Los Angeles living trusts are a particularly useful estate planning tool you should consider including in your estate plan. Before you make that decision, though, there are a few misunderstandings about these tools you should be aware of. Three of the most common misconceptions are (1) you must relinquish all control of your property, (2) they can help you avoid estate taxes, and (3) they are the only estate planning tool you will need. This article will discuss all of these issues.
You Do Not Have to Give Up Control of your Property
Creating a trust in general requires that trust become the legal owner of the property you transfer to that trust. A common misconception is that, in doing so, you are required to relinquish all control over your property once it is transferred to the trust. That is not the case with a living trust because it must be revocable. That means you will always have the ability to make any changes to the trust and the trust property at any time during your lifetime. In fact, that is one of the greatest benefits of having a living trust. It also means that you maintain the authority to manage the trust and use all of the property owned by your trust.
You Cannot Avoid Estate Taxes with a Living Trust
A dangerous misconception is that a living trust can allow your estate to avoid estate taxes. While some trusts do, they must be irrevocable, which is the opposite of a living trust. Due to the revocable nature of a living trust, the assets are not permanently removed from your estate. For this same reason, living trusts cannot provide asset protection. If you need asset protection or estate tax relief, you should discuss an irrevocable trust with your attorney.
You Should Probable Include More than Just a Living Trust in Your Estate Plan
Although there are many benefits to having a living trust, it simply cannot provide everything you need for a comprehensive estate plan. For instance, living trusts do not allow you to name an executor or guardian for your minor children. To accomplish those tasks, you also need a last will and testament. Discuss all of your comprehensive estate planning options with your attorney.
What is Required to Create a Living Trust?
Now that you know the truth about living trusts, there are a few straightforward steps required to create one. Your estate planning attorney will meet with you initially to gather information about your particular needs. Using this information, your attorney will then draft the trust document outlining all of the terms of the trust. Basically, these are the instructions your successor trustee will ultimately follow. Once the trust document is created, the property you want to include in the trust is then transferred or “funded” into the trust. It is that easy if you have the assistance of an experienced Los Angeles living trust attorney.
There are Both Advantages and Disadvantages to Having a Living Trust
The main reasons most clients create a living trust is to avoid the lengthy and costly probate process. But, before you decide whether a living trust is the right choice, you should consider both the advantages and disadvantages of creating a living trust. One of the major advantages is probate avoidance. But a disadvantage is how limited living trusts can be if you fail to include all of the property you intend.
Living Trusts Can Help You Avoid Probate
Living trusts often save time and expense in estate planning. There are also valuable tax advantages, as well. For instance, a living trust may decrease the amount of estate taxes owed by your estate. Also, because living trusts avoid probate, the terms of your trust document will remain private.
Living Trusts are Legally Enforceable by the Courts
One great advantage of a living trust is that it is legally enforceable in court. Unlike a last will and testament, which only describes how you want your property distributed, a living trust is a binding agreement between you and your trustee to perform certain tasks. This means that in the event someone challenges a transfer of assets made after your death, the court can easily enforce the terms of your trust document.
Living Trusts May Be Limited in Coverage
One disadvantage to using a living trust is that is generally more limited in its coverage than a last will and testament. That is because a living trust refers only to specific property – the property that was funded to the trust. If you fail to include all of your assets in your trust, then the remaining property will need to go through the probate process in order to be distributed after your death. If one of the purposes of your estate plan is to avoid probate, then you need to be sure to include all of your property in your trust.
Join us for a free seminar today! If you have questions regarding estate planning, trust contests, or any other trust administration issues, please contact the Schomer Law Group either online or by calling us in Los Angeles at (310) 337-7696, and in Orange County at (562) 346-3209.
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