A trust established by an individual, or a married couple, that becomes effective immediately upon establishment while the Creator/Trustor/Settlor is still alive (thus “Living”), remains revocable and amendable during the lifetime of the Trustor (thus “Revocable”), and is used to avoid probate; facilitate some tax planning; provide for management during periods of incapacity without need for guardianship conservatorship; address family circumstances; maximize allocation and distribution flexibility; ensure a high degree of privacy; and provide for ultimate distribution of the estate.
The Living Trust is a popular estate planning tool in California. Potential benefits include:
Keep the Court Out of Your Personal Affairs
Unlike a will, which is a death instrument only, the Living Trust also protects you while you’re alive by allowing you to appoint someone to handle your business affairs in the event you become incapacitated. This minimizes the chances of guardianship and court involvement in your personal affairs.
A Revocable Trust can spare your family the trouble and expense of dealing with the Probate Court. This is of particular importance to California residents, since California’s probate system can be expensive and cumbersome process.
Maintain Family Privacy and Discourage Challenges
The Living Trust is a private document and need not be filed with the court. That means another advantage: privacy. Your dispositions are not public record, as they are with a will. That also reduces the possibility of your plan being challenged by any disgruntled heirs.
Estate Tax Advantages
Note: As of January 1, 2015 the federal estate tax exemption is $5.43million per person. In 2014 the exemption was $5.34 million,
The Successor Trustee
When you establish a Revocable Trust as part of your estate planning, you (the grantor, also known as the trustor) make yourself the trustee of the assets you place in the trust. You are still free to sell, trade and give away the assets as you see fit. You may also change the terms of the trust, or revoke it, at any time. But once you pass on, the successor trustee(s) you’ve designated take control of your assets, and distribute them in accordance with the provisions of your trust.
In certain circumstances you may find it preferable to appoint a third party rather than a relative as successor trustee. For example, you may believe that time constraints or questionable integrity will interfere with your adult child’s ability to handle the job. Also, if your adult children do not get along, choosing a third party can be preferable to choosing just one child, which may inflame sibling rivalries, or to appointing all your children as co-trustees and somehow hoping that they can work together amicably. A bank, broker or Professional Fiduciary Association may serve as a third-party trustee.