What is a Living Trust?

A “living trust” is a revocable living trust. A trust is a written legal agreement between the individual creating the trust and the person or institution named to manage the assets held in the trust (the “trustee”). It is sometimes referred to as a revocable intervivos trust, or a grantor trust. A living trust may be amended or revoked by the person creating it (commonly known as a “trustor”, “grantor”, or “settlor”), at any time during the trustor’s lifetime, as long as the trustor is competent.

What Can a Living Trust Do For Me?

Contrary to what you’ve probably heard, a will may not be the best plan for you and your family — primarily because a will does not avoid probate when you die. A will must be verified by the probate court before it can be enforced. Also, because a will can only go into effect after you die, it provides no protection if you become physically or mentally incapacitated. So the court could easily take control of your assets before you die. Fortunately, there is a simple and proven alternative to a will — the revocable living trust. It avoids probate, and lets you keep control of your assets while you are living – even if you become incapacitated – and after you die.

A living trust can provide for the private management of your assets if you choose not to act as trustee, or when you are unable to do so, by the person or persons whom you appoint as trustee. When you are incapacitated, your trustee can assume responsibility for your assets in an accountable fashion,and manage them for your benefit without direct court intervention or supervision. At your death, the trustee acts much as an executor would, gathering your assets, paying valid debts and claims and taxes, and distributing your assets as you have directed in your living trust.

How Does a Living Trust Help If I Am Incapacitated?

If you are acting as trustee of your own living trust and become incapacitated, whomever you have named as your successor trustee will assume the responsibility for managing your assets on your behalf. If your assets are not in your living trust, someone else must manage them. How this is accomplished may depend on whether the assets are your separate or community property.

How Does a Living Trust Help At My Death?

Assets held in your living trust can be managed by the trustee of your living trust and distributed in accordance with your directions in the trust agreement. The trustee is also accountable to your beneficiaries for the trust assets held for their benefit after your death. The trust is not under the direct management of the probate court at and after your death and, therefore, the value and nature of your assets and the identity of your beneficiaries do not become a public record. However, in California, death notice must be given at your death to all of your heirs and to all beneficiaries of your living trust, advising them, among other things, of their right to obtain a copy of the trust agreement.

If your assets were in your name alone at your death, they would be subject to probate. Probate is the court-supervised process required for transfer of your assets at your death to the beneficiaries set forth in your will, and in the manner prescribed by your will. At your death, a petition is filed with the Court, usually by the person or institution named in your will as executor. After notice is given and a hearing is held, your will is admitted to probate and an executor, or if none is named an administrator, is appointed. A full inventory of the assets held in your name alone at your death is filed with the court and the probate continues until your estate is ready for distribution and the court approves the final distribution of your estate. Probate can take considerably more time to complete than the distribution of your trust following your death. Assets held in a living trust can be more readily accessible to beneficiaries than those in a probate. The cost of a probate is often greater than the cost incurred by a comparable estate managed and distributed under a living trust.

Who Should Be the Trustee of My Living Trust?

Many people act as their own trustee until their incapacity or death. Others determine that they need financial assistance and management of their assets simply because they are too busy or too inexperienced, or simply do not wish to have the responsibility of day-to-day management of their financial affairs.

Perhaps the most important decision for you to consider is your choice of a successor trustee to act in your place when you are unable or unwilling to serve as trustee. As you have read, your trustee will have considerable authority and responsibility, is not under direct court supervision, and will assume that responsibility either during your lifetime (if you so choose) if you become incapacitated, or at your death. A trustee may be a spouse, adult children, other relatives, family friends, business associates or a professional fiduciary. The professional fiduciary may be a bank or trust company which must be licensed by the State of California. You may also provide for co-trustees. You should discuss your choice with an experienced estate planning attorney.

Who Should Draft a Living Trust For Me?

You should consult with a qualified estate planning attorney to assist you in the preparation of a living trust, together with your will and other estate planning documents. While other professionals and business representatives may be involved in your estate planning process, your living trust is a legal document which should be prepared by a qualified attorney. You should seek advice only from professionals who are qualified to give estate planning advice.

How Do I Transfer Assets Into My Trust?

You need to change titles on real estate (in- and out-of-state) and other titled assets (stocks, CDs, bank accounts, other investments, insurance, etc.). Most living trusts also include jewelry, clothes, art, furniture, and other assets that do not have titles.

Also, beneficiary designations on some assets (like insurance) should be changed to your trust so the court can’t control them if a beneficiary is incapacitated or no longer living when you die. (IRA, 401(k), etc. can be exceptions).

It will take some time – but you can do it now, or you can pay the courts and attorneys to do it for you later. One of the benefits of a living trust is that all your assets are brought together under one plan. Don’t delay “funding” of your trust. It can only protect assets that have been transferred into it.