WHAT IS A LIVING TRUST?
A revocable trust (commonly called a living trust) is a part of an estate plan that helps minimize estate taxes and probate expenses.
A trust is a fiduciary arrangement that allows a trustee (yourself or a third party) to hold assets on behalf of a beneficiary. There are several different types of trusts that can be tailored to your specific estate planning needs to determine when and how the assets pass to the beneficiary.
A major benefit to having a trust is that it will usually allow you to avoid probate, which allows beneficiaries to gain access to the assets more quickly than if the assets were transferred using a will. That’s right, even if you have a will, the estate will still go to probate court to be distributed to the beneficiaries. Probate court in California can take over a year to distribute assets, and statutory mandated fees average about 4% of the full market value of your assets and move down on a sliding scale as assets increase. For example, if your home is worth $900,000 (and you still owe $700,000 on it), and you have $600,000 in financial assets, the court will assess your assets on the full $1,500,000 and probate fees are estimated to be $28,000! That is a hefty price to pay for not planning ahead. Further, the court can approve additional compensation to be paid to the personal representative’s attorneys. In short, probate is expensive, very expensive. Investing into a well thought out estate plan now can save your estate tens of thousands of dollars.
In addition to revocable trusts, if you set up an irrevocable trust (often this is done for life insurance policies and called an ILIT for short, or an Irrevocable Life Insurance Trust), the trust may not be included in your taxable estate, so fewer estate taxes will be due upon your death. This is another estate planning strategy worth discussing with an experienced estate planning attorney.
Chudleigh Law P.C. helps a wide range of clients throughout Orange County, California to plan for the future with an estate plan that is tailored to their specific needs.