Updated: Nov 24, 2022
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A California Living Trust is a legal document that replaces the Last Will and Testament as most people know it. In other words, a living trust ensures that the assets are distributed to the people you specify. In practice, a Trustor (the person who maintains the Trust) signs a document called a Declaration of Trust, usually appointing himself or herself as Trustee of that Trust.
The Trustor, therefore, transfers his or her properties to the Trust at the same time. The act of transferring assets into a trust is referred to as funding the Trust. A California revocable living trust will help an estate escape probate when adequately funded. A living trust often prevents the second probate for your spouse or wife when he or she dies, as well as probates in other states where you own land.
Living trusts (when correctly drafted) help people secure asset security for their loved ones while maintaining a seamless transfer of assets from you to the next generation and avoiding a California probate. Furthermore, transfers to your children can be structured so that they receive health care, schooling, welfare, and maintenance after you pass away without having the potential to misuse family properties.
Most people, for example, fear the prospect of their children squandering inherited funds in Vegas, on a new Ferrari, or in some other wasteful way. In reality, many parents choose to set up a California living trust that gives their children the majority of the family estate until they reach a certain age, such as 30.
What Is Probate and How Does It Work?
Probate is the mechanism by which the court:
In California, you can transfer or inherit the land.
Determining the legitimacy of a will
Resolving the deceased's unpaid debts
Your property consists of your house, bank accounts, automobiles, and everything else of monetary value. The Supreme Court of California is where this procedure takes place. This court oversees the settlement of your debts and the subsequent transfer of your land.
If you become incapacitated, a probate court will become interested in your finances. If you can no longer handle your finances, the probate court will appoint someone (a "conservator") to manage your house, and you will be responsible for both the maintenance costs and the court fees to choose this person.
Why Would You Want to Avoid Probate Court?
Any California living trust solicitor will tell you that avoiding probate will benefit your family if you have significant assets at the time of your death. The probate process in court will take anywhere from 9 months to 3 years. This is far longer than the time it would take to divide assets if you used another estate planning method.
Furthermore, probate is costly, with probate fees running into the thousands of dollars. If you use estate planning software, these costs can be greatly reduced. Even after paying the court fees, going to probate court costs money because estate taxes are levied on properties transferred in probate, which can be as high as 30% to 50% of the property's value. Estate taxes are only levied on properties exceeding a certain amount with the correct estate planning tools.
As a public venue, probate court filings are public documents, and the family's privacy will be violated. You can, however, keep details about your assets and their transition private if you use estate planning software.
While many people assume that their properties will not be subject to probate if they have a will, this is a common misconception. And if you have a will, your assets will most likely go into probate, according to a California living trust solicitor. If you become incapacitated, your properties can end up in probate court even before you die.
How Can Probate Be Avoided?
The easiest way to escape probate in California is to set up a living trust with a California living trust solicitor's help. A living trust moves the assets into the Trust until you die, eliminating the lengthy and costly probate process. Furthermore, if you become incapacitated and have a living will that names a trustee to handle your estate, you will stop going to probate court and having the court appoint others to manage your assets. Instead, as part of the Living Trust, you nominate someone to serve as a successor trustee.
What Is a Living Trust and How Does It Work?
A living trust is a legal agreement that transfers your assets to a trust during your lifetime and appoints a trustee to control the Trust's assets for the rest of your life. Most people appoint themselves as trustees for the rest of their lives. You can also nominate someone else if you are too busy or concerned that you lack the management skills or financial expertise to properly handle the properties.
If you appoint yourself as a trustee, it's also a good idea to name someone else as a trustee if you become unable to do so or pass away. This person may be a family member or friend, or a specialist who specializes in trust administration. Regardless of who you want to administer the Trust, you must be assured that they are trustworthy and truthful to minimize the likelihood that the funds will be mishandled.
A living trust distributes the properties to the individuals or organizations you specify after you die. "Beneficiaries" refers to these individuals or organizations. The Trustee you appointed will be in charge of paying your debts and taxes. He or she would also transfer the Trust's assets to the intended recipients.
What are the Benefits of a Living Trust?
When you want to have the following things, you'll need a living trust:
Avoiding probate. Unlike a will, a living trust does not go through probate because the beneficiaries can see how the estate assets are allocated.
Keep all of the assets confidential. Unlike a will, a trust is normally kept private, and the assets are distributed privately.
A Living Trust saves you money. A trust usually costs more upfront than a will, but a living trust will save money in probate costs and could even prevent beneficiaries from contesting the Trust. With the help of a knowledgeable Living Trust solicitor, you will ensure that your Living Trust is protected from tax-related issues and various other documentary defects.
Financial Security for Minor Beneficiaries. A trust may retain funds for minor children. For example, the funds may be distributed at various times depending on the recipient's age.
Avoid Conservatorship. Having a living trust will be immensely beneficial if the Trustor cannot manage their financial affairs at any point in the future. Family members who do not have the legal power conferred by the living trust contract must normally go to court to obtain it. The family would need to obtain legal permission to handle the Trustor's accounts, which will be a lengthy and public process.
Guardianship. If one or both parents pass away, the Trust will include a set of guidelines to the Trustor specifying who will care for the minor children.
You can still control your assets. You will keep ownership of your properties with a living trust until you pass away. As long as you are professional, you can alter or terminate a living trust at any time.
Basics of Living Trust
Only an Estate Planning Lawyer has the expertise to ensure that this complex and critical legal procedure is completed correctly. With the help of an Estate Planning Lawyer, you must properly draft the living Trust. Furthermore, the properties must be properly transferred into the Living Trust. Even if you enlist the aid of other financial practitioners to set up your estate or lower your taxes, an Estate Planning Lawyer is required to properly prepare this legal document.
Is it appropriate to employ an Estate Planning Lawyer to set up a living trust?
Since the two documents have different purposes, you will almost certainly need a will even though you have a living faith. When you die, a will specifies how property in your name (not part of the Trust) will be distributed. A will also specify who should be the guardian of any minor children under 18. It is important to remember, though, that a will also go through probate, as discussed above, so it is preferable to use a living trust instead. An Estate Planning Lawyer may also advise you about what other estate planning resources you can need to safeguard your properties.
The Differences Between a Will and a Trust
A California living trust solicitor may create a trust document. This agreement specifies the assets that are included in the Trust, who will inherit those assets, and names you as a trustee. The assets listed in the Living Trust will then be transferred to the Trustee by you or your solicitor. Even if you appointed yourself as a Trustee, you must pass the trust property to yourself as a Trustee.
Preparing and recording deeds to real estate, modifying the Beneficiary on life insurance or the 401k, and converting bank accounts and stocks are all examples of property transfers.
Revocable and Irrevocable Trust
In a Revocable Trust, the Trustor has the right to change the terms any time. The Trustor can remove beneficiaries, appoint new ones, and direct the management of the Trust's properties. You've always heard of a revocable trust, also known as a living or family living Trust. An irrevocable trust cannot be altered or terminated without the approval of the Trustor's designated Beneficiary.
What is a Revocable Living Trust, and how does it work?
The Trustor may cancel or change the terms of a revocable trust. The Trustor will earn income distributed over the life of the living Trust. The property passes to the heirs when the owner dies. As a result, a revocable living trust is a component of estate planning that aids the Trustor in asset protection and management. When the Trustor passes away, the revocable Trust becomes irrevocable.
Unless one or more of the Trustor's designated beneficiaries wishes otherwise, an irrevocable trust is permanent. When a grantor creates an irrevocable trust, he or she ultimately transfers the ownership of assets to the Trust and relinquishes power over them.
The grantor of a revocable trust maintains ownership over the trust assets and has the ability to change the Trust during their lifetime.
Properties in revocable trusts are not protected from creditors.
If you go to the trouble of creating a trust to hold your properties, you should also consider keeping them safe from creditors. While an Estate Planning Attorney can suggest a revocable trust to hold your property and money, it is not the best type of Trust for protecting your assets from creditors.
You will appoint yourself as the Trustee in a traditional revocable living trust to escape probate. This helps you to maintain your ownership rights to the Trust's properties. You are free to bring and take property from the Trust anytime. Since the property is yours in perpetuity, you may sell or give it away at any time.
However, this ensures that the creditors could seize the assets if they file a legal argument. Since the properties would end up in your name if you withdraw the Trust, the court will treat you as the property owner. A revocable living trust's capital is taxed as personal income as well. The Trust will not be considered as a separate tax-paying agency during your lifetime.
What is an irrevocable living trust, and how does it work?
An irrevocable trust is created to save money on taxes and avoid probate. When you establish an irrevocable trust, you forfeit all ownership rights, but the assets in the Trust are not excluded from your taxable estate. Personal income tax does not apply to the income generated by assets held in an irrevocable trust.
Properties in irrevocable trusts are secured from creditors.
Creditors are unable to seize properties held in an irrevocable trust. The explanation for this is that you don't have ownership over the properties, can't revoke the Trust, and therefore can't be considered the asset's owner.
Perhaps better are today's Irrevocable Trust laws. Unlike older irrevocable trusts, some modern trust management and administration provisions allow for a great deal of flexibility. You may also move an older trust to a newer trust with revised provisions for better asset management. A trust's domicile status may also be changed to save money on taxes and other benefits.
However, tax laws differ by jurisdiction, and in certain cases, if you are both the grantor and the Trustee, you will not be able to keep the wealth.
The following things may be put in an irrevocable trust:
Resources for investment
Policies for life insurance
Amount of money
On the other hand, creating a trust is not simple; you'll need the assistance of an estate planning attorney specializing in trusts, wills, and estate planning. Most people associate trusts with the rich. Trusts, on the other hand, are useful in estate planning, whether you are wealthy or not.
When can an Irrevocable Trust be used?
Irrevocable trusts are useful for people who work in professions that are vulnerable to litigation, such as doctors and lawyers. Your asset is secured from creditors and court proceedings until it is placed in an irrevocable trust. Compared to inheriting assets directly, an irrevocable trust will protect beneficiaries with special needs by making them eligible for government benefits.
The following are some examples of living trusts:
Insurance Life Insurance Trust. Many people are unaware that the value of a life insurance policy will cause an estate tax bill, depending on the amount. An ILIT is one way to minimize estate taxes. A life insurance trust (ILIT) is a living trust created specifically to own a life insurance policy.
Charitable Remainder Trust. A charitable remainder trust allows you to make a large donation to a charity of your choosing while still saving you and your heirs' money on taxes. Income taxes, inheritance taxes, and capital gains taxes are also reduced.
Blind Trust. The Trustee of a blind trust has complete control over the properties. The Trustor initiates it, which can be terminated, but it has no power over it. Typically used when the Trustor's investment holdings could place him in a conflict of interest due to a regulatory problem—typically used by a wealthy individual seeking elected office.
Qualified Terminable Interest Trust. A QTIP is an A/B trust that is used by a married couple.
Testamentary Trust. A testamentary trust is formed in a will for the benefit of minor children.
Is it possible to make adjustments to an Irrevocable Trust?
In such cases, irrevocable trusts may be undone. In most countries, there are legal ways to modify such trusts. The consent of all appointed beneficiaries is normally required, and they must be of legal age. Some irrevocable trust deeds also grant the Trustee the right to change the Trust in unexpected circumstances, but only if it is in the Beneficiary's best interests.
An irrevocable trust is the best type of Trust for protecting one's assets from creditors and court judgments; once established, the grantor cannot alter it. You would also be eligible for Medicare, Supplemental Security Income, and other government benefits if you use irrevocable Trust.
How Long After Someone Dies is a Trust Valid?
When a trustor dies, such as a Grantor, Settlor, or Trustmaker, the Successor Trustee has a certain amount of time to get all funeral arrangements, death certificates, and other paperwork in order. The time frame isn't set in stone, but it can be as short as 30 days. Following the completion of any arrangements proposed by the decedent in the Trust, all accounts and properties are accounted for to avoid any violation of fiduciary duties.
So, to get a full picture of time, you can divide it into different time segments, each of which can differ in length due to its complications. Selling a house, or many homes, as well as a company, is one example of a complication. Obtaining appraisals, listing the property on the Multiple Listing Service (MLS), and other tasks, such as seeking a qualified buyer, take time.
How Long Would It Take to Settle a Trust After Someone Has Passed Away?
There are deadlines that the Trustee and the beneficiaries must be informed of within the overall time frame, which may range from 12 to 18 months. Failure to meet these deadlines can result in serious consequences. If you're a Trustee or Beneficiary, here are a few deadlines to keep in mind:
Prepare an estate inventory that covers all assets as well as liabilities.
Obtain a Trust Identification Number (TIN).
Probate Code Section 16061.7 requires you to submit a notice to all survivors and potential heirs.
The Beneficiary can request a copy of the Trust.
Beneficiaries have a period of time after receiving notice to appeal the Trust.
You get a copy of the Trust at this stage, which does not include paying any previous taxes, debts, or selling the property if applicable at 120 days from notice or 60 days. Since a beneficiary may contest (challenge) the Trust's terms, a Trustee will not look to release any distributions before 120 days.
Time Limit for Distribution of Living Trusts
A Revocable Trust is not distributed until the Trustor dies, at which stage a Successor Trustee takes over the estate and completes the transfer process according to the Settlor's wishes. As a result, distributions must be made in a "fair" amount of time. Transparency is important for Trustees and Beneficiaries to avoid conflicts. To proceed, Trustees may and should make preliminary allocations to beneficiaries before making the final distribution, but they must set aside a certain sum in reserve.
When settling an estate with a Trust
Regarding Trust delivery timeframes in California, there is no exact line to be drawn in the sand. The laws do not specify a specific time period. On the other hand, the overarching theme is complete accountability and keeping beneficiaries fairly informed. The Trust document's aim is to avoid any conflicts, voiding, or invalidation of the Trust. Yes, a Beneficiary can challenge the Trust based on undue control, criminal acts such as forgery, and so on.
Is it possible to sue a Trustee?
If you are an heir or a Beneficiary and suspect the trust assets have been mishandled, you can seek legal advice immediately. As a beneficiary, you must now be fair in enabling the Trustee to meet timeframes and other requirements.
The Trustee must notify the Settlor's name, a right to request a copy of the trust instrument, and a right to accounting within 60 days of learning of the irrevocable Trust's existence, whether they learned of it through the Settlor's death by some other means.
When the Trustee believes they have acted reasonably and by the Trustee's objectives, you will have to go to court to prove the violation of fiduciary duty.
Where Can You Get Updates?
Hopefully, if you are the Beneficiary, you are aware of the current situation. If you don't have any, you'll need to start by gathering the following information:
A copy of the Trust
Updates to the assets
What Is the Average Time It Takes to Get a Settlement?
The Trustee has a fair amount of time to complete the Trust's settlement. The question is, what constitutes "fair" behavior? If the Trustee has been successful in keeping the beneficiaries informed, stating the truth about the estate, and so on, the court will work with the Trustee if the Trust is challenged. However, the courts will consider a few considerations to ensure that the Trust is closed within a fair period, including:
All delivery contingencies have been met.
Taxes and loans have been paid in full.
All assets have been gathered and are ready to be distributed.
The Trustee's primary aim is to make sure that all properties are allocated without leaving any stone unturned. If the Trustee discovers after distribution that there is another tax or debt that has not been paid, they will have to pay it out of their own pocket. Situations like this can now last three years or longer if an estate tax return is needed.
What should I do if my distribution is taking too long to arrive?
As a beneficiary, you'll want to double-check that you've followed your timetables and stay up to date on Trustee news. Find an Estate Planning Attorney who specializes in your case "before" alerting the Trustee if the Trustee is not honest about their conduct. Note that you must appear "reasonable" to the courts, not only ready to collect your delivery.
In certain cases, a rule is known as a "no-contest clause," also known as an "in terrorem clause," which specifies that if you contest the Trust and lose your case, you will receive 0% of your inheritance. As a result, speak with an Estate Planning Attorney and learn what steps are left to take and when they must be completed.
Beneficiaries' Right to Information
As a beneficiary, you have the right to know whether the Successor Trustee is properly handling the Trust. You can secure the properties left to you by the settlor/grantor. However, a beneficiary should be mindful that the Trustee must stick to such timeframes to remain on the right side of the courts. You'll want to stay informed about the Trust Administration process's progress while also giving the Trustee "fair" time to distribute the requested updates.
First and foremost, as a beneficiary, you must recognize that the Trustee has the right to settle the estate, enlisting the aid of lawyers, appraisers, and other professionals to assist with the settlement of the estate to prevent any violation of their fiduciary duty. The Trustee's responsibilities include 'timeframes' for acting, which usually vary from 12 to 18 months depending on whether assets must be sold, debts, tax consequences, and other factors.
When the Trustee/Settlor dies, the Trust immediately becomes irrevocable, which means it can no longer be changed. If you are a beneficiary of a trust, you have statutory rights as a beneficiary at this stage. If you are the Trustee, you now have a legal obligation to keep the Trust's beneficiaries updated on how the Trust's assets are handled.
How do you ensure your Beneficiary Rights to Information are being followed up on?
First and foremost, you must have experience on your side. You can contact a trust litigation solicitor if you need legal assistance due to the Trustee's lack of accountability. The Trustee has 60 days after the Settlor/death Trustor's to have a true copy of the Trust records, including any changes, according to California Probate Code Section 16061.7.
Keep ahead of the game by informing the Trustee by email or letter that you know the 60-day deadline and would appreciate a True Copy of the Trust documents. Hopefully, this will suffice, but it's time to step it up a notch if you still haven't received the Trust document. Let the Trustee (s) know that you can seek legal advice and file a petition with the courts to obtain your copy and that they will cover all expenses, such as attorney fees.
What should a beneficiary expect from the Trustee?
Since there are no hard and fast rules for each part of the Trust Administration process, you can hear the term "reasonably" from time to time. So, what are some of the early hopes you can anticipate?
The Trustee can contact all of the beneficiaries as soon as possible.
Educate all those who will benefit from the position.
Assist in determining priorities based on the Trust's properties.
All assets must be counted and regulated until the trust assets are allocated to any beneficiary.
The secret to an effective Trust Administration process is transparency.
What other rights does a Trust beneficiary have?
Right to Communication. You have the right to be kept up to date with any Trust changes. The importance of effective communication cannot be overstated.
You have the right to an accounting of the assets held by the Trust, the interest received by the Trust, and the expenses paid out by the Trust.
Right to ask a court to have a Trustee removed or a trust terminated. The right to petition a probate court to remove a Trustee or invalidate a Trust is subject to a set of conditions that must be met, and having an experienced trust litigator on your side is recommended.
Right to Distribution. As a beneficiary or successor, you have the right to obtain trust asset distributions under the terms of the trust agreement.
Find an Estate Planning Attorney in Los Angeles
Finding an Estate Planning Lawyer may help you through the whole process of setting up a Living Trust. They can help you organize your documents and inform you of all the legal details of the Trust.
1000Attorneys.com is a California Bar Association Certified Lawyer Referral Service that can refer you to a Los Angeles Living Trusts Attorneys that best fits your legal needs. Fill up the submission form or contact us through our 24/7 live chat for a free initial consultation.