Revocable Living Trusts are used by individuals and couples in California to avoid having their estates subject to probate. In California, if your estate’s market value is over $150,000, it will most likely be subject to probate. A Revocable Living Trust can help you avoid probate.
What is a Living Trust?
Revocable Living Trusts allow you to retain full control over trust property while you are still alive. After your death, the property in the trust is transferred quickly to your beneficiaries without the complications of probate. Revocable Living Trusts are very flexible estate planning devices because they allow you to transfer some or all of your property by trust. Also, Revocable Living Trusts are not made public upon your death, unlike a will that becomes part of the public record after going through probate. A living trust is called “living” because you make it while you are alive. A revocable trust is one that you can revoke (cancel) or change at any time, for any reason, before you die. Because you may change it at any time, you effectively own all the property you have transferred to your Revocable Living Trust and can do what you want with that property, including sell it, spend it or give it away.
You create a living trust by transferring assets to be held for your benefit or the benefit of your loved ones during your lifetime. A trust can either be revocable or irrevocable, depending on your needs. The living trust can be created with a legal document that includes instructions setting forth to whom you want to leave your assets, in addition to who will manage your assets and how they will be managed if you become unable to manage them. A living trust allows you to maintain control of your assets while making sure the assets are managed according to your wishes upon your death or incapacity.
When you establish a living trust, the next step will involve transferring assets into the trust, such as real property and personal property. After the transfer, these assets still remain in your control. Furthermore, transferring assets to your living trust will not trigger federal gift, estate, or income tax consequences because, although the assets are held in the name of you as the trustee of your living trust, you are still considered the owner for tax purposes.
What is the Purpose of a Living Trust?
The revocable living trust is typically used instead of a will. The primary reason to have a trust is to avoid or minimize court costs and legal fees associated with probate and estate administration. Probate fees can range anywhere from 3%-7% of your total estate. The assets placed in the living trust are not subject to probate or estate administration.
What Happens When I Die?
When you die your co-trustee or successor trustee will carry out the instructions set forth in your trust and distribute your assets to your named beneficiaries. The beneficiaries of the living trust can be people or organizations, such as family members, friends, or charitable organizations. But remember, the assets held in your living trust will be subject to federal and state taxation. However, your attorney can add provisions in your living trust to help reduce and possibly or even eliminate taxes, depending on the size of your estate. If your primary concern is to avoid burdensome federal estate taxes, you should consult with an experienced estate planning attorney to consider alternative options.
A revocable living trust can be a valuable estate planning tool to help you maintain control over your assets during your lifetime and at death. A living trust may be used as a will substitute, allowing flexibility for lifetime changes such as marriage, partnership, divorce and children. A living trust can also help you reduce or eliminate probate and administrative expenses when your estate is settled. By creating a living trust, with the assistance of an experienced estate planning attorney, you can lower estate costs and fees and avoid unnecessary taxation at the federal and state levels.