How A Living Trust Can Help You

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How A Living Trust Can Help You

The estate planning attorneys at Anastasi & Nielsen have over 40 years of experience helping California families with their estate planning needs. One of the most common parts of many estate plans is a living trust. A living trust can help you and your family pass along assets without having to go through the probate process.

What Is A Living Trust?

A living trust is a legal document among three parties:

  • The settler is the person who creates the trust.

  • The trustee is the person who manages and controls the property transferred to the trust by the settler.

  • The beneficiary is the person who receives the benefit of the trust. In a typical estate plan, the settler, trustee and beneficiary may all be the same person.

A living trust usually is revocable, which means that the settler may amend, change or terminate the living trust at any time. Therefore, the settler has full control of the trust and its assets. When the settler dies, the trust typically becomes irrevocable so that no one can change the settler's plan for distributing the assets after the death of the settler.

Advantages Of A Living Trust

There are three principal advantages to a living trust:

  • A properly funded trust will avoid probate at the death of the settler. This will save considerable costs and hassle for the beneficiaries. For example, on an estate worth $600,000, the statutory executor fee is $15,000. The attorney for the executor receives the same statutory fee, and the fees are calculated on the fair market value of the property, without deducting any liens or encumbrances. So, the cost of probating a $600,000 estate where the executor and the attorney receive statutory fees would be $30,000. All of these fees are avoided with a living trust. Although there are some fees involved in administering a living trust after the death of the settler, they are usually considerably less than the statutory probate fees.

  • If the settler becomes unable to manage his affairs, a court-appointed conservator of the settler's assets would not be necessary. The successor trustee named in the living trust would take over and manage the settler's assets and pay the settler's bills.

  • Privacy: With a living trust, there is no one, single document listing all of the decedent's assets and their value at the date of death, which is a matter of public record in a probate estate. Also, there is no single public record of how or who receives those assets after the decedent's death.

Tax Savings With A Living Trust

Tax savings may be realized with a living trust. With the proper use of tax-savings trusts established in a living trust, in 2013 a husband and wife can transfer up to $10.5 million to their children, or other beneficiaries, without incurring any federal estate tax (the personal exemption is $5.25 million). This amounts to a tax savings of approximately $2.1 million ($5.25 million x 40 percent).

Need For A Will

A will is still needed if you have a living trust, to ensure that any assets that are not transferred to the living trust will still be distributed according to the provisions of the living trust. Thus, the will serves as a backup to the living trust.

Funding The Living Trust

To ensure that probate will be avoided with a living trust, assets must be transferred to the living trust. This is accomplished by transferring title to the assets to the trustee. For example, John Doe would transfer his assets to John Doe, Trustee of The John Doe Trust. John Doe, as Settlor, still has full control and management of the assets, but the assets inside the living trust will not have to be probated at his death.

Schedule Your Free Consultation

To discuss creating a living trust with one of our lawyers, please contact us at our San Jose office by calling 408-294-9700 or by sending us an email. We will walk you through the options that are available to you, and help you do what is best for your family.