One of the most versatile and effective estate planning tools is the revocable living trust. If you have never considered the benefits, you are probably going to be pleasantly surprised. A living trust can be a much more comprehensive solution than a last will, even if you are not extraordinarily wealthy.
Spendthrift Protections
If you are going to be leaving an inheritance to a loved one that is not good at managing money, you will probably take pause. What would happen if they burn through their inheritance too quickly?
They have often come to you for support over the years, and you will no longer be there to help. Plus, they tend to run up bills, and creditors could go after their inheritance even if they don’t spend it all.
You can put these concerns aside if you utilize a living trust as the centerpiece of your estate plan instead of a last will.
It would be possible to include a spendthrift clause along with instructions for the trustee to follow after your passing. A typical way to proceed would be to allow the trustee to distribute the earnings from the principal of the trust to the beneficiary on an incremental basis.
In this manner, the principal or corpus would remain intact to keep producing income, and the spendthrift beneficiary would have no access to it. When it comes to the creditors, they would “step into the shoes” of the beneficiary. Since the beneficiary would not be able to access the corpus, the same dynamic would apply to the creditors.
Incapacity Planning
Once you reach the age of 67, your life expectancy is at least 85 years. The Alzheimer’s Association tells us that four out of every 10 people that are 85 years of age and older have contracted the disease. This is a major cause of incapacitation in elders, but there are others.
While it is not the most pleasant prospect to consider, incapacity is a looming threat to the oldest old. It is prudent to take steps to prepare for this eventuality in advance, and this can be easily done when you have a living trust. You can empower a disability trustee to act as the trust administrator if you ever become unable to make sound financial decisions on your own.
Streamlined Planning for Married Couples
If you are married, you and your spouse could choose to establish a joint living trust. You could serve as co-trustees and co-beneficiaries while you are both alive and well. There are many different ways that such a trust could be structured, but we will look at the most common one here.
Control of all the jointly owned property in the trust would fall to the surviving spouse/trustee after the death of one spouse. The desired distribution of personal property would be spelled out in the trust agreement. In many cases, the surviving spouse would keep the trust intact and make the children the final beneficiaries. As we stated, this is one possible arrangement, but there are other possibilities.
Our estate planning trust attorneys do everything possible to provide educational opportunities to members of our community. This is because so many people are unprepared from an estate planning perspective. When they understand more about the process, they tend to take action, because they find out why it is so important.
To this end we are holding a number of webinars in the near future. You can learn a lot if you attend one of these sessions, and they are being offered free of charge. We invite you to visit our webinar schedule page to get all details.
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Scott Schomer, Estate Planning Attorney
A graduate of Boston University School of Law, Scott P. Schomer is a frequent lecturer on estate planning and elder law issues, having discussed these important issues on local and national television. A seasoned courtroom advocate, Scott has obtained combined judgments and verdicts in excess of twenty-five million dollars for his clients. Scott has served as a member of the Los Angeles Superior Court Probate Volunteer Panel (PVP Attorney), Probate Settlement Panel and a Judge Pro Tempore. Scott's expertise has been recognized by his peers with such accolades as a life-time membership in the Multi-Million Dollar Advocates Forum, the Five Star Wealth Manager designation, and repeated nominations as California Super Lawyer.
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But for more complex estates, a trust can be a valuable tool. “A will manages what happens to your assets after death, but a trust goes into effect as soon as you sign the paperwork,” says Cyndy Ranzau, wealth strategist with RBC Wealth Management-U.S. “A trust can dictate what happens while you're alive.
Assets held in a Trust, unlike a Will, are not subject to the probate process. A Living Trust allows you to set up protection for your property during your lifetime. A Trust gives a Trustee the right to manage assets on your behalf indefinitely. A Will allows you to name guardians for your minor children.
What Are the Disadvantages of a Trust in California? Trusts are costly to create. Creating a trust without an attorney may be less expensive, but doing so leaves the trust much more vulnerable to trust contests and other legal litigation. It is also more time-consuming to properly set up a trust than to create a will.
You want to avoid the probate process. You want your beneficiaries to have access to funds, property, or other assets while you're still alive. You want to avoid estate tax with an irrevocable trust.
I've been practicing as an estate planning lawyer in California for over 10-years and if there is any advice I most consistently give it is this: if you own real property you need to put it into a living trust.
Many advisors and attorneys recommend a $100K minimum net worth for a living trust. However, there are other factors to consider depending on your personal situation. What is your age, marital status, and earning potential? At what point in time will your focus shift from wealth creation to wealth preservation?
If you are a California resident and you have assets that would go through probate, then you need a revocable living trust as the foundation to your estate plan. A well written and funded revocable living trust will allow your family to avoid the high costs and hassles of probate when you pass away.
Creating a living trust in California is not terribly difficult, but it takes some planning. You might find it helpful to work with a financial advisor or another professional when drafting up your living trust. However, you can also download the forms online and then take them to a notary public yourself.
Your Assets Might Not Be Protected: Another crucial point to note is that not all trusts offer protection from creditors. For instance, in revocable trusts, the assets are not protected from creditors as the grantor retains control of the assets. Potential Tax Burdens: Finally, trusts can carry potential tax burdens.
The major benefit from holding property in a trust is that the property avoids probate after your death. As many are aware, probate is a court-supervised process for transferring assets to the beneficiaries listed in one's will.
Apart from cash and medical and health savings accounts, many things are considered that they cannot be placed in the revocable trust. For instance, certain retirement accounts (401-K, IRA, 403-B) and vehicles.
Trusts are legal structures that protect assets and direct their use and disposition by their owners' intentions and are managed by a trustee. A will takes effect upon death but trusts can be used both during the lives and after the deaths of the grantor, or creator.
A major benefit of the living trust is that it will not have to go through the probate process, as a will must do. But, in some states, the probate process is quick and inexpensive, so it really depends on your state and the types of assets you own.
After the Trust is written and established, the Trustee holds the power to administer the Trust as it is written. The Trustee has to follow the rules written within the Trust. Some Trusts can be revoked or changed after they've been established.
A Trust allows you a certain level of control over your Estate that Wills cannot provide. The structure of Trusts allows you to decide how and when your assets will be distributed. If you have young children, this can be a great way to ensure they do not receive their inheritances in one lump sum.
Introduction: My name is Horacio Brakus JD, I am a lively, splendid, jolly, vivacious, vast, cheerful, agreeable person who loves writing and wants to share my knowledge and understanding with you.
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One of the most versatile and effective estate planning tools is the revocable living trust. If you have never considered the benefits, you are probably going to be pleasantly surprised. A living trust can be a much more comprehensive solution than a last will, even if you are not extraordinarily wealthy.