This is probably the most widely held misconception about estate planning. It is true that there are trusts that are used by high net worth individuals that have complex concerns. However, the living trust is a device that is ideal for a wide range of people that are not extremely wealthy.
A living trust is revocable, and the word is self-explanatory. If you ever want to dissolve the trust and take back direct personal possession of the property that you conveyed into it, you can do so.
Your control is not limited to the power of revocation. If you establish a living trust, you would act as the trustee and the beneficiary while you are alive and well. As a result, you would have the latitude to change the terms at any time, and you could add or remove property from the trust.
The answer to this question is entirely up to you. Any willing, competent adult can legally serve as a trustee. This being stated, the task will require significant financial acumen in many instances. Plus, there could potentially be conflicts of interest if there are multiple beneficiaries to the trust.
There is an alternative if you do not know someone that would be a good choice to serve as the trustee. Trust companies and the trust department of banks offer trustee services, so you could engage professional assistance before you pass away.
Short of this, if you select an individual as the trustee, we could be enlisted to provide assistance if it is necessary.
If you were to use a last will to state your final wishes, unless the estate is very modest, the probate court would supervise the administration of the estate. The full probate process will typically take close to a year, and no inheritances can be distributed during this interim.
In addition to the time factor, there are considerable expenses that accumulate during probate. Another drawback is the loss of privacy. Probate is a public proceeding, so anyone that wanted to find out how the assets were distributed could access probate records.
All of these drawbacks are avoided if you use a living trust as an alternative, because the trustee would be empowered to distribute the assets outside of the probate process.
Another benefit is the ability to include spendthrift protections. Through the inclusion of a spendthrift provision, you could protect the assets from the beneficiary’s creditors. You could also instruct the trustee to distribute limited assets over an extended period of time.
Unfortunately, a significant percentage of people become unable to handle their own affairs at some point in time. There are multiple causes of incapacity, but Alzheimer’s disease is a leading culprit.
When you have a living trust, you can account for this eventuality. A disability trustee can be named in the trust declaration that would assume the role if you ever become unable to make sound financial decisions. It could be the successor trustee that will administer the trust after your passing, but this is not necessary.
In California, a Heggstad petition could potentially be filed under these circumstances. If it can be proven that you intended to convey these assets into the trust, the court could allow for the postmortem transfer.
A pour over will could also be created as part of the initial plan. This type of will is used to direct your personal property into the trust after your death.
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If you are interested in creating a living trust, or if you have any other estate planning concerns, our doors are open. You can send us a message to request a consultation appointment, and we can be reached by phone at 310-337-7696.