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FAQ on (revocable) living trusts

If you have resided in California for any length of time and own real estate here, you may want learn about the benefits offered by living trusts. These trusts can meet a number of estate planning goals, but must be drafted and funded carefully.

What is the benefit of a living trust?

You can place assets (a home, vacation property, bank accounts and other investments) into the living trust. You remain in control of these assets during your lifetime, but you may name a successor trustee who steps in when you are no longer able to make decisions or after your pass away.

The living trust agreement sets up a structure that:

  • Grants a trustee the right to manage assets in the trust and
  • Names who should receive what after you die.

This can avoid the need for a formal probate, which opens your estate to public view and adds costs and time for your loved ones. Whoever you appoint as a trustee is held to a high standard of a fiduciary.

Is a living trust right for everyone?

As with most estate planning, there is no one-size-fits-all solution. The California State Bar Association has published detailed guidance. In general, a living trust is a good solution for couples with complex investment portfolios that may include real estate, rental properties, business ownership interests and securities.

The higher the value of your assets, the more benefit a living trust provides - the general tipping point is rather low. Consider establishing a living trust when the value of your assets surpasses $150,000 (equity in your home might be enough in the current market).

Can a living trust avoid the need for a conservatorship?

The answer is yes. If you are in an sudden accident or unable to make important decisions due to memory loss, your chosen successor trustee steps in.

Why would you want to avoid a conservatorship? They take time and are often costly. They require a judge to determine whether an individual is competent to handle his or her own finances. They offer you no control over who is appointed as a conservator. They also carry the added burden of filing regular reports with the court.

These proceedings are public and often less flexible in managing certain assets like real estate or business interests.

To discuss whether a living trust might be right for your family, schedule a meeting to speak with an experienced estate planning attorney. The process is less burdensome that you image. But initial set up must be handled correctly or your loved ones might not be adequately protected.

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