Santa Cruz Estate Planning Attorney

Living Trust

Like a Will, a Living Trust is created to manage your assets after your death. However it does so in a different way that offers numerous benefits. By using more of a contract approach to asset distribution than a traditional Will helps avoid some costs such as probate. A living Trust is also not bound to some of the rules that apply to Wills, so it can provide a much more flexible estate planning tool if you have more complex wishes regarding how your property should be distributed. This flexibility also allows us to use multiple trusts in combination as a way to deal with federal estate taxes.

Looking at how a Living Trust works can help to understand the benefits. Instead of relying on probate, which is a court supervised process, a living trust appoints a Trustee to distribute assets. A living trust provides two crucial pieces of information. First it sets out instructions how your estate is to be distributed. Second it selects a trustee who shall follow those instructions. Upon death of the creator, the trustee uses the instructions in the living trust to make distributions to the creator's heirs.

Avoiding probate is a significant benefit of a Living Trust. However there will still be some costs associated with administering your Living Trust. Assets still need to be collected. Real property still needs to be appraised so your heirs can receive a step up in basis. The goal is to minimize these costs and escape the statutory fees associated with probate. In California attorney's fees for probate cases are set at a % of the estate, so the larger the estate, the larger the fees become.

Flexible options when deciding how you want to distribute your assets can help you better meet the needs of your family members. A will must distribute immediately after probate is completed, but a trustee can manage assets for years after the death of the creator. The property can be used for the benefit of the heirs, or only income provided to them. This addition flexibility often meets the needs of the creator in a way that a Will cannot.

If you are concerned about federal estate taxes a Living Trust can offer solutions to help minimize or completely eliminate any estate taxes your estate may have to pay. The challenge with estate taxes right now is the constant fluctuation. Each person has an exemption amount, that if their estate is under they do not have to pay estate taxes. In 2001 it was a 1 million dollar exemption. In 2009 that exemption climbed up to 3.5 millions dollars. In 2010 we had no estate tax. In 2011 we have a 5 million dollar exemption and in 2013 we are scheduled to return to a 1 million dollar exemption.

Attorneys have spent a great deal of time working to minimize estate taxes with this constant change the last few years. In addition to portability which was created in 2011 by Congress, a Living Trust can incorporate other types of trusts such as a QTIP or Bypass Trust to help deal with reducing the taxes your estate will pay.

The primary benefits of a Living Trust are estate tax issues, probate and flexible distributions. However there may be disadvantages to consider also. The cost to administer a Living Trust may be comparable to that of probate in some cases. The cost of creating a Living Trusts is generally quite a bit more than a Will. If your distribution is likely to be heavily contested then court supervision may be a good thing. It is important to sit down with an attorney who can help you consider the benefits and disadvantages before deciding to create a Living Trust.