Living Trusts: Protect Your Assets for Those You Love

Making sure loved ones are provided for after death is the number one priority for many people. One of the biggest concerns in estate planning is ensuring that your heirs inherit exactly what you intend after you pass. Living trusts are valuable tools that can help you control your assets before and after your death. With the added benefit of avoiding probate, they are a popular choice for distributing assets in California.

Living Trusts in California

In California, a revocable living trust is a legal document that places some or all of your assets in the control of a trust while you are still alive. Even with the trust in place, you are able to continue using the assets. Upon your death, the assets are then transferred to whomever you named as beneficiaries.

Revocable living trusts are a popular estate planning tool because they allow the asset holder to maintain control of the entire inheritance process. In addition to naming your beneficiaries, you choose the trustee who will be responsible for managing the assets while you’re alive and distributing them after you’re gone. You also get to choose which assets are placed in the trust, and provide exact instructions for how the assets are to be distributed upon your death. A revocable living trust can be modified or cancelled at any time while you’re still alive.

If you are considering a living trust, you are taking the right steps to protect your assets for your loved ones. Living trusts are an effective tool for shielding assets, and for allowing a faster distribution to heirs. Your relatives will thank you for having the foresight to put together a detailed plan for the distribution of your assets, and you will enjoy the peace of mind that comes with knowing that your affairs are in order. Every person or couple has a unique situation, and a living trust should be crafted to meet those unique needs. A boilerplate, online version may create problems in the future, so ensure you connect with an estate planning lawyer if you are considering putting a living trust in place.

Here are some basics on how living trusts work, and the potential benefits:

• A living trust is a legal document that places your assets into administration for your benefit while you are alive, and provides for their transfer to your loved ones after your death.
• You can retain the power to manage your assets by naming yourself as the trustee during your life, and naming another person to manage them if you are incapacitated, or when you pass away.
• You may amend or revoke the document as necessary.
• Spouses can manage their shared assets with just one legal document.
• If you name another person as the trustee, he or she is held to a very high standard. Trustees must act in your best interests. After your death, the trustee will be responsible for transferring assets in the trust to your loved ones.
• Unlike with a will, the transfer of assets does not require court supervision. This will save your family time and money.
• In some cases, it is appropriate to have both a will and a living trust. A trusted estate planning lawyer can help you decide what’s best for you and your family.

5 Benefits of a Living Trust That Everyone Should Know

There are numerous benefits in having a living trust. Here are 5 of them that you should know:

1. Avoids probate.

A major benefit of a living trust is that it avoids probate. Probate is a legal process that determines the validity of a will or which distributes the assets of your estate by court order. Probate can cost thousands of dollars and you lose any degree of privacy since the court proceedings are public.

2. Tax Benefits

By removing the value of your assets from your estate, your estate will not be taxed on this property on your death since the trust owns the property. Also, you can reduce the value of your estate if it is subject to estate taxes by placing certain assets in trust.

3. Provide for Your Children

Your children will have full control and access to their inheritance at age 18 if you pass away before they reach this age. If you wish for them to become more mature before handling these assets, a living revocable trust will enable the property to be held in trust for them and managed by a more experienced person or trustee. The trustee can use the trust funds for the children’s benefit including paying for their education, buying a house or starting a business.

4. If You Have a Child with Special Needs

Should you have a child who will never be able to manage his or her own assets during their lifetime, you can ensure that certain assets in the trust are managed for the child’s benefit. Since your child is probably eligible for public benefits such as Social Security Disability, these benefits may be adversely affected if you leave property to them in a will. A Special or Supplemental Needs Trust can provide long-term management to assist your child with additional resources without affecting their right to continued public benefits.

5. If You Become Incapacitated

By creating a revocable living trust in which you are the beneficiary during your lifetime and funding it, you can create a process that ensures your assets will continue to be managed by your appointed trustee during the period of your incapacity. This eliminates the need to have a court appoint a conservator or guardian.

The Benefits of an Irrevocable Trust

In creating a trust for the benefit of others, a primary issue to address is whether you would like to make the trust revocable or irrevocable. As the names suggest, a revocable trust is one that you, as the creator, have the right to revoke at any point, meaning you can transfer whatever property is in the trust back to yourself. An irrevocable trust, on the other hand, is generally revocable only by unanimous consent of the beneficiaries or through some other mechanism outside of the control of the trust’s creator. So why would anyone ever create an irrevocable trust over a revocable trust? There are several reasons.

The Trust Assets Will Be Protected From Creditors

When you create an irrevocable trust, you are transferring the assets to the trust in such a way that the law will no longer view you as the true owner of the assets, as you can no longer reclaim those assets as you could in a revocable trust. Because of this, when creditors seek your assets, they generally cannot touch assets in an irrevocable trust, as they are no longer yours. This is not the case with a revocable trust.

An Irrevocable Trust Can Provide Tax Benefits

Similarly, assets in a revocable trust may be considered part of your estate when you die, and thus could be subject to federal and state estate taxes. But assets in an irrevocable trust are not considered part of your estate, and thus would not be subject to the estate tax.

That said, careful attention should be given to gift tax issues, which are linked with estate tax matters. Working with an experienced estate planning attorney can lessen your gift tax burden in creating an irrevocable trust.

Assistance in Medicaid Planning

Many states have strict asset requirements for those seeking Medicaid assistance for assisted living and nursing home care. Placing assets in an irrevocable trust may assist in planning for Medicaid eligibility.

The Beneficiaries Can Gain Assurances Regarding the Trust

Finally, when you place assets in an irrevocable trust, your beneficiaries will have assurances that they can count on the funding from the trust without concern that it could be revoked at any time. This is, of course, a preference that is entirely up to you, and there is certainly nothing at all wrong about creating a revocable trust, but some persons like being able to offer this feature to their beneficiaries.

Amending a Revocable Living Trust in California

If you already have a living trust in place, you probably understand that the primary benefits of a living trust are to provide resources to your beneficiaries (which can include yourself) in a way that serves your intended purposes (e.g. medical or educational needs) while protecting your privacy and avoiding the probate process. But there may be a number of reasons why you want to amend some aspect of your living trust. For example, a new family member may come into your life that you want to include as a beneficiary, or they may be a current beneficiary for whom continued financial support no longer makes sense. You may also want to add property to the trust or revise the conditions by which funds can be distributed. In all cases you will need to take legal action to amend your revocable living trust.

Determining Whether Your Trust is Revocable or Irrevocable

Your trust documents should indicate whether the terms of the trust are revocable or irrevocable, and, if it less than clear, an estate planning professional can review your documents and provide guidance. Under California law, a revocable trust can be modified at any time or revoked in full. If the trust is irrevocable, modification or revocation may still be possible if all of the beneficiaries consent to the change and a court approves as well.

Methods for Amending or Revoking a Living Trust

California’s probate code lays out several methods that the settlor (the person who created the trust) of a living trust can take to validly effectuate an amendment or revocation. First off, the contents of the trust itself may provide a method for making changes, and a court will uphold any changes made in accord with those terms. Furthermore, a settlor may create a new legal document (other than a will) expressing his or her wishes regarding changes to the trust which is then transmitted to the trustee named in the trust.

A settlor may also authorize another person to have power of attorney over the trust which gives that person the right to make changes to the trust in accord with California law (although if an attorney is provided power of attorney, the trust document itself must reflect this). Finally, where there are multiple settlors contributing property to a trust, each settlor has the right to modify the trust with regard to his or her own contributions.

there are multiple settlors contributing property to a trust, each settlor has the right to modify the trust with regard to his or her own contributions.

Lawyer for Living Trust in Pasadena, California

Creating a living trust requires reflection, and assistance from experienced counsel. A qualified lawyer can help you draft a living trust in Pasadena, California. As every estate is different, determining how to best protect your assets for those you love requires an evaluation of your estate. Generally, the process of creating a living trust is not difficult, particularly for the transfer of ownership of a home. This process requires drafting documents to transfer property to the living trust. Keep in mind that putting a living trust in place makes the distribution of your estate far simpler.

A living trust functions similarly to a will, in that the trust sets out exactly how it will be administered, and how the assets will be distributed to the various named heirs, including children, grandchildren, or other people or organizations that are important to you. The advantage is that with a living trust, the estate will not need to be probated. With a will, this is not the case. The probate process can be lengthy, and the costs associated with administering the estate will diminish the value of the estate. With a living trust, the entire process of transferring your assets after your death generally takes just a few weeks. Your loved ones will appreciate your efforts.
Contact us at CBJ Law Office to schedule a consultation about establishing a living trust in Pasadena, California. We are committed to finding estate planning solutions that suit our clients’ specific goals and needs.