adds other assets to the trust at your death. As a result, one trustee will be in charge of managing all of your assets under one trust agreement.

Protect Your Estate From Attack

When an estate goes through probate, the court freezes the assets and asks anyone to come forward and contest the will if they please. Creditors are invited to come forward with their claims, and heirs may challenge certain bequests under the will if they are disappointed because they received less than they had anticipated.

With a living trust, however, assets are not frozen and can be distributed to your designated beneficiaries immediately without the highly technical requirements of probate disposition.

The trusts assets can also be protected from judgment creditor’s claims and/or lawsuits filed against you or your beneficiaries. In addition, you can shield a distribution to a beneficiary from the beneficiary’s creditors, alimony attachments, Medi-Aid spenddown requirements, and even the beneficiary themselves.

Continuity of Management

Creating a living trust can bring needed attention to your assets. A living trust permits you and/or your appointed trustee to take timely advantage of investment opportunities and, conversely, to dispose of investments no longer desirable. With a living trust, you set up the machinery to provide continuity of management at death and the immediate shift of income from yourself to your beneficiaries at your death.

Avoid multiple probates of real property located in other states.

If you own real property in another state, that property will have to go through probate in that state (known as an “ancillary probate”), in addition to a probate in California of residency. With a living trust, you can avoid these additional probate proceedings and have that property pass to your beneficiaries immediately according to the terms of your trust.

The many benefits that you will experience with a living trust should not be ignored or put off; they are too valuable to you and to your beneficiaries. Explore our complete Living Trust services.

Living Trust Service Offerings

CA Paralegal Living Trust Services

Summary of Estate Planning Documents, included by CA Paralegal Services.

Your revocable living trust constitutes an agreement between the “Trustor” and the “Trustee,” wherein the Trustor, being the individual establishing the trust, entrusts assets for the benefit of the designated beneficiary. The Trustee assumes the responsibility of managing the trust. To initiate the trust, the Trustor transfers assets to the Trustee for inclusion in the trust’s holdings. As the creator of the trust, you assume the role of both Trustor and initial Trustee. The trust stipulates that during your lifetime, you exclusively serve as the beneficiary. These provisions are delineated within the Recitals and Article I of the trust.

Under specific and exceedingly restricted circumstances, this Declaration might offer some assistance subsequent to your demise in the event you overlooked transferring an asset to your Trust; its sole purpose is to affirm your intention to encompass all your assets within the Trust. However, it is imperative to note that this Declaration does not supplant the necessity of transferring (“titling”) your assets into the name of your Trust to prevent potential probate proceedings for those assets outside the Trust.

The Certification affirms the existence of your Trust and your unrestricted authority as Trustee to manage any account or asset held within the Trust. Serving as a concise rendition of the Trust Agreement, the Certification furnishes all necessary information to third parties without delving into the confidential dispositive provisions, which should remain undisclosed.

This Assignment serves as the means of transferring all your tangible personal property assets, typically lacking a title or ownership document, to your Trust, thereby circumventing the need or potential for probating these assets. Additionally, this Assignment facilitates the transfer of your digital assets and/or rights, encompassing “social media,” online accounts, and/or email accounts, to the Trust.

This form is discretionary and can be completed at your discretion (it is advisable to retain copies for future reference). Here, you have the opportunity to allocate specific items of your tangible personal property (referred to as your “possessions”) to designated individuals upon your demise. For instance, ” bequeath my diamond engagement ring to my daughter “SALLY”; I bequeath my stamp collection to my grandson AARON SMITH”; and so forth. However, it is important to note that this form should not be utilized for designating cash gifts or specific trust assets. You are free to augment or modify this form as frequently as desired without the need to formally amend your trust or execute a codicil to your Will; in the event of additions or deletions, it is recommended to date and initial the changes (or complete a new form and discard the previous one).

Your Will is commonly known as a “pour-over” will. According to its provisions, any assets under your ownership that have not previously been transferred into your Trust will be integrated into the Trust upon your demise (though this may necessitate probate administration). The objective is to ensure that all your assets, regardless of their inclusion in the Trust, are distributed in accordance with the dispositive plan outlined in the Trust.

This document represents your “general power of attorney,” primarily designed to authorize your designated agent to manage any assets outside the Trust in the event of your incapacity. It is important to note that this document grants your agent extensive authority to handle, sell,transfer, and encumber your real and personal property. Should you have any reservations about conferring such wide-ranging powers, please contact me promptly.

The Advance Directive grants authority to your designated Agents to make medical decisions, sign consents and/or releases with hospitals and/or doctors, in compliance with the new Federal Laws (referred to as “HIPAA”) concerning releases. Additionally, it serves as your “living will” for end-of-life decisions.

The HIPAA Authorization and Waiver is an independent document designed to authorize your healthcare providers to disclose your typically confidential medical information to the individuals you’ve designated to act on your behalf in case of incapacity, as well as any other individuals you wish to grant such access.

These instructions afford you the chance to specify your preferences for the handling of your remains (such as cremation or burial), to outline any pre-existing arrangements, and to designate individuals to execute your wishes.