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Living Trust
Living Wills
Probate
Wills
A living trust (also called a “revocable living trust” or “inter vivos trust”) is a type of trust created for the purpose of owning an individual’s assets during the person’s lifetime and for distributing those assets after death. A living trust is commonly used to pass assets to one’s heirs without the need for probate.
Avoiding probate can help avoid the costs, delays, and public nature of probate. The costs of distributing assets through a living trust can be significantly lower than that of probate for the same estate. Furthermore, the probate process is public, whereas distribution under a living trust can be kept confidential.
Living trusts also can be used in planning for the contingency of incapacity. The individual setting up the trust may designate another trustee or co-trustee, with the living trust providing that either trustee alone may act on behalf of the trust. The trust instrument may also provide that other the co-trustee shall act as sole trustee if the grantor (the individual establishing the living trust) becomes incompetent.
Despite the advantages, there are also some negative aspects to think about when considering a revocable living trust. Beneficiaries do not save on estate or state inheritance taxes. Also, they are expensive to set up, and the expense is immediate, not after the grantor’s death.
A common misunderstanding regarding living trusts is that they shelter assets from having to pay the estate tax. This is not correct. However, a married couple having a living trust can effectively double the estate tax exemption amount (the amount of net worth above which an estate tax is levied) by setting up the trust in a certain way.
Our law firm has extensive experience drafting documents necessary to establish a revocable living trust to variety of needs. It is possible to utilize form living trusts that are available online or through print books. The old motto “you get what you pay for” is certainly true, and these boilerplate living trusts often are quite basic. Our experience shows that no two individuals or families have the same estate planning needs, thus we are able to prepare a custom living trust that fits your specific needs. Something as important as a living trust should be properly drafted by an experienced estate planning attorney, to ensure you and your loved ones are adequately protected by your estate plan.
A living will is a legal document that expresses the desires of the author with regard to medical decisions, which are used in the event that the author is incapacitated and unable to act on his or her behalf. Living wills, also known as advance health care directive, are often executed in conjunction with a financial power of attorney accompanied by a specific type of power of attorney.
A living will provides specific instructions regarding the treatment of the author should the author be unable to give consent due to incapacity. In some instances, a living will details treatments that are forbidden, or the desire of the author to refuse food or water. Living will recently received attention with the Terry Schiavo case. The Schiavo case could have been avoided if she had signed a living will- which would have clearly indicated her wishes. Mrs. Schiavo was in her mid twenties when she had her accident, which illustrates the need for everyone to have their own living will. Living wills can be purchased online or through books, however it is recommended to utilize an attorney to ensure that your living will reflects your desires and is properly executed.
A living will should not be confused with a health care power of attorney, which appoints an individual to make health care decisions on your behalf if you are incapacitated.
Probate is a general term used to describe the process of administration of estates of dead persons, including those with or without wills, under supervision of a court. Through the probate process, a deceased individual’s property is legally transferred to the intended beneficiary or beneficiaries. Probate is required when a person dies with a will, without a will (called “intestate”), or with a living trust that was improperly created or funded.
In California, the steps for probate are:
* Someone who has an interest the estate notifies the Court that the individual has
passed away
* An inventory of the deceased’s assets is taken
* The assets are appraised (valued)
* The deceased individual’s debts and taxes are paid
* The validity of the deceased person’s will (formal or holographic) is proved before the
court
* Over a period of time, the remainder of the assets are distributed in accordance with
the will, or under state intestacy laws if the individual died intestate or if the individual’s
will was invalid.
The time intensive nature of probate means that if there is no estate or property to be distributed then there is no need to go through probate. In California a summary probate proceedings, which is faster and less expensive than a traditional probate, is applied if the gross assets in the estate are less than $100,000.
Another component of probate is that in addition to distributing the property under the terms of a will of a deceased individual, it allows objections to the will by other parties. These potential objections can include: the deceased was not of sound mind when the will was made; that another will was made at a later date; the will was forged; or the deceased’s decision was improperly influenced.
Some assets of an individual are exempt from the probate process. An example of this are “pay on death” benefits, such as a life insurance policy or an individual retirement account.
Probate has several drawbacks. First, probate is a public process before a court. Second, probate can be a time consuming process. Third, the probate fees (court and attorney) set by law can be substantial. In California, an attorney is generally due a sliding scale percentage of the estate. The percentage is smaller for larger estate.
Probate can be avoided through a properly executed living trust. A living trust allows for faster distribution to the deceased’s heirs, minimizes or avoids probate fees, and is private. Our law firm additionally has extensive experience administering estates and the probate process, and can assist you and your loved ones with the probate administration process.
A will (not to be confused with a living will) is a legal document that expresses the desires of the uthor with regard to the disposition of his or her property after their death. A will is a good start towards creating an estate plan.
Executing a will is the first step towards establishing an estate plan. While a living trust is superior for many reasons, a will is an way for passing minimal assets to your loved ones or favorite charity. One negative aspect is that a will is subject to the probate process. Probate is a lengthy and public court process that can cost up to ten percent of the gross value of your assets in fees. Probate fees, including attorney fees, are set by law, and thus generally not negotiable. Most people prefer that their hard earned assets and property go to the people and charities of their choice, rather than to lawyers, executors and the courts. The California Probate Code is quite complex, and contains over 21000 sections.
Smaller estates, such as those under $100,000 in gross assets (including retirement funds, life insurance proceeds, and all other assets- excluding any debt), a formal probate will not be required. For individuals with smaller estates, an younger individuals, a will may be the appropriate estate planning device. However, it is highly recommended that you speak to an attorney before making a final determination on whether or will or a trust is the best vehicle for you. It is possible to utilize form wills, such as those purchased online and through books. The old motto “you get what you pay for” certainly applies, and these types of wills are not custom tailored to your specific needs.
We certainly recommend some type of estate plan for everyone. A will, while it may subject you to probate, is better than no estate plan at all. And as with any estate plan, it is extremely important to execute powers of attorney and a living will along with your will.
