You should have a Will if you wish to name which beneficiaries will inherit your assets when you die.
A Living Trust, like a Will, allows you to name the beneficiaries to inherit your assets. However, a Living Trust enables your beneficiaries to receive inheritances without probate — a state court proceeding which causes expenses and delay for your family and beneficiaries.
Probate expenses include fees for Attorneys, Executors and asset appraisals as well as court and administration expenses. These expenses amount to thousands of dollars paid from inheritances you would rather go to your beneficiaries.
Although a Living Trust is like a Will, in that it is a document, it also is a separate legal entity able to hold title to your assets. The change of title to the name of the trust is called funding. A properly funded trust avoids probate.
A Living Trust does not automatically avoid taxes. Nevertheless, properly drafted Living Trusts can avoid taxes, particularly when a husband and wife prepare their estate plans together.
A husband and wife can utilize their individual exemptions from the federal estate tax to transfer up to $22.8 million of their assets to beneficiaries. Further, due consideration must be given to preserve an income tax benefit available to beneficiaries, called step-up in income tax basis. The particular form of the Living Trust chosen for a married couple is critical in preserving the best possible tax position.
No. Generically, Living Trusts are called revocable trusts because the trust maker(s) can amend or revoke a Living Trust during the maker's lifetime. For married couples, effective estate tax planning requires choosing between forms known as the A-B Trust (including derivations of such form, called A-B-C or QDOT) or Disclaimer Trust.
Generally, not for the trust maker. There may be such protection available for a surviving spouse and for successive trust beneficiaries, such as children. A Special Needs Trust is such a trust form designed to ensure that a trust beneficiary will remain qualified for government subsidies due to disability as well as to avoid governmental reimbursement claims for such subsidies.
Living Trusts are useful for management of assets for a named beneficiary, such as a minor or young adult unable to manage financial affairs at the time of inheritance. Living Trusts may avoid other probate court proceedings, such as guardianship and conservatorship.
The Trustee controls and manages Living Trust assets. While the maker(s) of the Living Trust are living, the maker(s) (called Trustor(s), Grantor(s) or Settlor(s)) is/are also the Trustee(s) (and the surviving spouse is the continuing sole Trustee of the Living Trust in most cases). Upon the death or incapacity of the original trustee(s), a Successor Trustee distributes Living Trust assets to beneficiaries named in the Living Trust.
No, unless the Successor Trustee is also a beneficiary named in the trust document, and then only to the extent of such beneficial interest. A Trustee acts as a fiduciary for the beneficiaries of the trust and must act only for the beneficiaries' financial interests.
It makes sense, in many cases, to name an adult beneficiary as Successor Trustee. A number of alternate choices for Successor Trustees can be named in the Living Trust document in the event a first choice is unable to act, and so on. Two people may act together as co-trustees, as do spouses when a joint trust is made by them (for example, an A-B or Disclaimer Trust). When a named beneficiary is too young or financially unable to act, however, another person should be named as a Successor Trustee in order to control and manage the Living Trust assets for the young or financially immature trust beneficiaries.
A Pour-Over Will is used as a back-up to the Living Trust for assets that were not funded (transferred) to the trust during that person's lifetime. The Pour-Over Will directs those assets to be distributed according to the terms of the Living Trust, thereby ensuring distribution of assets to beneficiaries named in the Living Trust.
Since a Guardian is required for a minor child or children when both parents are unable to act, you should name a Guardian for minor children in your will. If you do not name a Guardian in your will, a court may select a person you would not have wanted to take care of your minor children.
A Living Will is a document used to name a person to make critical health care decisions for you if you are not able to do so. In California, this document is called an Advance Health Care Directive and the person named to make decisions for you is called your health care agent.
A Power of Attorney is a document used to name another person to make decisions for you if you are unable to do so, usually financial decisions. A Power of Attorney for Financial Decisions is the name of the document used to name an agent to make financial decisions for you. A Springing Power takes effect only if you are declared incapacitated (for example, by doctors) whereas an Immediate Power authorizes an agent to make financial decisions for you immediately even if you are able to make your own decisions.
Not quite. A Living Trust is the document used for naming beneficiaries of your assets (also known as your estate). An Estate Plan, as the term is commonly used, generally involves utilizing documents needed to address issues arising due to death or disability, including the Living Trust, Pour-over will, Advance Health Care Directive, Power of Attorney for Financial Decisions, and usually a Deed for transfer of your residence or other real estate to the trust.
Robert K. Smith,
Estate Planning, Probate and
Servicing The Greater Los Angeles Area
including La Canada, Arcadia, Burbank, Glendale, Los Angeles, Pasadena, Redondo Beach,
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La Canada, CA 91011
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