THE LIVING TRUST vs. THE WILL ? 2004-2005
A Living Trust is an estate planning tool much like a Will, but with distinct advantages.
For the most part, a Will by definition must be probated in court. A Living Trust generally avoids Probate, its costs and delays. Probate is a time-consuming, public, non private court process wherein the court will decide after court hearings, who takes what, under the will. You can't expect Probate to be a free process, and it is not. It costs anywhere from 3-10% of the Gross Value of your assets, including life insurance, your home, etc., and can take months to years before your heirs can receive your assets. If the market value of your home or assets is $1,000,000, a Probate Fee of some $30,000-$100,000 may be due from your estate. If the money is not available, it must be borrowed or assets must be sold to pay it. Someone has to pay for the attorneys, the judge and the court, that someone is you. Is this anyway to leave assets to your heirs?
There is an alternative which generally allows you to Avoid Probate, its delays and costs. The alternative is the Revocable Living Trust. Your heirs have no delay in receiving the assets that you decided each ought to receive (because the Living Trust effectuates those decisions when made). This trust is a centerpiece set of instructions for who gets what assets from you, including how and when. This trust is revocable, so it can be changed by you anytime. This type of trust is generally considered a tax-neutral device, so there are no tax burdens or tax returns associated with it during life.
The Living Trust usually comes with accompanying documents such as:
- Pour-Over Wills (much like a Will but it pours-over assets into the Living Trust),
- Advanced Health Care Directives (the California authority to instruct your family and doctors how to care for you in the event of illness and incapacity),
- Durable Power of Attorney for Asset Management (naming an attorney-in-fact to handle decisions over your assets or business even if you become disabled),
- Appointment of Conservators for you and/or your spouse, (generally without the need for court intervention. This is a very important device that can preempt disruptive and costly court intervention over you, your spouse, or estate),
- Nomination of Guardians for your children (generally without the need for court intervention. This is a very important device that can preempt disruptive and costly court intervention of your children)
- Funding instruments (to transfer assets into your Living Trust so that it may be effective in its purpose)
Although a Will can do many of the things a Living Trust can do, it generally does not avoid Probate like a Living Trust. This is, in most cases, is a simple but huge advantage.
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This article is not legal, tax or financial advice. This is a brief non exhaustive newsworthy article and may be deemed an advertisement from the State Bar. You must hire an attorney to handle your estate affairs as each client as unique facts, goals and objectives. All Rights Reserved in Copyright, Trademark,etc. Richard Rydstrom, Esq. 949-798-6206
