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.
- Conclusion
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.
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