What is a living trust, and why should you have one?

Trust. The word evokes confidence and a feeling of safety—something you can depend on. And that’s exactly what a living trust is. It safely holds your property and assets for you and assigns someone you trust to distribute those assets as you want them distributed if you pass away or become incapacitated. With a LIVING TRUST, you decide who is going to be your successor trustee and how you want your assets allocated.

The concept of living trusts goes back to the 16th century, when landowners wanted to protect their property from the king, who otherwise had the power of probate over them. For the most part, only the wealthy bothered with living trusts until a few decades ago, when their popularity grew rapidly for middle class families.

Who should have a living trust?

Anyone with assets worth more than $150,000. These assets will automatically go into probate if you don’t have a trust. If your assets are less than $100,000, you’ll still need a will in order to avoid probate, but a trust is not necessary.

However, regardless of your assets, if you become incapacitated and don’t have a living trust, your assets will face a court-ordered conservatorship, an expensive and often unpleasant procedure, to determine who will control your assets. You could end up with both a big legal bill and someone you really don’t trust managing your assets—and your remaining life, if you are incapacitated.

What’s covered by a living trust?

Everything you transfer to the trust—property, stocks, bank accounts, life insurance policies. If you have a pourover will, anything that’s not already in the trust at the time of your death will be bequeathed to the trust.

Are there different kinds of living trusts?

Yes, although a simple living trust is the rule for most people. But let’s say you’re a married couple with either complicated individual estate-planning issues or a blended family with stepchildren. You’d want a special kind of trust called an AB trust, which creates two trusts after one spouse passes away—one with the surviving spouse as beneficiary and a separate one that may be held for the children of the spouse who passed away. There are also tax advantages to AB trusts.

Other types of trusts, such as QTIP and ILIT trusts, are mainly of concern to people with very large estates who want to minimize or postpone the amount of inheritance tax paid.

Most living trusts are “revocable,” which means you can revoke them or change them if you wish. You might want to set up an irrevocable trust—one that can’t be changed—for a family member who is incapacitated, so that the assets will be protected from unwise decisions by the family member. For instance, a grandparent or parent might set up an irrevocable trust to protect a disabled grandchild or child, or to preserve the child’s ability to get government assistance.

Can unmarried couples create a living trust in their names?

In California, yes, but only if they are registered domestic partners. Under the age of 62, only same-sex partners can register as domestic partners. After age 62, any couple can register.

What do you need to bring when you meet with your trust attorney?

You’ll need copies of any investments, bank accounts, IRAs, and life insurance policies. You’ll also need deeds to the real property you own, because all property needs to be transferred to the trust.

To attend a free seminar to learn more about a Living Trust, contact Bridget Mackay Law in Petaluma at (707) 769-9975. We proudly serve the areas of: Petaluma, Novato, San Rafael, as well as Santa Rosa.



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