A Living Trust, also know as an Inter Vivos Trust, is a legal instrument transferring ownership of property.  With a Living Trust assets are place into the trust for your benefit during your lifetime, upon your death those assets pass to the beneficiaries that you have named either outright or in the manner you chose.

Generally, speaking a Living Trust does three things a Will does not. First and most important, a Living Trust avoids probate. Probate is the judicial oversight of a decedent’s estate. People want to avoid probate because it is time consuming, generally more costly than both trust creation and administration combined, and it is a matter of public record. Second, a Living Trust can help minimize estate taxes. Currently, any person who dies with an estate of 5 million (adjusted for inflation) or less will not be subject to Federal Estate Tax due to the Federal Unified Credit. A Living Trust can preserve a deceased spouse’s Federal Unified Credit so that it will not be taxable as part of the widow’s or widower’s estate. Third, A Living Trust offers control beyond the grave. While this term sounds creepy, it is in fact quite ingenious. Nobody wants to imagine what will happen if they die with young children or teenagers, but the possibility exists. Experience shows that giving a teenager a significant lump sum of money results in a new car and a lot of fun… for a short period of time. A living trust allows you to stagger payments for children or teenagers, thereby preventing them from frivolously spending their inheritance. A Living Trust can also provide incentives for kids to get an education or seek gainful employment by conditioning the receipt of payments on attending school or receiving a paycheck

It is a common misconception that only the very wealthy are in need of a Trust. In fact many people who are not particularly wealthy still benefit from having a trust. However, a Trust is not for everyone. Typically younger couples or those without real estate, or children may not need a trust. The general rule of thumb is a person with no real estate, and less than $150,000 in assets does not need a trust. In California, if you die with no real estate and less than $150,000 a probate is generally not required. If you have either of these things a simple trust will prevent your loved ones from dealing with the time and expense of probate, and reduce potential family conflicts concerning the disposition of your estate.

During your lifetime, you will be the trustee of your trust. However, if you are not comfortable as trustee or not able to manage your trust, the trust allows you to select another person to manage it for you. Upon your death the trust directs who will step into your roll as the Trustee. You will want to pick a responsible, financially savvy person that you believe will carry out your wishes after you are gone.

Placing your assets into trust is called trust funding. Your assets must be transferred to the trustee of your living trust to avoid conservatorship proceedings if you become incapacitated, or the probate process at your death. Deeds to your real estate must be prepared and recorded. Bank accounts and stock and bond accounts or certificates must be transferred as well. These tasks are not necessarily expensive, but they are important and do require some paperwork. Tangible assets without title such as furniture, furnishings, jewelry, etc. are given to the trustee by an assignment of personal property and listed in the trust as trust assets as well. The important thing to remember is not to leave more than $150,000 or any real estate out of the trust.

A basic Trust Package consists of the Declaration of Trust, Pour-Over Wills, and Powers of Attorney for both Finances and Health Care Decisions. The Living Trust is the primary document of your estate plan, while the Will and Financial Power of Attorney act as safety nets for any assets left outside of trust. The Will also allows you to name guardians for minor children if you have any. The Power of Attorney for health care, often called a Living Will, allows you to give another party the ability to make health care decisions on your behalf when you are unable to make such decisions yourself.  It also gives that party access to your medical information, and the ability to carry out your wishes pertaining to end of life decisions.

You should hire an experienced estate planning attorney to prepare your trust. Attorneys are responsible for staying on top of changes in the law and tax changes that may affect your estate plan. Be wary of individuals or insurance companies that sell trusts as an incentive to deal with their company. If you are offered a trust from such a person make sure it is prepared by a licensed attorney and meet with that attorney personally. Today we are seeing more and more estate planning software. While the software is getting more intuitive, it is far from perfect.  No estate planning software has casual conversations or the ability to recognize a client’s area of concern because of a visible change in manner or demeanor. However, if you use software to develop your estate plan, please have it reviewed by a licensed attorney for any errors or omissions.

Other types of Trusts used for estate planning are Irrevocable Life insurance Trusts or ILIT, Annuity Trusts, and Charitable Trusts, Personal Residence Trusts, etc. While these trusts are used less frequently they do serve their purpose of reducing estate tax and distributing as much wealth as possible to your beneficiaries.

A Living Trust will very in price depending on the size and extent of your estate. Generally, I can prepare a basic Living Trust package for $1500. This price includes the Living Trust, Will and Power of Attorney for Finances and Health Care as well as the transfer of the primary residence to the trust. Additional real estate transfers are billed per property.  I generally charge a flat fee for drafting estate plans and I will inform you of the total cost before any work is done.