What is Probate and why does everyone want to avoid it?
What is a Revocable Living Trust?
What are the advantages of having a Living Trust?
Will I lose any control over my property if I create a
Revocable Living Trust?
Do I have to transfer all my assets to my Living Trust?
If I transfer title to real property to my Living Trust
can the bank accelerate my mortgage?
Q: What is Probate and why does everyone want to avoid it?
When a loved one passes away, his or her estate often goes through a
court-managed process called probate or estate administration where the assets
of the deceased are managed and distributed. If your loved one owned his
or her assets through a properly drafted and funded Living Trust, it is likely
that no court-managed administration is necessary, though the successor trustee
needs to administer the distribution of the deceased. The length of time
needed to complete probate of an estate depends on the size and complexity
of the estate as well as the rules and schedule of the local probate court.
Every probate estate is unique, but most involve the following steps:
-
Filing of a petition with the proper probate court
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Notice to heirs under the will or to statutory heirs (if no will exists)
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Petition to appoint Executor (in the case of a will) or Administrator for
the estate
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Inventory and appraisal of estate assets by Executor/Administrator
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Payment of estate debt to rightful creditors
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Sale of estate assets
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Payment of estate taxes, if applicable
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Final distribution of assets to heirs
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Q: What is a Revocable Living Trust?
A properly drafted Revocable living trust (RLT) is a powerful estate planning
tool that allows you to remain in control of your assets during your lifetime,
have them managed during incapacity, and efficiently and privately transfer
them to your loved ones at death according to your wishes.
Sometimes referred to simply as a Living Trust, an RLT holds legal title
to your assets and provides a mechanism to manage them. You would serve as
the trustee and beneficiary of your trust during your lifetime. You also
designate successor trustee(s) to carry out your instructions for how you
want your assets managed and distributed in case of death or incapacity.
In order for the Living Trust to function properly, you need to transfer
many of your assets to your Living Trust during your lifetime. The fact that
it is "revocable" means that you can make changes to it or even terminate
it at any time.
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Q: What are the advantages of having a Living Trust?
Like a will, a Living Trust is a legal document that provides for the management
and distribution of your assets after you pass away. However, a Living Trust
has certain advantages when compared to a will. A Living Trust allows for
the immediate transfer of assets after death without court interference.
It also allows for the management of your affairs in case of incapacity,
without the need for a guardianship or conservatorship process. With a properly
funded Living Trust, there is no need to undergo a potentially expensive
and time consuming public probate process. In short, a well thought
out estate plan using a Living Trust can provide your loved ones with the
ability to administer your estate privately, with more flexibility and in
an efficient and low-cost manner.
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Q: Will I lose any control over my property if I create a Revocable Living
Trust?
Creating a Revocable Living Trust and transferring your assets to the name
of that trust will generally not affect your ability to control such assets.
During your lifetime when you are mentally competent, you have complete control
over all of your assets. As the trustee of your trust, you may engage
in any transaction that you could before you had a Living Trust. There are
no changes in your income taxes. If you filed a 1040 before you had a trust,
you can continue to file a 1040 when you have a Living Trust. There are no
new Tax Identification Numbers to obtain. Because a Living Trust is revocable,
it can be modified at any time or it can be completely revoked if you so
desire. Upon your incapacity, the individuals you designate will be able
to transact on your behalf according to the instructions you have laid out
in the Living Trust. Upon your passing, the Living Trust can no longer be
modified and the successor trustee(s) you have designated will then proceed
to implement your wishes as directed.
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Q: Do I have to transfer all my assets to my Living Trust?
Assets with beneficiary designations such as a life insurance policy or annuity
payable directly to a named beneficiary need not be transferred to your Living
Trust. Furthermore, money from IRAs, Keoghs, 401(k) accounts and most
other retirement accounts transfer automatically, outside probate, to the
persons named as beneficiaries. Bank accounts that are set up as payable-on-death
account (POD for short) or an "in trust for" account (a "Totten Trust") with
a named beneficiary also pass to that beneficiary without having to be titled
into your trust. It is important, however, to seek the counsel of an experienced
estate planning attorney who can advise on and assist with transferring necessary
assets to your trust.
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Q: If I transfer title to real property to my Living Trust can the bank
accelerate my mortgage?
Federal law prohibits financial institutions from calling or accelerating
your loan when you transfer property to your living trust as long as you
continue to live in that home. The only exception to the federal law, enacted
as part of the 1982 Garn-St. Germain Act is that it does not provide for
such protection for residential real estate with more than five dwelling
units.
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The Attorneys of Lane Law Group assist clients with Estate Planning, Wills,
Trusts, Probate/Estate Administration, Residential Real Estate, Corporate
Law and Limited Liability Companies in San Pedro California as well as Manhattan
Beach, Hermosa Beach, El Segundo, Wilmington, Harbor City, Lomita, Rancho
Palos Verdes, Palos Verdes Estates, Rolling Hills, Rolling Hills Estates,
Long Beach, Torrance, Carson, Redondo Beach and Gardena in Los Angeles
County. |
