Living Trust Planning

What is a Revocable Living Trust?

A Living Trust is the fundamental document used by most of our clients to provide for the distribution of their estates and the protection of their family members. A Living Trust is revocable, which means that it can be changed at any time by the person creating it. A Revocable Living Trust is actually a legally enforceable contract, which is usually made by one or two persons (a single person or a couple). The Living Trust agreement allows property to be owned by the Trust itself. The Trust agreement has three parties: The Trustmaker, the Trustee, and the Beneficiary. The Trustmaker is the one who makes the trust. The Trustee is the one who has legal authority to manage and control the property owned by the Trust. The Beneficiary is the person who has the right to the Trust property.

In Living Trusts, the Trustmaker, the Trustee and the Beneficiary are the same person (or persons in a joint trust).  The Trustmaker creates the Trust, manages the Trust assets, and has the right to use all Trust assets. Since the person creating the Trust has complete and unrestricted access to the Trust assets, there is no loss of control when assets are transferred into the Living Trust. For example, Mr. Baxter would sign a Deed to his house which would place title to his house in the name "John Baxter, Trustee, The Baxter Living Trust." From that time on, his house is owned by his Living Trust. He would do the same transfer for most of his other assets.  Mr.  Baxter remains the owner of all of his assets, with complete control.

How can a Living Trust avoid Probate? A properly funded Living Trust can avoid probate altogether. The Living Trust agreement designates someone to act as a Successor Trustee after the death of the Trustmaker. Thus, when the Trustmaker dies, another person steps into the role of Trustee. That person then has legal authority over all of the Trust assets. The Successor Trustee is then legally obligated to follow the deceased Trustmaker’s instructions set forth in the Living Trust for distribution of the trust assets.

In our example, since Mr. Baxter transferred ownership of his house into his Living
Trust, his 
Successor Trustee has full legal authority to sell the house after his death.  Mr. Baxter directed in his Trust that all property would be distributed to his three children. Jane, his daughter,  as Successor Trustee could then execute a Deed conveying ownership of the Baxter house to herself and her siblings.  The Successor Trustee could handle the transfer of the rest of Mr. Baxter’s assets to the beneficiaries in similar fashion. There is no Court involvement because the Successor Trustee can legally handle all of Mr. Baxter' trust assets.

In our example, since Mr. Baxter transferred ownership of his house into his Living Trust, his Successor Trustee has full legal authority to sell the house after his death.  Mr. Baxter directed in his Trust that all property would be distributed to his three children. Jane, his daughter,  as Successor Trustee could then execute a Deed conveying ownership of the Baxter house to herself and her siblings.  The Successor Trustee could handle the transfer of the rest of Mr. Baxter’s assets to the beneficiaries in similar fashion. There is no Court involvement because the Successor Trustee can legally handle all of Mr. Baxter' trust assets.

What is Probate?  Probate is the court-supervised process of transferring assets of the deceased to the living. This court proceeding is necessary when you die and your home or other assets remain titled in solely your name.  An Executor is appointed by the court with legal authority to take control of the asset.  Once all probate assets are under the court jurisdiction, then the Executor can seek an order from the Court authorizing the distribution of assets to the estate beneficiaries.  The entire process usually takes one to two years to complete, at substantial cost to the beneficiaries.

How Can a Living Trust Provide for My Children? When you have young children, you need to consider the impact of an inheritance.  What would happen to your child’s share of your estate if you were to die next week?   If you die without having done estate planning, then your child is entitled to receive his or her inheritance outright at age 18!  By establishing a Living Trust, you will be making provisions for the distribution of your estate to your children so that you may continue to assert control and guidance over their inheritance well beyond age 18, and
thereby allow them to grow into adulthood without facing the dangers of direct access to substantial sums of money at an early age. 

Your Living Trust will contain provisions to establish separate trust shares for distribution of your estate to your children at your death.  You will designate a Successor Trustee who will have complete authority over the Children’s Trust assets.  The Successor Trustee will follow your written guidelines for making distributions to your children. Those Trustee guidelines may be very general, or very detailed, depending on your goals and desires. This type of trust is called a General Needs Trust.  For example, you can provide that the trust funds can be used to pay for medical expenses, food, clothing, rent, a college education, to purchase a house, to start a business, or to pay for your child’s wedding. You can also provide guidelines for allowing the Trustee to make outright distributions of set amounts to your child at certain ages when you believe that your child should be able to handle his or her inheritance. The General Needs Trust will provide great flexibility to your Successor Trustee to control the timing and amount of trust distributions, and thereby protect your children from the potential disasters of an outright inheritance at age 18. 
  

 

Listen. Counsel. Plan.®


Call 916-333-5088

or complete online form:

consultation = no charge