Living Trusts: A Valuable Estate Planning DeviceMichael Elson
December 18, 2008 — 1,583 views
A revocable living trust is a legal instrument which holds title to the personal assets of a person or married couple, including bank accounts, real estate, LLC and stock interests, etc. Like a will, a living trust contains your instructions for the distribution of all your assets after you pass away. A primary distinction between a will and a trust is that a trust avoids probate, whereas a will does not. Probate of a will requires filing of a costly probate proceeding in the county where property is located, newspaper publication notices, letters to all heirs even if disinherited and statutory waiting periods under California law. Also, the records of the probate are public information.
Utilizing an attorney prepared revocable living trust is a method of avoiding this expensive, time consuming and confusing probate process. When a persons assets are transferred to their living trust during their lifetime, probate is avoided entirely. After the person who established the living trust, who is called the Trustor, dies, the successor trustee(s), who are often the adult children, relatives, or friends of the Trustor, distribute the trust assets to the designated named beneficiaries. Because the living trust eliminates probate and, often under a myriad of circumstances, can greatly reduce estate taxes, it is typical to pass on a much greater portion of your valuable assets to your heirs.
It is a very common misconception that holding property in joint tenancy provides probate avoidance protections similar to a living trust, however this is not the case. Joint tenancy only avoids probate on the death of the first joint tenant, however the surviving joint tenant will be left with the probate problem unless estate planning is implemented after the first death. This is usually not a good time for planning, due to the life changes and emotional stress and trauma associated with the loss of a spouse. In addition, joint tenancy can also cause a loss of the step-up in basis on inherited property, which can cause large and unnecessary capital gains taxes. In conclusion, the execution and funding of a living trust plan prepared by a living trust attorney, when both spouses are healthy, avoids probate and eliminates the possibility that a surviving joint tenant may be unable to put into effect future estate planning attorney services due to incapacity or a traumatic accident.
Key Benefits of a Living Trust:
- Probate is avoided, including multiple state probates if property is owned in other states
- Probate entails public court proceedings which can last two and sometimes even three years or more; whereas living trusts are private and can be administered quickly, which your heirs and successor trustee(s) are likely to greatly appreciate
- The individual(s) who set up the trust are the trustee(s) during their lifetime and have complete control over the trust assets, including the power to easily change or revoke the trust in any way
- The trust for a married couple can be designed to maximize the estate tax exemption, which can result in a potential tax savings to the heirs of millions of dollars
- The trust will not cause a change in income taxes or property taxes, and tax filings remain exactly the same throughout the life of the Trustor
- The trust can hold corporate stock or LLC membership interests, so that the company and its assets will avoid probate
- Living trusts can be established for individuals, or as a joint trust for married couples, bringing all of your assets together under one central plan
- Prevents court control of assets at incapacity or death
- Provides maximum privacy
- Quicker distribution of assets to your beneficiaries
- Assets can remain in testamentary trust even after your death should you desire
- Can reduce or totally eliminate estate taxes
- Inexpensive, easy to set up and maintain
- Changes, modifications, or revocations can be made at any time before the Trustor dies
- Difficult to contest
- Prevents court control of minors' inheritances and eliminates guardianship proceedings
- Can protect dependents with special needs
- Prevents accidental disinheriting and other problems of joint tenancy ownership
- Secure peace of mind
About the Author
Author is an LA area estate planning and living trust attorney and provides estate planning attorney services and living trusts. He is also a part time volunteer helicopter tour pilot in LA doing la helicopter tours and occasionally takes law office clients up for short helicopter tours.