Living Trusts in a Nutshell
The Purpose of Living Trusts
Avoiding Probate
Terminology of Living Trusts
Revocable and Irrevocable Living Trusts
Advantages of Living Trusts
San Francisco Estate Planning Attorney
The Purpose of Living Trusts
As a San Francisco Estate Planning Attorney I would like to provide a brief overview of the subject. As a trust and probate attorney in California I am frequently asked to explain what living trusts are good for. That shall be my starting point. In my opinion a living trust is the best possibility to hand over your property to your heirs. A living trust is capable of doing all tasks that a will is able to perform. With a living trust your property can be transferred promptly to your successors upon your death. Besides the living trust there is the will, the testament and intestate succession.
Sacramento Estate Planning Attorney
We provide sophisticated estate planning solutions for our Sacramento clients.
Avoiding Probate
In addition having a living trust avoids long and expensive probate court procedures, that are, generally speaking, a waste of time and money. If probate is necessary (because you haven’t provided yourself with a living trust), the probate court will have to determine an inventory of what you have left and see to the proper distribution of your estate. If there is a last will the probate court also has to ensure the proper execution of the will; if there’s none, the court has to go through “intestacy proceedings”, which are governed by state law.
Probate has initially been created as a measure to prevent fraud. So in generally speaking there is nothing wrong with it. However probate court proceedings in California often overshoot that purpose and besides that usually take a minimum of 6 to 12 month. In that time heirs won’t be able to profit of the estate. In addition there are often hefty fees involved. Separate fees for a probate lawyer, an executioner, court costs and other expenses are common. These are usually taken out of the estate before are paid. The fees can easily sum up to 15.000 $ or even more. Holding assets in different states can be even worse. In this case the heirs would have to hire a lawyer for every single state in that the deceased had owned property. Consequently – as a trust attorney in Sacramento County – in most cases I strongly advise my clients to avoid probate by setting up a living trust in advance.
Terminology of Living Trusts
Now that you know the major reason for thinking about a living trust, let’s turn to their specific terminology and the overall concept of trust law. Although trust law can sometimes be confusing, the basic concept of a living trust is quite easy to understand. A trust is basically a fictive legal entity, that is capable of “holding” your property. An observable signs of the trust itself is the trust document. Additionally the name of the trust often appears on the trust assets’ documents of titel.
Of course there are real persons involved as well. The “grantor” (sometimes “settlor” or “trustor”) is the founder of the trust, who signs the necessary documents (declaration of trust) and who transfers his property in the trust. The “trustee” is the one in charge to manage the assets of the trust. He is also the one, who legally owns the assets of the trust. Although the trustee is the legal owner of the trust property, the trustee is not allowed to use the trust property for himself. Instead he is obliged to manage the trust for the benefit of the beneficiaries. The “beneficiaries” are the persons who profit from the trust. From an economic perspective they “own” the trust property because they receive the payouts while the trust exists. Upon the end of the chosen term of the trust the trust assets are usually transferred to the beneficiaries.
Traditionally (back in medieval England) the aforementioned were three different real persons. But that is not necessary. In today’s most common living trusts one person stands for the grantor, the trustee and the beneficiary simultaneously. That does not changes until the person dies. But afterwards the named successor trustee(s) and the successor beneficiary(ies) take over and the trust starts fulfill its real purpose by distributing the assets of the deceased to the named beneficiaries.
A living trust is called a living trust (rarely “inter vivos trust”) because it is set up while you’re alive. In contrary a so called “testamentary trust” is set up in a will and it is created only upon the death of the grantor. Hence testamentary trusts do not avoid probate procedure the focus of this guide is directed to living trusts.
Revocable and Irrevocable Living Trusts
In your research you might have stumbled over the terms “revocable living trust” and “irrevocable living trust”. This is easy to explain: Revocable trusts can easily be revoked or amended as long as you live, whereas irrevocable living trusts are usually carved in stone for your lifetime or even longer. Once set up, they are unchangeable. Irrevocable living trust can have significant tax advantages, but that is to be discussed below.
Even though you “give away” your property to the trust, the transfer does not mean you loose control over your assets. You’re free to do what you like with your trust property as long as you live. That is not necessarily the case with irrevocable living trusts. Therefore the revocability of a trust is the more common option.
Revocable living trusts become irrevocable once you die. They persist until the purpose of the trust is fulfilled. The named successor trustee takes control of the trust and starts to manage the trust as outlined in the declaration of trust. If the trustee is required by the declaration of trust to distribute the trust’s assets to the named beneficiaries right away, the trustee will do so. But living trusts can be used in different ways – thus being highly flexible. For example, the trustee can be bound by the terms of the trust to distribute only the earnings of the trust to the beneficiaries. Thus the beneficiaries will profit from the trust for many years. This setup is often used for a child’s trust. Similar arrangements can be made for relatives with special needs. Those trusts are commonly known as “special needs trusts”. Your trust attorney will help you to find the right solution for your estate.
Advantages of Living Trusts
Besides avoiding probate, living trusts have many other advantages, that – at this point – can only be discussed briefly. As mentioned before, living trust can result in significant tax savings if they are structured in the right way. There are methods to reduce estate and even income taxes with use of living trusts. Unlike in the probate procedure (where your testament will become public) with a living trust your estate planning remains a secret even when you pass away. There is no need to disclose any of your last wishes if you have used a living trust. Finally someone you literally trust will manage your living trusts, because you can choose the trustee yourself. On the contrary in probate procedure a judge and a executioner, who don’t necessarily have to know you, will look after your estate once you have died. That is – in my opinion as Trust attorney – not a good situation.
To summarize my initial thoughts as a trust adviser about living trusts: For most families it is highly desirable to set up a living trust.
We are Estate Planning Attorneys in San Francisco and Sacramento. We offer estate planning and trust work to our clients in San Francisco County, Sacramento County and Contra Costa County. We also serve residents of Solano County with its cities of Fairfield, Vacaville and Vallejo.
Avoiding Probate
Terminology of Living Trusts
Revocable and Irrevocable Living Trusts
Advantages of Living Trusts
San Francisco Estate Planning Attorney
The Purpose of Living Trusts
As a San Francisco Estate Planning Attorney I would like to provide a brief overview of the subject. As a trust and probate attorney in California I am frequently asked to explain what living trusts are good for. That shall be my starting point. In my opinion a living trust is the best possibility to hand over your property to your heirs. A living trust is capable of doing all tasks that a will is able to perform. With a living trust your property can be transferred promptly to your successors upon your death. Besides the living trust there is the will, the testament and intestate succession.
Sacramento Estate Planning Attorney
We provide sophisticated estate planning solutions for our Sacramento clients.
Avoiding Probate
In addition having a living trust avoids long and expensive probate court procedures, that are, generally speaking, a waste of time and money. If probate is necessary (because you haven’t provided yourself with a living trust), the probate court will have to determine an inventory of what you have left and see to the proper distribution of your estate. If there is a last will the probate court also has to ensure the proper execution of the will; if there’s none, the court has to go through “intestacy proceedings”, which are governed by state law.
Probate has initially been created as a measure to prevent fraud. So in generally speaking there is nothing wrong with it. However probate court proceedings in California often overshoot that purpose and besides that usually take a minimum of 6 to 12 month. In that time heirs won’t be able to profit of the estate. In addition there are often hefty fees involved. Separate fees for a probate lawyer, an executioner, court costs and other expenses are common. These are usually taken out of the estate before are paid. The fees can easily sum up to 15.000 $ or even more. Holding assets in different states can be even worse. In this case the heirs would have to hire a lawyer for every single state in that the deceased had owned property. Consequently – as a trust attorney in Sacramento County – in most cases I strongly advise my clients to avoid probate by setting up a living trust in advance.
Terminology of Living Trusts
Now that you know the major reason for thinking about a living trust, let’s turn to their specific terminology and the overall concept of trust law. Although trust law can sometimes be confusing, the basic concept of a living trust is quite easy to understand. A trust is basically a fictive legal entity, that is capable of “holding” your property. An observable signs of the trust itself is the trust document. Additionally the name of the trust often appears on the trust assets’ documents of titel.
Of course there are real persons involved as well. The “grantor” (sometimes “settlor” or “trustor”) is the founder of the trust, who signs the necessary documents (declaration of trust) and who transfers his property in the trust. The “trustee” is the one in charge to manage the assets of the trust. He is also the one, who legally owns the assets of the trust. Although the trustee is the legal owner of the trust property, the trustee is not allowed to use the trust property for himself. Instead he is obliged to manage the trust for the benefit of the beneficiaries. The “beneficiaries” are the persons who profit from the trust. From an economic perspective they “own” the trust property because they receive the payouts while the trust exists. Upon the end of the chosen term of the trust the trust assets are usually transferred to the beneficiaries.
Traditionally (back in medieval England) the aforementioned were three different real persons. But that is not necessary. In today’s most common living trusts one person stands for the grantor, the trustee and the beneficiary simultaneously. That does not changes until the person dies. But afterwards the named successor trustee(s) and the successor beneficiary(ies) take over and the trust starts fulfill its real purpose by distributing the assets of the deceased to the named beneficiaries.
A living trust is called a living trust (rarely “inter vivos trust”) because it is set up while you’re alive. In contrary a so called “testamentary trust” is set up in a will and it is created only upon the death of the grantor. Hence testamentary trusts do not avoid probate procedure the focus of this guide is directed to living trusts.
Revocable and Irrevocable Living Trusts
In your research you might have stumbled over the terms “revocable living trust” and “irrevocable living trust”. This is easy to explain: Revocable trusts can easily be revoked or amended as long as you live, whereas irrevocable living trusts are usually carved in stone for your lifetime or even longer. Once set up, they are unchangeable. Irrevocable living trust can have significant tax advantages, but that is to be discussed below.
Even though you “give away” your property to the trust, the transfer does not mean you loose control over your assets. You’re free to do what you like with your trust property as long as you live. That is not necessarily the case with irrevocable living trusts. Therefore the revocability of a trust is the more common option.
Revocable living trusts become irrevocable once you die. They persist until the purpose of the trust is fulfilled. The named successor trustee takes control of the trust and starts to manage the trust as outlined in the declaration of trust. If the trustee is required by the declaration of trust to distribute the trust’s assets to the named beneficiaries right away, the trustee will do so. But living trusts can be used in different ways – thus being highly flexible. For example, the trustee can be bound by the terms of the trust to distribute only the earnings of the trust to the beneficiaries. Thus the beneficiaries will profit from the trust for many years. This setup is often used for a child’s trust. Similar arrangements can be made for relatives with special needs. Those trusts are commonly known as “special needs trusts”. Your trust attorney will help you to find the right solution for your estate.
Advantages of Living Trusts
Besides avoiding probate, living trusts have many other advantages, that – at this point – can only be discussed briefly. As mentioned before, living trust can result in significant tax savings if they are structured in the right way. There are methods to reduce estate and even income taxes with use of living trusts. Unlike in the probate procedure (where your testament will become public) with a living trust your estate planning remains a secret even when you pass away. There is no need to disclose any of your last wishes if you have used a living trust. Finally someone you literally trust will manage your living trusts, because you can choose the trustee yourself. On the contrary in probate procedure a judge and a executioner, who don’t necessarily have to know you, will look after your estate once you have died. That is – in my opinion as Trust attorney – not a good situation.
To summarize my initial thoughts as a trust adviser about living trusts: For most families it is highly desirable to set up a living trust.
We are Estate Planning Attorneys in San Francisco and Sacramento. We offer estate planning and trust work to our clients in San Francisco County, Sacramento County and Contra Costa County. We also serve residents of Solano County with its cities of Fairfield, Vacaville and Vallejo.
