Many clients create a living trust as a way to avoid the time and cost of probate. Every state has its own probate laws which establish the requirements for creating living trusts in order to ensure they are valid. If you are considering including a living trust in your estate plan, then you need to first understand how a living trust works. Here is some information from a living trust lawyer Sacramento residents can use.
What is a living trust?
A “living trust” is a special type of trust that goes into effect during your lifetime, as opposed to being created by your will after your death. As with other kinds of trusts, the property you transfer to the trust will be managed by a trustee, and then distributed to your beneficiaries as you instruct. One benefit of a living trust is that you can name yourself to serve as trustee while you are alive and competent, and then a successor trustee will takes over when you become incapacitated or die. Living trusts are valid in all fifty states regardless of where the trust was originally created.
Living trusts are not the same as a last will and testament
Although a wills and living trusts both allow for the distribution of assets, they do not operate in the same way. A will basically gives you a way for you to distribute your assets to your designated beneficiaries after you die. A living trust, on the other hand, holds your assets in a trust account for your benefit during your lifetime. Then, after your death the property is distributed to your named beneficiaries.
Living trusts can help with probate avoidance
One primary advantage of creating a living trust is the ability to avoid the time and expense of a probate proceeding. With a valid will, your estate will need to go through probate in order for your assets to be distributed to your heirs. However, with a living trust, your estate does not have to go through probate. That means there can be faster distribution of to your heirs.
Living trusts can save money
A living trust will often cost more to draft than a will does. That is because a trust is a more intricate legal document. Also, funding or transferring the property to the trust requires additional steps. Although a will may cost less to draft, a living trust will save you more in the long run. A living trust can minimize estate taxes, as well as, save on the costs of probate.
Living trusts provide more privacy
If maintaining your privacy is important to you, then a living trust is a great choice. The terms of a will become public record as it goes through probate court. Living trusts are not made public, which means your estate can be distributed quite privately.
A durable power of attorney is not necessary for a living trust to function properly
Unlike a will, a living trust can be drafted so that a successor trustee can automatically take over managing the trust property if you become ill or incapacitated. With a will, though, you would also need a durable power of attorney to oversee your affairs. A living trust actually provides the same protection without the need for court intervention. Even with a living trust-based estate plan, a durable power is attorney is usually included to address ancillary issues not involving assets controlled by the trust.
The terms of a revocable trust can be modified
Because living trusts are revocable, you can modify the terms of the trust at any point while you are still alive. Indeed, it is a good idea to review your trust agreement occasionally so you can make any necessary changes. This is especially true when you there are changes in your family circumstances such as the birth of a new child, marriage, divorce, or death. Your ability to amend or revoke your living trust is unlimited while you are still living.
Download our FREE estate planning checklist! If you have questions regarding living trusts, or any other estate planning needs, contact the Northern California Center for Estate Planning and Elder Law for a consultation, either online or by calling us at (916) 437-3500.