A Living Trust is an excellent option for people who want to avoid the Probate process. It allows you to manage the assets in your Trust during your lifetime and directs who will receive your property after your death.
A California living trust provides a legal way to bypass probate, which can be lengthy and expensive. It also helps protect family members from petitioning the court for a conservatorship if they become incapacitated.
Avoid Probate
A living trust is an estate planning document that allows you to name beneficiaries and transfer assets without probate. Probate court is expensive, time-consuming, and public. On average, it costs $46,000 to probate a million-dollar home in California. This amount includes attorney and court fees. Probate also makes a deceased person’s finances and outstanding debts publicly available. Many people do not want their private financial information to be made public after death.
A trust also provides privacy to heirs. Unlike a will, which must go through the court to be validated, a trust can be immediately executed. A trustee, such as a family member or a professional trustee, can manage your assets after you die or become incompetent without needing a conservatorship, which can be costly and time-consuming.
Another benefit of a cost of living trust in California is that it can help you save on taxes. The federal government taxes all estates over $5.4 million, but you can avoid this tax if your Trust is formulated as an AB trust (also known as a QTIP trust). A living trust can also help you save on state taxes by avoiding probate.
Protect Your Assets
While probate and estate tax may seem a considerable expense, you can significantly reduce these costs by transferring property into your Trust while alive. For example, if you own a house in your name, sign a deed transferring ownership to the Trust. This will prevent the property from being tied up in probate and save your heirs many thousands of dollars in court fees.
In addition, a living trust can protect your assets from a disgruntled spouse. For instance, if you are afraid your grieving widow will take off with the pool boy or the cocktail waitress at the country club, you can place a trustee over the assets in your Trust so that they are not distributed until she has a new man.
A trust also provides care for physically or mentally challenged family members without interfering with their governmental benefits. This is often called a “special needs trust.” The trustee can pay your heirs’ bills and expenses and protect the rest of the inheritance from creditors.
Avoid Medi-Cal Recovery
Medi-Cal estate recovery is a well-known issue for those looking to receive benefits to pay for long-term care. It can devastate families when they lose a loved one and then face being obligated to pay for their nursing home costs.
With a living trust, the assets in the Trust can be passed on to beneficiaries without going through probate. This includes bank accounts, investments, and property that has to be retitled (houses). A trustee takes control of these assets for the duration of the Trust and will keep beneficiaries up to date on what is happening with their inheritance.
Before January 1, 2017, the state could claim any asset in a Medi-Cal beneficiary’s estate at death. However, with the new law, if the estate is small enough, it can be protected from this claim. This protects homes and other assets often paid for by the benefit. For this reason, we highly recommend our clients consider creating an Irrevocable Medi-Cal Asset Protection Trust while they are healthy.
Avoid Credit Card Debt
A living trust can help you avoid credit card debt that your loved ones must pay after you die. If your estate planning attorney and family members are candid about your debts, a plan can be put in place to pay them off before passing them on.
A California living trust is a tool that lets you transfer your property and assets to a trustee, who will then manage those assets until your death or incapacitation. This is an excellent alternative to a will, which requires your beneficiaries to go through probate court to get your estate and assets.
To set up a trust, you must work with an experienced attorney specializing in trusts and estate planning. There are also costs involved, including the initial consultation, drafting fees, and fees for transferring assets into the Trust. This can add up quickly, and the final price depends on the size of your estate and the number of investments you want to include in the Trust. Once the Trust is established, you must retitle your property into the trustee’s name, which can be done quickly with financial institutions.
Avoid Estate Tax
A California living trust, alongside a will, is an estate planning tool essential for anyone with any significant assets. Whether you’re wealthy or want to leave your young children’s property, a trust can save heirs from many headaches and expenses.
The reason is that a will only allows you to designate beneficiaries for your property and appoint guardians for kids under 18. And it has to go through probate court. This is expensive and often contentious.
If you use a living trust, your family can skip the probate process by filing a small estate affidavit. That will save your heirs thousands of dollars in legal fees.
The other big reason to get a living trust is to avoid estate tax. The federal government levies an estate tax on assets over a specific amount – $5.4 million. The good news is that the new tax law doubled this exemption. A well-drafted trust, often a QTIP or marital Trust, can shield most of your wealth from estate taxes.
