Created while you are
alive, a revocable living trust lets you control the distribution of your
estate. Ownership of your property and assets is transferred into the trust.
You can serve as trustee or you can appoint another to serve as trustee. If
you serve as trustee, you must appoint a successor to serve as trustee upon
your death.
Properly drafted and
executed, a revocable living trust can avoid probate and delays as the trust
owns the assets not the deceased. Consult with your attorney and/or CPA
before deciding a revocable living trust is the right choice for you.
Advantages to a Living
Trust Holding Title
A husband and wife can
establish a joint revocable living trust.
While the trustor
serves as a trustee or a co-trustee, a separate tax return is not required
for the trust.
The revocable living
trust allows the trustee to buy, sell and finance assets just as before.
In the event of
incapacitation, management of the living trust passes to the successor
trustee without the necessity of a court-appointed conservator.
The living trust can be
cancelled or changed at any time before death or incapacitation.
Probate - including
multi-state probate - is avoided when assets are held in a living trust.
(Often probate takes 9 to 12 months.)
Privacy. When a
decedent dies with a living trust, the provisions of that trust usually do
not become public.
Litigation is
discouraged by a living trust.
A married couple with a
living trust can reduce or eliminate federal estate taxes by setting up an
Exemption Trust. While both are alive the assets remain in the revocable
living trust. Upon the death of a spouse, the trust is split into two
trusts: the survivors trust and an exemption trust. (For tax purposes, the
surviving spouse and the exemption trust are two separate taxpayers.)
Disadvantages of a Living
Trust
A living trust will
cost more to set-up than an estate plan with only a will.
A trust agreement with
a new will must be set-up.
Transferring assets
into the living trust will require paperwork and incur costs not
encountered with a less elaborate estate plan.
Handling an Exemption
Trust may require extra effort from the surviving spouse.
Some lenders may
require property held in a living trust be removed from the living trust
to refinance the property.
Common Terms
Trustor:
Creates the revocable living trust and transfers major assets into it.
(A husband and wife can have a joint living trust or each can have
their own living trust.)
Trustee:
Manages the living trust's assets.
Beneficiary:
Receives the assets of the living trust.
Initially the
trustor, trustee and beneficiary are the same person(s).
California Financial & Investment Advisors, Inc. 30 S. El Camino Real #104 San Mateo, CA 94402
