You will be the “trustee” of your living trust which means that during your lifetime, you will have revocable trust formation control over the living trust’s assets. Avoidance of Probate The main advantage for a living trust is the avoidance of probate.
Probate is a state court proceeding in which your property is transferred to your heirs. Since probate only affects assets which you own at the time of your death, assets placed in a living trust are not owned by you, therefore, there is no probate on those assets. Confidentiality and Continuity of Ownership Since probate is a court proceeding, your Will and the valuation of your assets are open to public inspection. A living trust, however, is confidential and the transfer of assets from the living trust is kept from public view. When the grantor of a living trust dies or becomes incapacitated, the successor trustee continues the administration of the living trust. Advantages to a Will A Will only takes effect upon the death of the person, therefore, nothing has to be transferred or administered currently. Also, the probate estate is a separate taxpayer which can select a fiscal year end — an advantage over a living trust.
Disadvantages of a Living Trust All assets which are to be owned by the living trust must be transferred currently into the living trust. In addition, the trustee must title and sign all documents relating to the living trust as “John Doe, Trustee, John Doe Revocable Trust dated January 1, 1989”, instead of merely signing his or her name. All purchases and sales must be conducted in the name of the living trust. Third parties who are used to dealing with an individual often have a difficult time dealing with the trustee of a living trust. Often they will insist that the living trust agreement be provided or that their attorneys review the living trust, at the living trust’s expense, before they will transact business with the trustee. To summarize, the transfer of assets to the living trust must be carefully and properly documented, and dealing with third parties tends to be difficult.
The living trust, because of the transfer of documents and its operation as a viable entity during the grantor’s lifetime, make it more expensive to draft and implement than a Will. Conclusion Initially a living trust has greater costs with respect to its formation and implementation than a Will, but those costs are usually a small percentage of the amount saved through the avoidance of probate costs at the time the grantor dies. Additionally, if confidentiality and continuity of ownership are important objectives, then the living trust is the document of choice. Irrevocable Life Insurance Trust An irrevocable life insurance trust is an ideal vehicle in which to place a life insurance policy. In this manner, the life insurance proceeds do not become part of the decedent’s estate for estate tax purposes. The annual life insurance premiums are paid by the grantor contributing the necessary funds to the trust and the trustee then pays the premiums. 1,000,000 life insurance policy on the life of the grantor.
The principal appoints an agent to make decisions regarding the property of the principal during the time of incapacity. The durable power of attorney is similar to the general power of attorney except that it only takes effect upon the incapacity of the principal. This power of attorney involves only health care decisions and does not affect the principal’s property and assets. Without a power of attorney for health care, doctors and hospitals may be reluctant to terminate life-supporting treatment for the principal, absent a court order. Pour-Over Will This Will is necessary when a living trust is used and is used as a safety net for those assets which have not been titled in the name of the living trust. Copies of all mortgages, trust deeds, and installment obligations held by the grantor under which payment is being made to the grantor. The names and addresses of all general partners for any partnership interest held.
The name and address of all transfer agents for all stock certificates held. A copy of any stock certificate held in a closely held corporation. Copies of all leases and promissory notes and the name and address of the parties to the leases and promissory notes. Title documents for cars, boats or other property which have title documents.
Financing statements for all property for which a UCC-1 financing statement has been filed. Titles of any books, publications, musical scores or other original creations and any federal copyright registration numbers thereon. This internet site provides information of a general nature for educational purposes only and is not intended to be legal or tax advice. This information has not been updated to reflect subsequent changes in the law, if any. Counselor at Law, located in Temecula CA, is committed to providing comprehensive estate planning, probate and trust administration services. If you become incapacitated, who is supposed to make decisions for you about the management of your property or your health care?
A durable power of attorney allows someone you designate to act on your behalf. It is usually included as part of an estate plan. Tax Reform and Charitable Estate Planning: Glass Half Empty or Half Full? When Your Parents Remarry, Everyone Is Happy, Right? Our law firm represents estate planning clients from Riverside County, North County San Diego, Temecula, Murrieta, Lake Elsinore, Canyon Lake, Wildomar, De Luz, Fallbrook, Bonsall, Escondido, Valley Center, Rainbow, Hemet, Riverside, Menifee, Sun City, Canyon Heights, Canyon Lake, Quail Valley, Pechanga, and Pala. Complimentary Consultations provided for individuals or couples seeking to create or update their own estate plan and for those individuals seeking counsel regarding opening a new probate proceeding for a family member who has passed.
We also offer a one hour complimentary consultation for the named successor upon the death of an estate planning client. When you set up your revocable living trust, you must name a successor trustee — someone to step in and administer and settle your trust for you after your death. He would also be called upon to serve should you become mentally incapacitated. Most trustmakers act as trustees of their revocable trusts, unlike with an irrevocable trust where someone else must be appointed.