If I have a Will, do I need a Living Trust?
Yes. A will requires the court process known as Probate. A recent study by the American Association of Retired Persons (AARP) describes probate as “costly, slow and outmoded… [a] sad state of affairs.” Probate is very expensive and time consuming. The probate process can take, on average, eight to twelve months, during which time all of your assets are frozen and can lose value. Your family must petition the court for the use and control of your assets, which is a legal nightmare. These problems would be completely avoided with a Living Trust.
Does a Living Trust avoid Probate?
Yes. You simply transfer all of your property into the trust. Since you no longer own the property in your name, there is nothing left in your personal estate that requires probate upon your death. It’s that simple!
Doesn’t Joint Tenancy avoid Probate?
No. Joint Tenancy only postpones probate. Probate takes place when the other joint tenant dies. Joint tenancy also has very expensive tax consequences. Property that has appreciated in value can result in hundreds of thousands of dollars in taxable gains. A Living Trust enables its beneficiaries to receive a “step-up” in basis, which usually results in no taxable gain. If your joint partner is sued, you can lose your property. If your joint partner is incapacitated, you won’t be able to sell, tent, or refinance without first obtaining the court’s permission (i.e. a conservatorship). Joint Tenancy is a very poor substitute for a Living Trust.
Is it difficult to transfer my property to a Living Trust?
No. You still maintain complete control over your property just as you do now because you become the manager, or Trustee, of the trust. Also, you may change, amend or revoke your Trust at any time.
What happens if I become incapacitated?
With a Living Trust, your spouse, child or trusted relative (i.e. your “successor trustee”) takes over for you immediately upon your incapacity. Your successor trustee would continue to follow your wishes as set forth in the trust. When you recover, you automatically regain control. If you die, your successor will make the distribution of your trust property according to the instructions left in the trust.
Is a Living Trust expensive?
No. Not when you compare it to the costs of probate and estate taxes. Although the cost of your Living Trust may vary depending on the complexity of your estate, ELDER LAW SERVICES, ALPC, is committed to providing you with the finest documents at affordable prices.
Are there any disadvantages to a Living Trust?
No. Everything about a Living Trust is advantageous to you and your beneficiaries. It plans for incapacity, avoids the anguish and cost of probate, and can save hundreds of thousands of dollars in estate and income taxes.
Do I need an attorney to prepare my Living Trust?
Yes. A Living Trust is a legal document. Probate is a legal process. Only an attorney is qualified to give you legal advice. Errors caused by a paralegal, financial planner, or do-it-yourself form kit could defeat your estate planning intent, and be extremely costly. Your estate and family’s future is worth obtaining the legal advice and expertise of an attorney.
What is the difference between a trust and a will?
The main difference is that a trust avoids probate and a will does not. Both instruments can work together and are very useful when creating an estate plan. One main difference is that a Will only takes affect after the creator of the Will dies, where a Trust takes effect as soon as the creator signs the documents. A Will states the creator's wishes as to who will receive the creator's property at their death and it appoints a representative, a.k.a. an executor, to carry out those wishes. A Trust can be used to distribute assets or property before the creator's death, at death or afterwards.
Also, a Will covers any assets or property that is owned by the creator at the time of death. A Trust covers only assets or property that is held in that Trust, which means it has to be transferred into the Trust while the creator is living.
Do I ever need to update my trust?
Yes, it is advised to update your trust every 5 to 10 years due to changes in your personal lives or new laws that might affect your trust. Types of changes that could affect your Trust: getting married, separated, or divorced, selling or purchasing new home, moving to a different state, having children or adopting children, declining health or death of a person you have named as a Trustee, Executor or Agent. Or if your assets increase or decrease.
What does a trust package include?
Initial consultation with an attorney.
Trust Agreement (a.k.a. Declaration of Trust)
Schedule of assets and assignment of personal property into the Trust
Pour over Will (s)
Durable power (s) of attorney for assets
Durable power (s) of attorney for health care
Certification of Trust
Funding and Successor Trustee's instructions
All necessary notary signatures
Deed to transfer real property into the trust
Recording of one deed with the corresponding county in California
Additional provisions are available as needed (for example; Special Needs, Qualified Domestic Trust, additional properties - outside of California, etc.) - this will be discussed during your initial consultation with the attorney.
What is an A-B Trust?
An A-B Trust is a trust created by a married couple designed to reduce or eliminate estate taxes. While it was a useful estate planning technique 10-20 years ago, it may have present disadvantages depending on the size of your estate. If your trust has A-B provisions, it's important to review them with your attorney and make modifications if necessary.
Should I have a revocable or irrevocable trust?
It depends on your situation. A revocable living trust is the most common type of estate plan, but there are certain circumstances (e.g., asset protection from a Medi-Cal recovery or minimization of estate taxes) where an irrevocable trust is more beneficial.
Does a Power of Attorney cover both health care and financial?
Technically a person could cover health care matters and finances in just one power of attorney document, but we do not recommend it, nor would it be a good idea. By separating these documents, it will make situations easier and simpler for your agent(s) and others.
For example, your health care document is likely to contain personal details, and perhaps feelings that your financial institutions do not need to know. Also, if you are admitted to a health care facility, such as a skilled nursing home, these facilities may require certain provisions to be in your health care power of attorney that may not be used for financial matters.
Do I need to put my business in my trust?
Yes, any asset you’d like to avoid probate on needs to be put into your trust, including your business. A main reason to put your business into a trust is to avoid that business from going to probate. Keep in mind that by you placing your business into a trust, you are transferring legal ownership of your business to the trustee of that trust, which can be, you, as the business owner.
Before transferring a business into a trust, you may want to consult with an experience estate planning and or business attorney to outweigh your options on the type of trust that you should fund your business in.
What are the first steps to take upon the death of a family member or spouse?
1. Take the time to mourn during this difficult time and notify family members and friends.
2. Make sure all funeral arrangements are sorted out and completed.
3. Obtain a death certificate.
4. Locate the living trust and notify an attorney that the Trust Administration process needs to begin.
What happens if there is no Living Trust upon death?
If there is no Living Trust upon death, Probate will need to take place in order for assets to be distributed properly. California Probate court will appoint a person to be the administrator of the estate, typically a family member.
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