A living trust is a crucial part of your estate plan because it is a document that can help manage your estate and assets while you’re still alive, and to understand how a living trust can work for you, it’s best to consult with an estate planning attorney.
If you already have living trusts as part of your estate plan, it may be worth revisiting it to determine if it’s time to have it updated and ensure your rights are reserved.
What is a Living Trust and How Does it Work?
A living trust is a fund, similar to a bank account. You can place your assets, items, accounts, money, and more into this account.
Almost anything can be placed into a trust like your assets such as real estate, bank accounts, vehicles, collectibles, and even virtual property like intellectual property. Just like a trust fund, your living trust also spells out how to distribute what’s in the trust after you pass away.
The way that this kind of trust works is that the person who originally owns everything, known as the grantor, transfers ownership of their selected assets into a trust. In some cases, it’s as easy as changing the name on a deed to the name of the trust. Moving things into a trust is called funding the trust.
You also need to name a successor trustee, the person who will be in charge of making sure the trust’s directions are followed. This could be a relative, friend, or other loved ones. In many cases, grantors will appoint a professional trustee from a financial institution of a legal firm to serve as the successor trustee.
The grantor can leave their assets to their beneficiaries, much like a will. The grantor can also place specific conditions that need to be met before the beneficiaries can take ownership of their inheritance. For example, you might specify that your children need to finish college before they receive their inheritance.
There are two main types of living trusts in an estate plan, the revocable living trust, and the irrevocable living trust.
A revocable living trust is the most common. In fact, most people, when they refer to a living trust, are talking about a revocable living trust. This kind of trust can be adapted or even canceled by the grantor. It’s not always an easy task, but it does offer some flexibility.
An irrevocable trust. on the other hand, is one that cannot be changed. Only under special circumstances would a judge consider making changes to the contract. Once the grantor passes away, a revocable living trust automatically turns into the irrecoverable version.
Why is it Important to have a Living Trust?
While a revocable living trust isn’t necessarily the best option for everyone meeting with a trust attorney in Orange County, it is something that you need to consider. It’s often a fantastic solution in the following situations:
- You own a home or other real estate, especially if it’s located out of state.
- You have over $200,000 in assets.
- You have a taxable estate, also known as estate taxes.
- You want to keep your assets private while avoiding probate court, which may include reduced costs for estate tax.
- You want to set up certain requirements or stipulations in your estate plan.
What are the Benefits of a Living Trust?
There are various benefits to having a living trust as part of your estate plan. Most estate planning attorney may recommend this addition to your plan.
Here are the top three reasons to add a living trust to your estate planning efforts:
- Save time and money from the probate court. The successor trustee can immediately take action doing things like paying for your funeral costs and distributing assets to your loved ones. Otherwise, your case would go to the probate court, which can take quite a long time — saving time ultimately means saving money.
- Protects against challenges. A simple will may be challenged by someone who believes they deserve more of your estate. This kind of conflict over your estate and assets can be devastating to your surviving spouse and other loved ones. A revocable living trust is harder to challenge as there would need to be evidence that you were coerced into signing your estate planning documents.
- Better privacy protection. A will is considered a public document, which means anyone can get a copy of it after your death. A revocable living trust is completely private, so no one knows the details of your wishes outside of your successor trustee and those who need to know specific details about your assets, like a beneficiary.
When Should You Amend a Living Trust?
One of the reasons revocable living trusts are so popular is that they can be amended, therefore, we’ll discuss the 7 reasons why you should consider altering your living will.
While they can be changed at any time the grantor is still alive, it may be worth waiting for particular moments or changes in your life.
Here are the top 7 reasons to consider altering your living trust.
- Marriage, especially in cases of re-marriage, when you need to update who is listed as your surviving spouse.
- Birth or the adoption of a child
- Death of a beneficiary
- Acquiring a new property that should be added to the trust
- Moving to another state where laws may be different
- Any time you want to change any element of the trust, like adding or removing a beneficiary, how property is distributed, etc.
There may be other instances that necessitate adapting your estate plan. If you’re not sure if your particular situation warrants making a change to how your assets are distributed, what is part of your estate, or how you want to deal with estate taxes, contact your living will attorney in Orange County.
How Often Should a Living Trust be Updated?
There is no hard and fast rule on when you need to update your estate plan. Outside of major life events, it is recommended that you revisit your estate plan every three to five years.
Your circumstances will change more often than you realize, as do the laws that impact estate planning, especially tax laws that impact your estate tax obligations.
Consult with a Dedicated Trust Attorney in Orange County, CA
Without direct knowledge of estate planning and tax laws, it’s impossible to know if a living will was created correctly. If elements of the documents are incorrect, the entire trust could be deemed invalid.
Instead of hoping that your assets are properly handled according to your wishes instead of a probate court’s decisions, make sure you work with a professional living trust attorney. You don’t want to wait until problems arise, or it’s too late.
As an Orange County trust attorney, Mr. McKenzie can guarantee that your assets, trust, and other estate planning documents are personally drafted to meet your needs. For your complimentary 30-minute consultation, contact McKenzie Legal & Financial today.