A will lets you determine how your property will be distributed when you die and must be accomplished through the probate court, and a revocable living trust also accomplishes that task without the need to use the probate court. The owner of the trust can make strict stipulations about how specific assets should be distributed, says Barron’s in the article “Revocable Living Trusts Can Help Your Heirs Avoid Probate. Here’s How They Work.” Another advantage of a revocable trust—avoiding probate, which gives the trust owner far more control over asset distribution.
Remember, probate is a process that takes place under the supervision of a judge in a court. All assets and actions during the probate process are subject to court approval and public view.
It’s best for individuals or couples with complex estate planning needs to meet with an estate planning lawyer, who will discuss whether a living trust is the right option. One question couples should ask: does it make sense for them to have a joint trust or should it be two separate ones?
When a trust is created, it needs to be funded. Assets such as real estate, bank accounts, taxable non-retirement investment accounts all need to be retitled so they are owned by the trust. The person who creates the trust has no restrictions as to how the assets within the trust are used while they are alive. The trust can also be revoked during the owner’s lifetime, but it’s more common for owners to make tweaks to the trust.
Trusts are very popular in states like California and Massachusetts, which have more restrictive probate laws than other states. Trusts are very good for people who own property in multiple states and would otherwise have to deal with probate in multiple states. Trusts are also excellent for people who wish to maintain privacy about their assets, since the trust’s contents remain private. A will, once it enters the probate process, becomes a public document.
Someone who does not own his or her own home and has limited assets may prefer to use a will, which is less expensive and simpler than a trust. Once they do own a home and have more extensive assets, they can always have a trust created. In California, if you have assets that do not otherwise transfer automatically at your death and whose total value exceeds $166,250, we recommend a trust.
A living trust is part of a larger estate plan. Other estate planning documents are still needed, including a durable power of attorney for finances, an advance health care directive, a nomination of guardianship for families with minor children and a will.
People who have revocable trusts should ask their estate planning attorney about something called a “pour-over” will. This is a will that ensures that any assets accidentally left out of the trust are added to the trust after the death of the owner. If the majority of assets are in the trust, the probate of the pour-over will should be much simpler and there may even be a “fast-track” option for assets under a certain dollar level.
One of the main goals of our law practice is to help families like your plan for safe, problem free, and successful transfer of assets to the next generation. Call our office today to schedule a time for us to review your estate plan and identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.
Reference: Barron’s (February 22, 2020) “Revocable Living Trusts Can Help Your Heirs Avoid Probate. Here’s How They Work”