1. What Is a Living Trust?
A trust is a separate legal entity you can create to hold property for yours or anothers benefit. A living trust is termed such because it is established during the lifetime of the creator. In contrast, some trusts are created in Wills. These are called testamentary trusts. These were fashionable at one time, but are rarely used today because they generally involve probate court costs and attorneys fees (just the types of expenses most people are trying to avoid by establishing a living trust in the first place).
In the context of estate planning, a living trust is established by a written document. In this document the creator (who well call the trustor) declares that he/she is creating a trust and sets forth what property the trust shall hold., who shall manage this property ( trustee) and who shall be the recipient (beneficiary) of the trust income or property. Usually the trustor names himself or herself as trustee and is the beneficiary of the trust until he or she dies, at which time his or her property is distributed to other beneficiaries as outlined by the trust document. By distributing property under a trust, as opposed to a Will, court/probate proceedings can be avoided, saving what can be many thousands of dollars in attorney fees alone (i.e. the current statutory attorney fee for a $1,000,000.00 estate in California is now $23,000.00).
2. What Are the Benefits of Having a Living Trust?
A. A living trust avoids probate at death if properly set up and maintained.
B. Can allow for the management of your property if you become incapacitated.
C. Generally allows for a much faster distribution of assets upon death.
D. Can allow for detailed control/management of minors inheritances, including delaying distributions well into adulthood.
E. May help eliminate or reduce estate taxes.
F. Can be changed or canceled at any time before death or incapacity.
G. Can be drafted to protect entitlement to government benefits for beneficiaries with special needs.
H. Avoids most of the problems generally associated with joint ownership/joint tenancy and, usually, more beneficial from a tax liability standpoint.
I. Privacy. Most trusts are administered without any court proceedings and therefore are not a matter of public record, such as a Will when submitted to probate.
3. What Are the Negatives of Having a Living Trust?
A. More costly to set up.
B. Takes some effort to maintain, as assets must be titled and kept in the name of the trust.
C. Potential for abuse/fraud/neglect by person named to administer trust after the death/incapacity of the trustor (as theres generally no court supervision).
4. Can I Avoid Probate Without a Living Trust?
Absolutely! First, in California, if a decedents estate is worth less than $100,000.00 and contains no real estate, it can usually be distributed without any court proceedings. Otherwise, there are ways to hold title to property which will allow or result in the transfer of property on death of the owner without probate. For example, many financial institutions will allow you to name a pay on death or transfer on death beneficiary. You can also hold many financial accounts, as well as real property, in joint tenancy. Or in the case of spouses, as community property with the right of survivorship. Life estates and family limited partnerships are other possibilities as well.
For most people, the above scenarios present a drawback or two. However, if theres a more convenient/efficient way to accomplish your goal, well be more than glad to suggest it. We do not hard sell trusts. We simply lay out the pros and cons objectively and let you decide whats best.
5. How Does a Living Trust Work?
In very general terms, a trust works as follows. A trustor transfers title to him or herself as trustee of his or her own trust. The trustee basically manages this property as he or she did before. Once the original trustor/trustee dies or becomes incapacitated a successor trustee takes control of the property.
If the case of incapacity, the successor trustee manages the trust for the trustors benefit. Generally using the income from the trust to pay the trustors expenses, until such time as the trustor passes away or can manage his or her own affairs again. In this manner, a trust can obviate the need for a conservatorship in many cases where the trustor is unable to manage his or her financial affairs.
In the case of death, the successor trustee pays the decedents debts and then distributes the trust assets as outlined in the trust document. The successor trustee may file the decedents last tax return or an estate tax return. The successor trustee may have continuing obligations if the trust is to be ongoing, such a husband/wife trust, minors trust or special needs trust.
6. What Does a Living Trust Cost?
Our basic charge for a simple, single settlor trust is $850.00, which includes preparing and filing one deed to transfer real estate into the trust. Thereafter, our fees increase based on the complexity of your trust and the number of settlors involved. You are more than welcome to call us for a free quote or come in for a free, no obligation consultation.
7. What Does Your Living Trust Include?
Our living trust package is part of a comprehensive estate plan which includes the following:
A. Trust Document, as outlined above, plus a Certificate of Trust, which is a summary of the trust you can provide to 3rd parties to prove the existence of the trust when necessary.
B. Pour Over Will. This document supplements your trust by giving any property that was omitted from your trust, to your trust. Moreover, if for any reason your trust is, or becomes, invalid, this Will dictates that your property should be distributed by the probate court as outlined in your trust.
C. Advance Healthcare Directive. This document allows you to name an agent to make healthcare decisions for you in the event you are unable to do so. Moreover, it allows you to express your wishes regarding life support and dictate the circumstances under which you want life sustaining treatment, including nutrition, hydration and pain relief. Lastly, this document allows you donate organs if you so desire.
D. Durable Power of Attorney for Finances. This document allows you to name another as your agent to transact financial related business. The purpose of this document is to insure someone can sign on your behalf if you become incapacitated. For example, to sign tax returns, endorse checks, execute contracts, apply for benefits, just to name a few possibilities.
E. Designation of Guardian. For individuals with children, we provide a separate document wherein you can designate who you want to be your childs or childrens guardian(s).
8. Can I Do My Own Trust or Hire a Document Preparation Service?
Yes you can, but we think youd be foolish to do so. The law in this area is complex and always changing. Most of the do-it-yourself kits are overly simplistic and not tailored to California (try finding a kit that doesnt have a disclaimer somewhere stating user assumes all risks). In California, anyone can call themself a legal document preparer. Yes, you can flip burgers one day and be a legal document preparer the next. Do not use one of these people to prepare your trust. In a nutshell, you cant risk making a mistake when drafting your trust because if theres a serious problem its not likely to show up until youve passed away.
9. Why Should I Hire Your Office to Prepare My Trust?
It seems as though cost is everyones first concern. If thats you, I assure you that our prices are among the lowest in the Orange County. That aside, what really sets us apart is our service. Here youll sit down with an attorney who will discuss your situation with you, at length, for no charge. Then, if you hire us, the same attorney will draft your trust, then meet with you at the signing to answer all your questions. Thereafter, whenever you have general trust questions (and you will have questions sooner or later), you can call us free for life. We honestly believe you wont find this level of service anywhere, regardless of price.