Introduction to a Living (Revocable) Trust
(information summarized from the State Bar of California)
Living trust is a legal document that you use to control your assets during your life and that your trustee can use to direct your assets when you are incapacitated or at death. Your assets (bank accounts, brokerage accounts) are put in the name of a trust (instead of your own) and administered by the trust.
You manage the trust during your life and your successor trustee (an institution or person) will direct it when you are unable or unwilling to do it yourself. This type of trust is called a revocable living trust or revocable inter vivos trust or grantor trust. Your trust can be amended or revoked while you are competent.
- A living trust agreement gives the trustee the legal right to manage and control the assets held in your trust.
- Instructs the trustee to manage the trust’s assets for your benefit during your lifetime
- Names the beneficiaries (person and charitable organizations) who are to receive your trust’s assets when you die
- Finally, it gives guidance and certain powers and authority to the trustee to manage and distribute your trust’s assets – the trustee is a fiduciary.
What can a living trust do for me? It can allow someone of your selection to make financial decisions and act on your behalf if you’re unable to manage them yourself. In setting up your living trust, you may serve as its trustee initially or you may choose someone else to do so. You can name a trustee to take over the trust’s management for your benefit if you ever become unable or unwilling to manage it yourself. At death or if disabled your trustee like a will’s executor and would then gather your assets, pay any debts, claims and taxes, and distribute your assets according to your instructions. Unlike a will, this can only be done without court supervision or approval.
Should everyone have a living trust? No.
What are the disadvantages of a living trust? No court supervision.
Cost of trust can be higher than creating a will.
Creates additional paperwork since lenders don’t usually lend to a trust and you may need to take it out of the trust (by deed) before you can take the loan on any real property.
If I have a living trust, do I still need a will? Yes. Your will affects any assets that are titled in your name at your death and are not in your living trust or some other form of ownership with a right of survivorship.
Will a living trust help reduce the estate taxes? No.
Will I have to file an income tax return for my living trust? During your lifetime the trust is identified by your social security number and all income and deductions related to the trust’s assets are reportable on your individual income tax returns.
How do you find an attorney to work with you?
Ask us for a referral or ask a trusted friend. You can also call the California State Bar – certified referral service. www.calbar.ca.gov/lrs or 1-866-442-2529. You may want one who is ‘certified specialist in estate planning, trust and probate law’ although some good estate attorneys do not have this certification. You could also check a list at www.californiaspecialist.org and click Specialist Search. Some attorneys charge hourly and others have a fixed/flat fee. Always be wary of insurance an annuity sales companies giving estate planning advice. You may want the pamphlet “How Can I Find and Hire the Right Lawyer?” from the state bar: www.calbar.ca.gov
** The information provided is NOT legal advice it is only provided for informational purposes to guide you through this process **