THE BENEFITS OF A LIVING TRUST IN CALIFORNIA

There are four main benefits to a living trust. These are:

• Probate avoidance
• Privacy
• Control
• Decreasing your estate tax burden.

PROBATE AVOIDANCE

A living trust is a way of holding title to your assets so they will not have to go through probate when you die. When you set up your living trust, the lawyer will transfer the title of your assets (stocks, bonds, real estate, etc.) from your name to the name of the trust. You are both the trustee and the creator of the trust. That gives you, and you alone, total and complete control of all your assets. Just like now, you can buy, sell, trade, or do whatever you want with your assets. However, there is one important difference, putting your assets in a living trust allows your beneficiaries to skip the hassles and expenses of probate. Whoever you name as your successor trustee will gain control of your assets to distribute them according to your instructions, after payment of expenses and death taxes.

Most people who go through probate just one time do not wish to repeat the experience. Probate costs include court fee, appraisal fees, attorney fees and executor fees. Court costs and appraisal fees are modest: a couple of hundred dollars for the average estate. The real costs are the attorney and executor fees. In California, attorney and executor fees are as follows:

1. 4% of the first $15,000; maximum $600.
2. 3% of the next $85,000; maximum $2,550.
3. 2% of the next $900,000; maximum $18,000.
4. 1% of the next $15,000,000 and 5% thereafter.

For example, to probate a $100,000 estate it will cost approximately $6,300. Usually it does not cost anywhere near that to have a living trust created unless you have a large complex estate. To some even worse is the time it takes to go through probate. Anyone involved with the court system knows there is no such thing as a quick court proceeding. A living trust almost always allows your beneficiaries to receive their portion of your estate quicker than going through probate.

PRIVACY

Another benefit to a living trust is that during your lifetime the document remains private. A will becomes a public document, which anyone can assess. Not everyone what relatives, friends or even the media to know how much money they had and how they disposed of it. Many people do not want their ex-spouses knowing their personal financial situation. With the privacy afforded by a trust this type of problem is eliminated.

CONTROL

An additional benefit is control. Many parents do want what their children to inherit a significant amount of money before they are ready. The last thing a parent wants it for their 18 year old to blow their hard earned money on expensive cars and parties. With a Living Trust you can control when you children get their money and how much they get. You can put safety measures in the Trust, which would allow the successor trustee to hold off distributing the money if the beneficiary has some sort of problem like drugs, or alcohol, which would prevent him or her from being responsible.

DECREASING YOUR ESTATE TAX BURDEN

The most significant advantage of a living trust is proper planning allows you to minimize death and estate taxes. Estate taxes, (also known as death taxes) range from 37% to 55% of the value of your assets when you die. Your assets include real estate, business interests, money, investment accounts, retirement plans (such as IRAs and 401(k) plans), personal property and, generally, your life insurance plan. Currently, if the value of these assets is more than $1,500,000 there will be a death tax when you die unless you do some death tax planning prior to your death. The difficult thing about tax planning right now is that the tax amount is scheduled to change substantially over the next six years and then drop back down to $1,000,000 in 2011.

Estate planning is not as easy. It requires a qualified attorney. Just as in most areas (in life) you get what you pay for. You should be weary of so called "great deals" offered by the legal community for drafting a living trust. You probably have received flyers of Living Trust deals or seen ads. In the long run the so-called "great deal" will end up costing a lot more than a trust done properly.

If a trust is done properly it will take a qualified attorney a significant amount of time. An estate plan needs to be tailored to each family's situation. In order to do that an attorney should sit down with you for several hours to talk about your concerns and answer your questions. Before making any decisions on estate planning matters, consider this; an estate plan will have a significant affect on the loved ones left behind so seeking the advice of a qualified estate planning attorney is truly a wonderful gift to give them.

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