Posted On: May 20, 2014, Posted By: Velasco Law Group
There are many reasons to have a living trust. I can’t begin to cover all of them, but will touch on three important reasons very briefly.
Reason #1: Protecting Property for Your Beneficiaries
When most of us think about estate planning, we think about passing our property to our family or loved ones after we die. However, sometimes our intended beneficiaries are not able to handle an inheritance. Minor children are probably the most common example of this. In California there are restrictions against Minors owning property. Typically, a guardian is either appointed to hold the property on behalf of inheriting children until they are 18 or the funds are placed in a court monitored blocked account. Even then, if you speak to parents of an 18 year old, they might cringe at the idea of their teenager receiving any large sums of money. An 18 or 20 year old with an outright gift of money might very well drop out of school, buy a sports car, and head to Vegas. Having a living trust can solve this problem.
Reason #2: Managing Property upon Incapacity.
If you can believe it, a major planning concern today revolves around living too long! Many people worry about whether or not their parents can live in their own homes. Many worry about how their parents’ bills are being covered and about the safety of their money from people who might take advantage of them. Unfortunately, in the case of parents who have not done adequate estate planning, the only solution is to file a petition with the probate court for a conservatorship. That’s a difficult experience, because it exposes personal and financial information to total strangers, involves thousands of dollars in recurring court and legal fees, and frequently results in disputes between family members. Besides, it can be a real indignity to be declared legally incompetent.
Don’t put your own family through that difficult experience. It is very easily avoided through proper planning.
A revocable living trust together with an advance health care directive and durable power of attorney for finances solves this problem. A revocable living trust allows your successor trustee to take control whenever you resign or are incapable of handling your affairs. There is typically no interruption in the management of assets, and there is no required court supervision. Revocable living trusts also enjoy a great level of acceptance throughout the legal and financial community with a broad range of statutory powers regarding the management of trust property. While it is true that a living trust isn’t effective unless your property is held in the trust, a durable power of attorney will enable your attorney-in-fact to transfer property into your trust if you can’t do it on your own. Of course, we at the Velasco Law Group can help you with all of the details.
Reason #3: Avoiding Probate.
When you die, property in your revocable living trust will not go through probate. That’s because the living trust itself spells out who gets to take ownership of the property. It’s very similar to 401(k) plans, life insurance, annuities, IRAs, and company retirement plans. Since those properties each have a designated beneficiary, those properties do not go through probate but, rather, pass directly to the beneficiaries (often with some tax advantages).
Jointly owned property with a right of survivorship does not go through probate either. It passes automatically to the surviving joint owner. Unfortunately, relying on joint tenancy laws is not advisable. We have seen cases where joint tenancy exposes the property to a joint tenant’s creditor, during the owner’s life. It’s also entirely possible that both joint tenants die at the same time or that the surviving tenant passes away without having specified who should inherit the property. A revocable living trust spells that out in advance and offers protection from a beneficiary’s creditors taking your property from you.
Estate Planning can be Overwhelming
The process of planning your estate can be an intimidating task. The good news is that you don’t have to do it alone, because the Velasco Law Group is a law firm dedicated to helping you develop and monitor a complete plan that achieves your desired results and minimizes the problems and obligations of your loved ones.
If you’d like to learn more about what that means, call our office today to schedule a complimentary consultation with one of our estate planning attorneys.
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Long Beach CA 90802-4459
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Downey, CA 90241
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