Revocable and Irrevocable Living Trusts: Which One Should You Get?
Updated: Jun 5
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A trust is a legal institution that holds assets on behalf of another. Living trusts are established to benefit the Trust creators (also known as "Settlors" or "Grantors") during their lives. Living trusts also specify how assets will be managed and distributed after the Grantors have died.
A living trust is a legal entity that you establish before you die. The property you transfer into the trust remains in the trust's ownership. You can continue to be the trustee and have authority over your assets until you pass away, at which point your assets are transferred to the named successor trustee. You can name a trustee to oversee the trust if you become incompetent, which you can do with a trust. In the case of your mental incapacity, a living trust allows you to administer your assets without the need for a supervised conservatorship (e.g., stroke or dementia).
Because the trust controls the property, your assets are usually not subject to probate after you die. This procedure will save your beneficiaries a lot of time and money. It also helps to relieve stress while you're going through a difficult time.
A California Estate Attorney usually drafts a living trust. The assets are transferred into the Trust once the terms of the Trust have been formed. For example, if the Grantors own a home, the property will be lawfully transferred to the Trustee; the Grantors will sign a deed transferring the title to the Trustee and record the deed with the County Recorder's office. The Trust will also receive the Grantor's bank account(s) and other assets. The assets are subsequently legally transferred to the Trustee.
The Trust management is the Trustee. During their lifetimes, the Grantors of a Living Trust are usually the original Trustees. The Grantors/Trustees will be responsible for managing their own assets. The Grantors can also choose someone to handle the Trust's assets, such as a family member, a friend, or even a qualified fiduciary. The Trustees are the ones who make financial choices about the Trust's assets.
Beneficiaries of a Trust
The Trust beneficiaries are the individuals who profit from the Trust's assets. During their lifetimes, the Grantors are usually the original beneficiaries of their own assets. After the Grantors die away, the Grantors decide who will be the beneficiaries. The provisions of the Living Trust dictate how and when the assets will be distributed to the beneficiaries.
When the Grantors of a Living Trust dies, the residual assets are distributed to the beneficiaries. Beneficiaries are usually the Grantors' children or relatives. In California, unless a parent dies without a Will or Trust, children do not have an automatic right to inherit their parent's possessions. A trust can be established to assist whoever the Grantor wishes to benefit from his or her assets.
After the Grantors die away, the Successor Trustee is the person who manages the Trust assets. The Successor Trustee is thereafter responsible for adhering to the Trust's provisions and managing the Trust's assets. This may entail selling the assets and promptly dispersing the cash to the beneficiaries. Some trusts are set up to pay the beneficiaries in installments throughout the course of their lives. The manner in which the assets are dispersed to the beneficiaries is determined by the Trust's terms. The assets are eventually divided to the beneficiaries, and the Trust comes to an end.
Wills vs. Trusts
A Living Trust is also known as a Family Trust, a Revocable Trust, or a Revocable Living Trust — all of these terms refer to the same legal form. One of the primary differences between a basic Will and a Living Trust is that a properly funded trust can avoid probate, whereas a simple Will requires any estate valued over $150,000 to be lodged with the probate court.
You are the trustee in charge of the assets in your trust during your lifetime. Your Trust becomes an irreversible trust after you die and cannot be modified. Any power of attorney you've issued to someone else is no longer valid. After that, the successor trustee you've named will have sole authority over your trust estate.
You might wonder who a trustee is in a trust and what a trustee does. You are both the Settlor (also known as a Trustor) and the initial trustee when you create your own Trust. If you're married, you and your spouse are both Settlors and Trustees, and you have control over the trust estate or estates. When the last of the Settlors dies, the Trust names a successor trustee or trustees who will transfer the property held in trust to the beneficiaries and keep track of the trust.
If you want your Trust to be distributed over time or under particular conditions, you can include testamentary provisions in the Trust text. Many successor trustees benefit from one of our Estate Attorneys' legal guidance, statutory notices, accounting, and distribution and sale of trust assets.
The benefit of drafting a Living Trust with a pour-over Will (the pour-over Will stipulates that all assets pour over into the Trust at the time of your death) rather than a simple Will without a Trust is that there is no need for probate if the estate property has been properly funded into the Trust. The Trust does not accept contributions from retirement funds. It's critical to understand how to properly fund a Trust.
If, however, all of the assets, such as real estate, were not listed as Trust assets as of the date of death, your Estate Attorney can file a Heggstad petition with the probate court, requesting that those omitted assets be included as trust property as if they had been in your Trust previous to your death.
What is the definition of a Will?
If you decide that a basic Will, rather than a Living Trust, is what you desire, you'll need to know how to write a Will to provide for your heirs. Creating a Last Will and Testament without the assistance of a CA Estate Attorney might be difficult. A holographic Will is handwritten, must be dated and signed, and must be proven to have been written by you in probate court after your death. Form Wills can also be problematic, as beneficiaries can contest them based on technical concerns or phrase interpretation.
If you have minor children, a Last Will and Testament allows you to name a guardian for them. If you wish to keep your family members out of your estate, you'll need a Will or a Trust so that the California probate statute doesn't divide your intestate estate among all of your relatives. Similarly, if you wish to donate a portion of your assets to charity or require a special needs trust, you must include it in your estate plan.
If you have less than $150,000 in assets, a simple Will rather than a Trust may be sufficient.
A pour-over Will is a Will that is prepared with a Trust, and it stipulates that all of the assets pour over into the Trust, which has the distributive provisions, whereas a simple Will provides the gifts to the beneficiaries.
Why Do I Need a Trust?
Trusts can assist you in managing your wealth, protecting your legacy, maintaining your privacy, and reducing the need for probate. The main advantage for most families is the avoidance of probate. When you die, your family is usually required to open an estate in probate court. The executor must next follow a set of stringent processes in regards to your assets, debts, and heirs. The probate process is often time-consuming, costly, and can lead to disagreements among your heirs. Fortunately, trusts and a well-crafted estate plan can help you avoid or minimize probate.
While you can find internet forms that claim to help you create trusts, it's nearly always advisable to consult with an Estate Lawyer. The laws governing trusts and estates vary by state, and your situation is unique. An online form will not be able to determine your specific requirements or assure compliance with California legislation. Your loved ones may endure needless problems and cost if your trust is structured wrongly. Working closely with an experienced Estate Planning Lawyer might help you prevent these problems.
When you die, a will does not protect you from probate. A will, on the other hand, ensures that your family will be subjected to the costs, fees, and delays involved with probate. Before a will may be enforced, it must be validated by the court in probate court.
A will can also only take effect after you pass away. As a result, if you become physically or mentally handicapped, it offers no protection. As a result, the court might easily seize your assets before you die. Millions of senior citizens and their families are concerned about this. Fortunately, a revocable living trust is a simple and effective alternative to a will.
Probate is avoided with a revocable living trust. It allows you to preserve control of your assets while you are alive and after you die, even if you become handicapped.
What's Wrong With Probate?
It can be quite costly. Before your assets may be fully distributed to your heirs, legal fees, executor fees, and other expenditures must be paid. If you possess property in other states, your family may be subjected to multiple probates, each governed by the laws of the state in question. These prices can vary greatly.
Probate takes a lengthy time, usually between nine months and two years, although it can take much longer. Assets are normally frozen for a portion of this period so that an accurate inventory can be taken. Nothing can be distributed or sold without the permission of the court and/or the executor.
If your family requires financial assistance, they must apply for a living allowance. This request may be denied by the court.
Probate is a procedure that is open to the public. Any "interested party" can know what you own, who you owe money to, who will get your assets, and when they will get them. Disgruntled heirs may be encouraged to fight your will, and your family may be exposed to unscrupulous solicitors.
In most cases, your family has no say in the probate process. The court procedure dictates how much it will cost, how long it will take, and what information will be made available to the public.
Is Joint Tenancy a Good Way to Avoid Probate?
Not at all. Probate is usually only postponed when the shared tenancy is used. When one of the owners of a jointly owned asset dies, full ownership passes to the surviving owner without the need for probate. However, if that owner dies without naming a new joint owner, or if both owners die at the same time, the asset must be probated before being distributed to the heirs.
Keep an eye out for other issues. You raise your chances of getting identified in a lawsuit and losing the asset to a creditor when you add a co-owner. There could be issues with gifts and/or income taxes.
Because most jointly owned assets are not controlled by a will, you may unintentionally disinherit members of your family. To sell or refinance some assets, particularly real estate, all owners must sign. So, if one of your co-owners becomes incapable, you may find yourself with a new "co-owner" in the form of the court, even if the incompetent owner is your husband.
When I'm incapacitated, why does the court become involved?
Only a court-appointed representative can sign for you if you are unable to conduct business owing to a mental or physical disability. Even if you have a will and co-own your home with your spouse, this is true. Remember, it only takes effect when you pass away.
Once the court becomes engaged, it usually remains so until you recover or pass away. Your assets will be utilized to care for you by the court, not your family. The procedure of "living probate" can be costly, humiliating, time-consuming, and difficult to complete. It's also open to the public! Because it does not take the place of probate at death, your family may have to go through the process twice.
How to Decide Between a Revocable and an Irrevocable Trust
Creating a trust, whether revocable or irrevocable, is usually strongly advised and seen as a prudent strategy for planning for your estate and loved ones. Knowing which form of trust is right for you, on the other hand, can be difficult. When considering the creation of a trust, you should speak with a financial professional who can help you estimate the total value of your estate, as well as an Estate Planning Attorney who can advise you on the different types of trusts, how to construct a trust, and numerous issues that are unique to your circumstance.
Why Should You Get A Revocable Living Trust?
Trusts are used to leave assets to loved ones, avoid probate, reduce taxes (depending on the type of trust), and avoid obligations, among other things. Some of these benefits are available through revocable living trusts. The following are some of the main advantages of establishing a revocable living trust:
Probate is avoided. When someone dies, the estate they leave behind must go through the probate court system. During probate, all of the estate's assets are inventoried, creditors are paid, and assets are divided to beneficiaries according to the terms of the will or California intestate succession rules if no will exists. The procedure might be lengthy and meticulous. However, assets that are held in a trust are not subject to the probate process. Assets held in a trust are available at the moment of the grantor's death because there is no need to wait for the probate procedure to finish.
Flexibility. One of the most significant advantages of a revocable living trust over an irrevocable trust is the management flexibility that the former affords. Making modifications to a revocable trust is simple, and it may be even easier than making changes to a will. The grantor of a revocable trust can amend the trust's provisions, move assets in and out of the trust, and amend the trust's directions. Furthermore, a revocable trust can be used to appoint a range of people, including non-related and out-of-state individuals, to be in charge of property administration after a person's death.
What Can a Revocable Living Trust Do to Protect Minor Children and Other Beneficiaries' Interests?
A revocable living trust allows you to choose not only who will inherit your assets after you die but also how and when they will be distributed.
Some beneficiaries may be small children or others who are not well-suited to receive their inheritance all at once at the time of your death. A minor child or even a young adult, for example, may not be responsible enough to accept and manage a big bequest. Other beneficiaries may have significant debts, and creditors ma