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.
Author
Recent Posts
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.
Latest posts by Scott Schomer, Estate Planning Attorney (see all)
How Does a Sub-Trust Work in My Estate Plan? - March 10, 2024
How Does a Qualified Personal Residence Trust (QPRT) Work in California? - March 9, 2024
Safeguarding Your Inheritance: Essential Strategies for Recent Beneficiaries - March 8, 2024
A living trust offers significant advantages, such as avoiding probate, maintaining privacy and allowing for precise control over asset distribution. On the other hand, wills play a crucial role in naming guardians for minors and can serve as an essential catch-all estate planning document for your intentions.
Trusts bypass probate and are less likely to be successfully challenged, which gives your finances and beneficiaries privacy. Wills take effect after your death, so they do not protect your assets if you become incapacitated. Trusts can protect your assets if you are incapacitated while still alive.
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.
Limitations: Requires adherence to trust document's instructions on asset assignments. Joint assets, including certain IRAs and retirement plans, cannot be placed into a one-person trust. No complete tax avoidance: Total avoidance of taxes is rarely possible with living trusts, though there may be ways to reduce them.
These include: When you set up a trust, you will have to pay the cost of preparation, which can be higher than the cost of preparing a will. Also, a trust doesn't provide special asset or estate tax protection.
A living trust, unlike a will, can keep your assets out of probate proceedings. A trustor names a trustee to manage the assets of the trust indefinitely. Wills name an executor to manage the assets of the probate estate only until probate closes.
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?
A trustee typically has the most control in running their trust. They are granted authority by their grantor to oversee and distribute assets according to terms set out in their trust document, while beneficiaries merely reap its benefits without overseeing its operations themselves.
A trustee can end up having to pay taxes out of their own personal funds if they fail to take action on behalf of the estate in a timely way. Of course, they can also face criminal liability for such crimes as taking money out of a trust to pay for their own kids' college tuition.
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 main benefit of putting your home into a trust is avoiding probate. Placing your home in a trust also keeps some of the details of your estate private.
One negative aspect of having a will is that it may be subject to probate, a court-supervised process that can be time-consuming and costly, potentially reducing the assets available to beneficiaries.
To make sure your Beneficiaries can easily access your accounts and receive their inheritance, protect your assets by putting them in a Trust. A Trust-Based Estate Plan is the most secure way to make your last wishes known while protecting your assets and loved ones.
There's no set hourly rate or cost for a living trust. However, an average California attorney may charge about $2,000 for the job. In exchange, your lawyer will first take some time to hear your situation and explain your options when it comes to living trusts.
Which Takes Precedence: Will or Trust? In California, a trust often supersedes a will if a person has created both documents. A trust takes effect immediately, while the trustee is still alive, whereas a will only takes effect after the death of the executor.
There is no right answer in regards to whether a Living Trust is better than a Will, or vice versa. Each individual should establish their own preference based on their personal circ*mstances. Some may choose a Living Trust over a Will from the standpoint of removing assets from the probate process.
According to California probate law, a trust often supersedes a will if a person has created both instruments. That means the trusts can serve the same purpose but with additional benefits such as enhanced privacy, asset protection, and the ability to circumvent probate.
Address: Apt. 814 34339 Sauer Islands, Hirtheville, GA 02446-8771
Phone: +337636892828
Job: Lead Hospitality Designer
Hobby: Urban exploration, Tai chi, Lockpicking, Fashion, Gunsmithing, Pottery, Geocaching
Introduction: My name is Ray Christiansen, I am a fair, good, cute, gentle, vast, glamorous, excited person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
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.