THE LIVING TRUST
Holding property in a trust is an approach to estate planning that has been used successfully to minimize taxation, prevent probate and government interference and protect privacy. It has been said that Patrick Henry wrote the first trust in the United States. The concept has been in use for centuries. A trust is a document that creates an artificial entity, in many ways similar to a corporation, to own your property. Since the trust does not die when you do, it maintains the ability to transfer your assets to the heirs you have chosen without probate, and outside the jurisdiction of the Probate Court.
HOW DOES A TRUST WORK?
The person who creates the trust is called the "Trustor" or "Settlor". The person who controls the trust is known as the "Trustee". The persons receiving benefits from the trust are known as the "Beneficiaries". With a living trust, you can be trustor, trustee, and beneficiary. You retain the right to revoke or amend the trust during your life to meet your needs. You can buy, sell, and use your property in the same way you always have, since you control the trust. The big difference that occurs when you create a trust is that upon your death, the office of trustee is filled by your surviving spouse or someone else whom you have selected to carry out your wishes in the distribution of your estate. This all occurs without probate and the costs, delay and hardship associated with that process.
ADVANTAGES OF A LIVING TRUST
AVOIDS PROBATE AND RELATED COSTS
COMPLETELY FLEXIBLE - CAN BE CHANGED OR REVOKED AT ANY TIME
PREVENTS COURT INTERVENTION UPON INCOMPETENCY OR DEATH LETS YOU AND YOUR FAMILY KEEP CONTROL
PRESERVES PRIVACY - TRUST IS COMPLETELY CONFIDENTIAL
CAN REDUCE OR ELIMINATE ESTATE TAXES
ALLOWS QUICK DISTRIBUTION OF ASSETS TO HEIRS
VERY DIFFICULT TO CONTEST
MINIMIZES HARDSHIP ON FAMILY
AVOIDS TAX PROBLEMS OF MARRIED COUPLES HOLDING PROPERTY IN JOINT TENANCY
PROTECTS INHERITANCES OF CHILDREN FROM PREVIOUS MARRIAGES
AVOIDS THE SERIOUS TAX CONSEQUENCES OF MAKING GIFTS TO CHILDREN DURING LIFE
DOES EVERYONE NEED A LIVING TRUST?
No! California has a Summary Administration of Small Estates Law that allows estates with a gross value of less than $100,000 to be distributed without probate. The catch is that the $100,000 is the gross value of your estate. It is important to understand that the standard is based upon the Gross value of your estate rather than the Net value. For example, if you own a home worth $200,000 with $10,000 of equity, the Gross Value is $200,000 and not the $10,000 of equity.
If you have an estate with a gross value of under $100,000, and if you do not own real property in a different state, and you do not have minor children or disabled beneficiaries, you will probably not benefit significantly from a trust. In that case, a Will would direct the distribution of your estate, without probate. However, a decedent's estate with a gross value of $100,001, must be probated. Further, because a living trust can provide for the care of minor children or disabled beneficiaries by preventing the probate court from taking control of your assets upon death or incapacity. Particularly parents of minor or disabled children, even with an estate of less than $100,000 should still seriously consider a living trust.
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