- posted: Feb. 28, 2023
- Estate Planning
One of the goals of estate planning is to pass on property to one’s intended beneficiaries without legal complications. Many estates must go through probate in a local or regional court. Probate can be a complex and time consuming process that delays the distribution of property to the beneficiaries. In addition, the fees and costs involved with probate can be significant. One way to make the transfer of generational wealth more efficient is by creating a living trust.
A living trust is a legal device for holding and transferring property separate and apart from the probate process. The trust holds whatever property is put into it, which can be most anything of value. The creator of the trust can appoint himself or herself as the trustee, which makes them responsible for managing the assets. When the creator of the trust dies, a successor trustee takes over management of the trust and distributes assets to the beneficiaries named in the trust.
Living trusts are very flexible. As trustee, the creator can modify or revoke the trust for any reason and may add, remove or use any property held in the trust at any time. Also the creator may add and remove beneficiaries of the trust. In sum, the fundamental trust provisions can change up until the creator’s death.
After the creator’s death, the successor trustee named in the trust administers and distributes assets to the beneficiaries. Because the trust is a separate legal entity, the transfer of assets does not go through the probate administration process. Transfers are done quickly with minimal government oversight and administrative delay. After all of the assets are paid out, the trust is dissolved.
Even if you create a living trust, you should also have a last will and testament. Only property held by the trust is distributed according to its terms. Often, the trustee does not put all of their assets into the trust. A special type of will — known as a pour-over will — controls the distribution of any assets not included in the trust which you may own at the time of death. This ensures that all your assets go to your chosen beneficiaries. Another reason for having a will is providing for minor children. A living trust does not and cannot address guardianship of children. Guardianship has to be specified in a separate document, most often the last will and testament.
The specific rules for distributing trust property and the associated tax implications can be complicated and an experienced wills, trusts and probate lawyer can provide valuable assistance.
Favaro, Lavezzo, Gill, Caretti & Heppell, PC, with offices in Fairfield and Vallejo, is a California law firm providing estate planning services throughout the greater North Bay region. Feel free to contact us online or call 707-674-6057 for a consultation.