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Published: 2008-03-26

The Revocable Living Trust in California



Introduction

Revocable Living Trusts are used by thousands of people in California to avoid having their estates subject to probate. In California estates with a market value over $100,000, anyone in California who owns a house is likely to be in excess of $100,000, may be subject to a probate. The transfer of real property into a revocable trust or a transfer of real property out of a revocable trust is not subject to reevaluation under Proposition 13.

What is a Living Trust?

Consider the following situation. To avoid probate expenses, Donald transferred the title of his home to this daughter Anna. Anna understood her father's strategy, which would allow her dad to live in the house for the remainder of his years. Ana died in a boating accident a few months after the transfer. Like most of her property, Anna had titled the home jointly in her husband's name upon transfer of title. Several months after Anna's death, Anna's husband sold the home effectively evicting Anna's father. This tragic result could have been easily avoided had Donald visited with an attorney and established a revocable living trust.

You can create a living trust by transferring assets to be held for your benefit and/or the benefit of others during your lifetime. A trust can either be revocable or irrevocable, depending on your needs. When you retain the right to dissolve the trust, it is called a "revocable living trust" ("living trust"). The living trust can be created with a legal document that includes instructions setting forth who you want to leave your assets to, in addition to who will manage your assets and how they will be managed if you become unable to mange them. A living trust allows you to maintain control of your assets while making sure the assets are managed according to your wishes upon death or incapacity. In addition to flexibility and control, the living trust will help you preserve your privacy, something that the probate process does not necessarily allow.

When you establish a living trust, the next step will involve transferring assets into the trust, such as bank accounts, real estate, and stocks. After the transfer, these assets still remain in your control. Furthermore, transferring assets to your living trust will not trigger federal gift, estate, or income tax consequences because, although the assets are held in the name of the living trust, you are still considered the owner for tax purposes. This may not necessarily be the case, however, under the laws of your state of residence.

What is the Purpose of a Living Trust?

The revocable living trust is typically used as a will substitute. The reasons for having a living trust are many but they are primarily used to avoid or minimize costs incident to probate and estate administration. Probate fees range anywhere form 3%-7% of your total estate. The assets placed in the living trust are not subject to the probate or estate administration process. Further, the living trust is flexibility than living trusts, whereas irrevocable trusts are nearly inflexible. Thus, revocable trusts are ideal for anyone desiring flexibility to allow for changes in life circumstances.

What Happens When I Die?

When you die your co-trustee or successor trustee will carry out the instructions set forth in your trust, distributing your assets to the named beneficiaries. The beneficiaries of the living trust can be people and/or organizations, such as family members, friends, religious organizations and educational institutions. The assets held in your living trust will be subject to federal and state taxation. However, your attorney can add provisions in you living trust to help reduce and possibly even eliminate taxes, depending on the size of your estate. If your primary concern is to avoid burdensome federal estate taxes, you may want to consider alternative options such as an irrevocable trust.

Conclusion

A revocable living trust can be a valuable planning tool to help you maintain control over your assets during your lifetime and at death. A living trust may be used as a will substitute, allowing flexibility for lifetime changes such as marriage, divorce and children. A living trust can also help you reduce or eliminate probate and administrative expenses when your estate is settled. By creating a living trust, an experienced attorney may be able to lower estate costs and avoid unnecessary taxation at the federal and state levels.

John Calvin Jarboe's Experience with Living Trusts

As an Estate Planning Attorney John has helped hundreds of clients use revocable trusts as part of their estate plain to meet their unique needs, allowing them to be in control, and have peace of mind knowing their wishes will be carried out. If you want that peace of mind call Toll Free 1-888-475-3111 in San Diego County, 619-440-0052 outside Sand Diego County or Email Jarboelaw@aol.com to schedule a free consultation.