Here are the Frequently Asked Questions about Living Trusts, Probate and Taxes along with their answers:


If I have a will, why would I want a living trust?
A will is a one-way ticket to probate if the estate has assests of $100,000 or more. Wills often must be formally verified or proven by a probate court and result in substantial probate fees being paid.

A living trust is almost always the best way to plan an estate because it avoids the probate process and all probate fees. The probate process often takes ten to fifteen months, whereas with a living trust, property can usually be distributed within a few weeks.

Can a living trust save on estate taxes?
Yes. While this is not always the case, many people are in a position to save on estate taxes by use of a well drafted living trust.


What happens if I have no living trust or will?
The state has written a will for you (via the California Probate Code)  that you may not like. It goes into effect automatically when a person fails to make their own estate plan. Probate and probate fees are included.

Why should probate be avoided by use of a living trust?
In addition to the fees and lengthy administrative process, probate is a public process. It is not confidential as with a living trust. All members of the public have access to all information including who is receiving what property. Also most important, with a living trust, family living expenses can be provided almost immediately. With a will, the court must evaluate and approve the distribution of family living expenses.

Will owning property in joint-tenancy avoid probate?
It will postpone it until the second person dies, at which point, probate will be required. In the event of simultaneous death (such as in an auto accident), probate will not be postponed.

Joint tenancy has other possible disadvantages as well. It can result in a loss of control over the assets and may have severe adverse tax consequences. It is not the best estate planning method.

Is a living trust valid in every state?
Yes. It is valid in most other countries as well.



Is a living trust expensive?
No. The cost is modest when compared to the costs of probate. The cost will depend upon the complexity of the plan, the type and amount of your assets and the amount of tax planning required. Always obtain a quote in advance.

Does it make sense to have a living trust if I am not married?
Yes. If you want to avoid probate, you should have a living trust.



Can two unmarried people who are living together have a living trust?
Yes. This is quite common and often makes sense.



If my child dies before me, does his or her spouse become the beneficiary of that child’s share of my estate?
It's up to you, but in most cases the answer is no. Usually the share goes to the children of that child (your grandchildren). If the deceased child has no children, usually the share would be divided among your other children. The formula is entirely up to you.

Do I still have control over the property in my living trust?
Absolutely. As trustee of your trust, you can do anything you could do before.


Can I leave part of my estate to a not yet conceived child or grandchild?
Yes. This can be accomplished easily with a living trust.



Can I use my living trust to provide long-term care for a disabled child or grandchild?
Yes. A living trust is the perfect tool to use for long-term care of any type.



Can I provide for my pet in my living trust?
Most definitely. A properly drafted living trust can provide for the long-term care of your pet after you are gone.


How difficult is it to change my living trust?
It's very easy. Changes are made by simple amendment as long as you are living.


Can my successor trustee make changes to my living trust?
No. Upon your death, the right to make changes ceases. The living trust becomes irrevocable and the trustee is under a legal duty to fulfill every instruction in your trust document.

Is the cost of a living trust tax deductible?
In most cases the cost is tax deductible. See your tax preparer for details.



If I transfer my home to a living trust, can I still deduct the interest?
Absolutely.



What assets should be transferred into my living trust?
Everything other than life insurance policies, IRAs, Keoghs and other pension plans. Usually your living trust will be named as a contingent beneficiary for these types of assets.

Can my mortgage lender "call my loan due" if I transfer my home into a living trust?
No. The lender’s position remains the same and they cannot call the loan due.


By transferring my home into a living trust, will I cause a reappraisal under California’s Proposition 13?
Absolutely not.



Should my life insurance policies be owned by my living trust?
Yes. In most cases, the living trust should be named as both owner and beneficiary of all policies. This will eliminate the risk that the named beneficiary (or beneficiaries) could die simultaneously with the owner of the policies, thus subjecting the insurance proceeds to probate. The policies should be owned by the insured.

Should my IRAs and Keoghs be placed into my living trust?
A living trust should never own your IRAs and Keoghs because such a transfer would be equivalent to an outright distribution. Thus, it would have negative tax implications.

Most people name their spouse as beneficiary and their living trust as contingent beneficiary.

If married, what happens if I have separate property.
Separate property is still transferred into the living trust. The assets will retain their character of separate property by use of a "Separate Property Agreement".

If I have a living trust, will I still need a will?
Yes. A pour over will makes sense for most people. It transfers any property left outside the trust at death to the living trust. While such property may still be subject to probate, it can at least be distributed as part of your overall estate plan.

Do I need an attorney to draft my estate plan?
Yes. Only an attorney can give legal advice. It never makes sense to take unnecessary risks with your assets and estate plan.


Do I need an attorney if my spouse dies and we have a living trust?
Yes. An attorney should review your estate plan, make sure your documents are legally up to date, still appropriate for your goals, and implement any tax planning devices that may be triggered at the death of a spouse.

Is an attorney needed to assist with the distribution of trust assets upon the death of the second spouse, or individual trustor?
Yes. The probate code governs the distribution of trust assets and outlines certain actions required to be taken by the Trustee prior to asset distribution. Many of the requirements are in place to protect trust beneficiaries. The probate code requirements, in addition to tax laws, are complicated and an attorney can assist in making the Trustee aware of these laws and implementing the requirements.

My parents refuse to form a living trust even though they are getting older. My brother and I who will inherit our parent's property want to avoid paying thousands of dollars in unnecessary probate fees and want to avoid the long court proceeding that we will certainly face if they don't form a simple living trust. What do you suggest?
You can prepay the cost of a living trust for your parents and then arrange an appointment for them to see an estate planning attorney. This should make them realize how very important proper planning is to their family and should eliminate any excuse to delay protecting their family. See Living Trust - Gift Certificate.


My spouse recently passed away and is no longer in need of the insurance we have on my life. The policy is expensive and I would like to stop making the payments. Do you have any suggestions?
Yes. Many life insurance policies can be sold for many times the cash surrender value. In fact, term policies with no cash surrender value can often be sold. Do not let the policy lapse without first obtaining information on the value of the policy. It may be worth more than you realize.

I desperately need a living trust to protect my wife and children but am short of cash. Will your firm consider barter?
Yes. Our firm will consider accepting the following types of property in exchange for legal services: Advertising, California Land or other Real Property, Trust Deeds, Antiques, Political or Historical Memorabilia, Classic Cars, LLC Interests, LP Interests, Stock in Small Corporations, High Quality Jewelry, or Restaurant Gift Certificates. Since our need for services will vary over time, please call to discuss the barter of your goods and / or services for legal services.

When goods or services are accepted in exchange for legal services, both parties exchange their services based upon the fair market value of the service provided. The IRS requires that the fair market value of goods and services traded must be included in the income of both parties.



For additional information on living trusts or other legal services,
please contact us.





Statistic

There are approximately 315,000,000 people in the United States. One hundred percent of us are going to die. Only a small fraction of the population knows when they will die. This is only one of the reasons life insurance and estate planning is so important.

 















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