When you create a living trust, you transfer asset titles to the trust. So, they no longer belong to you, but to the trust.
There are three key people you must name in a trust instrument, which is the document that outlines the terms of a living trust:
- A trustor, also commonly referred to as a settlor or grantor. This is the individual who places their assets, such as real estate, cars, bank accounts, and investments in a trust.
- A trustee can be an organization or individual. They’ll be in charge of the assets placed in the trust.
- A beneficiary. The individual who will benefit from the trust.
A living trust, just like a will, is an important estate planning document that will assure you that your assets will be smoothly passed to their heirs when you pass on.
You should have a trust created by an experienced estate planning attorney if you own lots of assets or have family issues that could stop the smooth distribution of your assets per your wishes.
Now that you know what a living trust is, read on to learn about the different living trusts, how a living trust differs from a will, and how to create a living trust.
What are the Types of Living Trusts?
An irrevocable living trust and revocable living trust are the two main types of living trusts.
As the name suggests, an irrevocable living trust cannot be revoked or amended once you sign it. Therefore, you must ensure you clearly understand the terms in an irrevocable living trust before you create it.
Because an irrevocable trust can’t be altered, most people start with a revocable living trust. This type of trust can be changed or revoked entirely at any time during the lifetime of a trustor. Upon their death, a revocable trust becomes an irrevocable trust.
In most instances, the person creating the revocable living trust serves as its initial trustee. Should they become incapacitated or die, a successor trustee named in the living trust will manage the estate or oversee the transfer of assets to beneficiaries.
A successor trustee can be your spouse, a bank, friend, or anyone you trust and know will carry out the duty well.
What is the Difference between a Revocable Living Trust and a Will?
Both these documents allow you to name beneficiaries to your assets, leave young children property, and modify how you distribute your property as your circumstances change or should you wish to.
Two key differences between a will and a living trust are the main reason many people are creating living trusts in California.
Avoid Probate Court
A will must go through probate court. Through the court, a legal process is followed to ensure your debts are paid and assets are inherited by the correct beneficiaries after your demise.
Probate can be lengthy, expensive, and contentious, particularly if your will is contested.
Living trusts are not required to go through probate court and cannot be challenged. This makes them an excellent tool you can use to minimize the chance of court disputes over your property, and ensure your assets are passed on to your beneficiaries immediately after your death.
Living Trusts are More Private
Because a living trust doesn’t have to go to probate court and has little chance of being contested, it affords your family more privacy. Unless a trustee or beneficiary shares the details of your trust, that information remains a secret.
Once a will goes to probate, it becomes a public document that can be easily obtained from the county records. So, anyone can see the details of your assets, scrutinize them, and challenge the will publicly.
Other differences between a revocable living trust and a will are:
- In a living trust, you cannot name a guardian for your children, managers for the property you leave your children, or instruct how your estate debts or taxes should be paid. It is possible to do all three things in a will.
- A living trust requires you to transfer your property to a trustee. A will doesn’t require you to transfer your assets to someone else.
- A will requires you to name an executor. An executor is the person who will ensure that your assets are inherited or managed as per your wishes. A living trust appoints a trustee to distribute and manage your estate after your death.
- A will becomes active when you die, while a living trust is active from the day you create it.
How Can You Create a Living Trust in California?
You don’t have to be old or wealthy to create a living trust in California. Planning how you want your estate handled should anything happen to you is a smart move, regardless of your stage in life.
One way you can create a living trust is through online estate planning tools. These tools allow you to create your own trust, will, power of attorney, and other estate planning documents.
At Gallagher Krich, APC, we recommend you use an estate planning attorney. Such an attorney knows the ins and out of the living trust creation process. So, they can help you establish a trust that caters to your specific situation and one that avoids any potential pitfalls.
What you pay an attorney will depend on the size and complexity of your estate. Most estate planning attorneys will charge a flat fee.
To minimize your cost of creating a living trust, decide before engaging an attorney the assets you want to include in your trust, who you would want to take them when you die, and your successor trustee.
Do You Need a Lawyer to Make a Living Trust in California?
If you would like to establish a living trust in California, get in touch with Gallagher Krich, APC, today for a free consultation.
When you call us for a consultation, one of our experienced estate planning attorneys will have a discussion with you about your assets. After the discussion, they’ll advise you on the best way to go about creating your living trust.
Waste no more time debating whether to create a trust. Start the process now, and you can rest easy, knowing your asset will be in good hands when you pass on. Talk to us at (858) 926-5797 or book an appointment online.