Even today, some people still view Living Trusts as something “only for the rich”. This misconception is far from reality. Over the last two decades, the popularity of Living Trusts has soared. Living Trusts are one of the most common estate planning tools in use today.
This legal document, usually drafted by your estate attorney, creates a totally separate entity called a Living Trust. The reason it is called a Living Trust is because it is a trust arrangement that is created by you while you are still living and after you die it still will continue to exist. Revocable Living Trusts are the most common form of Living Trusts and, as the name implies, can be revoked or amended by the creator as long as the creator remains competent.
A Living Trust is comprised of three different parties. First is the party that creates the trust, that’s you, referred to as the “Grantor” or “Trustor”. Secondly, there is the “Trustee”, the person named by the Trust as the controller of the Trust’s assets. Often this party is the same as the creator or grantor. The third party to a Living Trust is the beneficiary or beneficiaries. When the Trustor passes away the beneficiaries, or heirs, are the ones that will benefit from the Trust.
One of the main benefits of having a Living Trust is to avoid probate of your estate after your death. If you do not have a Living Trust your estate will probably have to go through probate. Probates are usually required of estates with a value of $150,000.00 or more. If probate is necessary someone needs to start the process with a petition to the Superior Court. If there is a will, then usually the executor will start the ball rolling. Usually, the executor hires an attorney to help with the process. A probate can take eight to twelve months. The cost of probate is set by California probate court; it starts at 4% of the estate and declines as the estate amount increases.
Living Trusts have many more benefits that your estate attorney can explain to you. Depending on the size of your estate and the complexities of family situations, Living Trusts can be structured in a multitude of ways to preserve your assets for your heirs and avoid thousands of dollars in probate fees. In addition, your attorney may suggest creating an LLC, or Family Limited Partnership if the size of your estate warrants.
If you do not have a Living Trust it would be prudent to make an appointment as soon as possible with estate planning attorney to discuss the benefits.
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