Should I consider a Living Trust?
I highly recommend revocable living trusts for everyone who owns a home or other assets.
A living trust has two primary benefits: It avoids probate court costs and delays after the trustor (trust owner) dies , and sets the management of the trust assets if the trustor becomes incapacitated. Suppose you become incapacitated with Alzheimer’s disease or a severe stroke. If your assets are in a living trust, and they need to be sold or refinanced to provide for your care, your successor trustee can handle without probate court interference. If you assets are not in a living trust, a conservator will have to be appointed by probate court to manage your assets.
AARP Explains Probate:
“Probate is a state court process that oversees the administration of your estate...Horror stories about the bureaucracy delay, and attorney’s fees associated with probating a will have inspired untold thousands of Americans to establish trusts…” AARP, Nov. & Dec. 2007, p. 36
Without a Living Trust, The State of CA will seize your assets and your heirs will have to go to probate court.
Probate is a proving process that guarantees the authenticity and legality of your Last Will and Testament. At your death it permits your financial custodians (banks, credit unions, stockbrokers, registrar of deeds, etc.) to safely release your savings accounts, stocks, real estate, etc. into the possession of your legal heirs, free from the fear of possible lawsuits by disinherited or disgruntled heirs.
This process of validating your will “freezes” your assets up-to 24 months, and consumes up-to 15 percent off the top of the estate in attorney fees and court costs.
Until the probate process is completed, your bank and other financial custodians will simply refuse to release your assets to your heirs.
During the course of the procedure the assets are usually frozen and left to twist and turn in the ups and downs of fluctuating markets. Most family financial needs must be put on hold (often for months) while the court is sifting through potential heirs, creditors, debtors, and possible legal challenges to the will. Even worse, if there is a mortgage, someone has to pay it during probate. If the mortgage is not paid, the property goes straight to foreclosure.
The Four Falsehoods Of Trying To Do It Yourself:
1. A Last Will and Testament avoids probate
The Bottom Line: Unlike a Will, A Living Trust…
Untrue. In fact, a will is the very reason for probate. A will must be guaranteed or "proven" in Probate Court. If you have a will, your estate is automatically headed for probate. This process takes 18 months, which translates to $$$ taken from the estate to pay court costs.
2. Joint ownership of assets with a spouse avoids probate
Joint ownership of assets with a spouse simply delays probate until the death of the surviving spouse. Probate occurs after both spouses are dead when there is no one left alive. The trust really provides its value after the death of the first spouse. How? It names a backup power of attorney to help the remaining spouse upon disability. Later, after the second spouse passes away, the assets in the trust pass immediately per instructions in the trust.
3. Giving the assets to the children, jointly or wholly, before death avoids Probate
This is correct, however, the practice exposes the children to exorbitant capital gains taxes that usually far surpass what it would have cost to probate the estate! It also exposes the parent's assets to their children's creditors - assets they could easily lose to settle a judgment against one of their children!
4. I have beneficiaries on my bank accounts!
All you have done here is allow someone to take these funds if you are deceased. However, no one has access to this account of you are disabled! Your trust includes a named power of attorney, who will be granted access to bank accounts to help you if you are disabled.
- Avoids probate at death (multiple probates if property is owned outside CA)
- Prevents the court from taking control of assets when incapacitated
- Pulls all assets into one plan
- Assets are handed down to beneficiaries quickly without delay
- Money can stay in trust until you want beneficiaries to take possession
- Inexpensive compared to thousands that would be spent to clean up estate without a trust
- Can make changes or revoke at any time
- Extremely difficult to contest
- Prevents the court from taking control of assets for children under 18 years
- Can protect/hold assets for people with special needs
- Sleep a little better at night knowing you have set up a "contingency plan
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