Ocouplene of the most frequent questions that families ask is whether a Will is good enough, or whether they should establish a Trust as well. Often, the answer is, “it depends.” Depending on your financial and estate planning goals, a Trust may be right for you. Our guide below is intended to provide some tips.

What is a Trust?
A revocable or living trust is a written document providing for the management of your property which becomes effective while you are living, unlike a will which takes effect after your death. A trust is set up for a trustee to manage your property for your benefit during your lifetime or in the event of your incapacity. Ordinarily you serve as the sole trustee until you die or become incapacitated. After your death, the trust document will provide for your successor trustee to distribute any remaining property to those persons or entities you have chosen (just as in a will) or provide for the continued management of your property by that successor trustee for many years, with the ultimate distribution as you direct. The primary advantage of a revocable trust over a will is that upon your death, the administration of your estate in probate court is avoided, and the distribu­tion of your property is governed by your trust outside of the probate court system.

The Probate Process
Probate is the process by which a person’s property is inventoried and distributed, after their passing. Most people try to avoid probate because it can be time-consuming and expensive, as well as a hassle for the loved one’s heirs.  It is important to note that not every piece of the deceased’s property goes through the probate process. 401(k)s, life insurance, pension accounts, and similar accounts are all excluded.  Bank accounts, homes, personal property, and other assets, on the other hand, must be probated.

Avoiding Probate Through a Living Trust
There are a number of ways to transfer assets to one’s heirs without going through the probate process, and these include making gifts before death, adding pay-on-death designations to bank accounts, or holding accounts, homes, or property in a joint tenancy with a right of survivorship, or adding the beneficiary’s name to life insurance or other accounts.  A living trust, however, can provide specific instructions as to what should be done with your assets upon your passing, in a manner that avoids probate.

What are the Disadvantages of a Living Trust
Living trusts do have disadvantages, and these include the costs and fees of having them prepared, and potentially modified later on down the line. A lawyer-drafted living trust generally ranges between $1,500 and up, depending on how complex the wishes are. Another disadvantage to a living trust involves the time and effort to re-title assets that will now be held in Trust.  Because the Trust is a legal entity, the Trust will become the owner of all assets transferred into the Trust. So, a bank account held in Trust will be in the name of the Trust, as accountholder. The same will be true for cars, homes, boats, or other assets being transferred into ownership in the name of the Trust. Sometimes, it can take time, effort, and fees to update all asset registrations.

Should You Have a Living Trust?
Living trusts are often not right for middle-income individuals who are in good health. Here are examples of individuals who might, on the other hand, benefit from a living trust:

  • Married with children, with a desire to direct how assets are to be distributed to children over children’s lives
  • Divorce individuals with remarriages and/or stepchildren
  • Individuals with over $150,000 in assets with specific instructions on how estate/assets should be distributed
  • Wealthy individuals with assets over $5 million
  • Individuals who wish to leave certain portion of assets to charity

Is there Anything Else I will Need?
Living Trusts are generally prepared alongside a few other estate planning documents, such as Advanced Healthcare Directives (also called “Living Wills”) and Powers of Attorney for financial and healthcare decisions. Often, you can purchase the set as a package.

How Often Will I Need to Update the Trust
The Trust should be updated when major life events happen, including the birth of children or grandchildren,  the acquisition or sale of large assets, marriages, divorces, the death of heirs, or similar events.  Consulting your lawyer every few years will help keep your Trust up-to-date and accurate.

 Next Steps
If you believe you might benefit from a living trust, give us a call and we will be glad to discuss your options with you in greater detail. A free and confidential consultation is available by calling (213) 403-0130 or emailing info@axislegalca.com.

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