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Living Trusts

What Is a living trust?

In its most basic form, a living trust is just a legal contract that you make with yourself to create an entity to hold your assets. A living trust can be set up so you can change it any time in your life (these are revocable living trusts) or so that you can’t change very much about it at all (these are irrevocable living trusts). A living trust can outlive you, manage your assets, and make sure that your family and friends get what you wanted them to have, when you wanted them to have it.

What are the benefits of a living trust?

Avoid Probate

In California, even if you have a will, the Probate Court is involved in collecting, appraising, and distributing your estate. A will doesn’t help you avoid Probate! A living trust avoids probate. There is no court involvement required (unless someone wants to argue with something or accuse the Successor Trustee of bad behavior.)

Take Care of Minors

A living trust can also manage your assets for the benefit of your children. This can be for the benefit of children who are minors or even those who are not but maybe have some bad decision making history. Your living trust continues until the time you stipulate, which can be a specific age for a child or a certain number of years or even upon a specific event.

Avoid Conflict

A well-drafted living trust can help prevent fighting between your family, friends, and anyone else who you want to get your assets once you’re gone. The more specific your living trust language, the less likelihood of conflict and confusion.

Minimize Estate Taxes

For high net worth individuals and couples, living trusts can help to delay and/or minimize the impact of estate taxes that your beneficiaries may have to pay. No one knows what may happen to the estate tax exemption in the future. The amount may increase or decrease dramatically in years to come, depending on the whims of Congress. We keep a close eye on estate tax issues on your behalf and advise you accordingly.

What type of living trust is right for me?

There are two kinds of living trusts that are most commonly used, the ones you can change in your lifetime (revocable living trust) and the ones you can’t (irrevocable living trust).

Revocable Living trusts

Revocable living trusts hold your key assets and all of these assets will avoid Probate and can be distributed to your heirs. For couples and individuals with assets below the federal estate tax exemption amount, a revocable living trust helps to maximize tax exemptions under federal law. It also helps you maintain your privacy (the living trust is a private document) and get things to your heirs more quickly when it comes time to distribute your assets.

Irrevocable trusts

Irrevocable trusts are very difficult to change once you have set them up but have the advantage of protecting whatever assets you put in them from creditors. Also, certain irrevocable trusts can be funded with life insurance policies to help pay estate tax liabilities.

If I Have A Living trust, Do I Still Need A Will?

The short answer is YES. When you have a living trust, the private living trust document holds all the key information about what you have and to whom you want to give it. The will created in conjunction with your living trust is called a pour over will. This type of will holds very little detail about your assets or about your beneficiaries. The pour over will tells the Probate Court (because all wills are to be filed in Probate Court after you pass on) that all your assets that are outside the living trust should be ‘poured over’ into the living trust and distributed as per the terms of your living trust. Effectively, this will is a back-up document to your living trust.

How to Create a Living trust

A living trust is almost never created in isolation. We usually recommend a complete estate plan for most of our clients who require a living trust. This includes a living trust, a pour over will, a Power of Attorney, and a living will (also known as an Advanced Health Care Directive.)

The estate planning process is straightforward. The first step is a meeting with you to discuss you, your family situation, your stuff and what thoughts you have about whom you want to give your stuff to and under what conditions. At the end of the first meeting, you will have an idea of which estate planning documents you will likely need as well as our cost for helping you through the process.

Once you have signed a fee agreement, we will send you a form that you can fill out either by hand or on your computer to provide us with all the information we need. When we get the form from you, we will create a first draft of your estate plan.

We will send you a draft of your estate plan for you to review, highlighting specific sections that need your attention and a close reading. Don’t worry, we will help you through this!

Once you have reviewed the draft of your estate plan, we will set up a meeting with you so that we can sign the documents, notarize everything and begin the process of funding your living trust.

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