For those interested in estate planning, a living trust might be an effective instrument. A living trust can be a useful tool for safeguarding assets in retirement, but residents of California should be aware of both state and federal regulations before establishing one. A living trust is an investment that, like any other, may reap significant rewards with careful planning.
What is a Living Trust?
You can designate a beneficiary to receive your assets in your will, but a living trust makes it easier. The trustee will act on your and your beneficiaries’ behalf to oversee the care of the trust’s assets. The trustee’s other duty is to distribute the trust’s assets to the beneficiaries in accordance with the trust’s terms. You have the option of e ither serving as the trustee or appointing someone else to do so on your behalf.
Both revocable and irrevocable living trusts are viable options for those who want to set up a trust for their loved ones. Every asset transferred into an irrevocable trust deed is there to stay until the trust expires or all beneficiaries sign a new trust agreement.
On the other hand, a revocable living trust is more adaptable and enables changes, as well as the elimination of property and/or beneficiaries, in the event that they are no longer required. Click here to read more about revocable living trusts. You’ll keep control of your assets in a revocable living trust, but you’ll lose them in an irreversible one. This means that the trust itself, and not you personally, is responsible for paying taxes on the trust’s assets, which can prevent tax issues in the future.
How Much Does a California Living Trust Cost to Establish?
California living trust creation costs vary by approach. In most cases, you may save more than $100 by doing it yourself with the help of a book or even an online guide. DIY estate planning, however, is not without its risks. Yet, hiring a professional comes at a higher price. It’s possible that hiring a lawyer to assist you in creating your trust will cost you more than $1,000.
If you decide to retain legal representation, be sure to hire a trusts and estates attorney rather than a general estate planner who may only handle wills and probate. Consider hiring a lawyer who has earned the California Bar Association’s certification in estate planning, trust, and probate law.
For What Reasons Should a Californian Establish a Living Trust?
Having a living trust set up is important for a variety of reasons. An important benefit is that it keeps your loved ones out of the court-mandated probate system after your death. When someone dies, their estate must go through the probate court system, which can be a lengthy process. To spare your loved ones the hassle, you might consider setting up a living trust.
Because the state does not follow the Uniform Probate Law, California residents have an additional incentive to establish a living trust, and the trust administration would handle all aspects of carrying out the parameters of the trust. This code streamlines the probate court process for estates in other states. Since it is not in place in the Golden State, a living trust is a need if you want to simplify things for your heirs after you pass away.
If you plan to leave property to a minor, a living trust can be an excellent tool to use. A third-party trustee you appoint can keep the money or property safe until your child becomes 18 or 21. Finally, if you have a living trust set up, a conservatorship over your assets will not be necessary in the case of your incapacitation. The assets in a living trust will be managed by a trustee you’ve appointed in advance.
When Should Someone in California Establish a Living Trust?
Even if a living trust isn’t just for the wealthy, one’s wealth is a factor in deciding whether or not to establish one. Due to their complexity, larger estates may benefit most from a living trust. Having a living trust set up can have some negative consequences. These may be more expensive, harder to arrange, and take more time. You may just need a will, even though the probate process in California is cumbersome, if your plan for passing on your wealth is straightforward.
Wills vs. California Living Trusts
Remember that a will is probably still necessary even if you acquire a living trust. Nothing is guaranteed to be transferred into a living trust. Property that isn’t part of a living trust can be distributed according to a will. However, neither of these substitutes for a valid last will and testament. It absolutely depends on the legal matters you assume will take place which is best for you.
Wills have more flexibility than trusts do in dealing with certain circumstances, such as:
- The Process of Appointing an Executor
- A procedure for naming a legal guardian (https://en.wikipedia.org/wiki/Legal_guar) of a minor.
- Specifying how to settle financial obligations.
- Designating Guardians for Minors’ Assets
In California, the effects of a living trust on taxes will likely be minimal. If you are a California resident and are thinking about legacy planning, you should be aware of the California inheritance tax as well as the California estate tax. No estate or inheritance tax is levied in the Golden State at the state level.
Briefly Summing Up
A living trust can be established in California with minimal effort but forethought. When creating a living trust, you may want to see a financial planner or legal expert for assistance. You can get the forms at a notary public, or you can download them online and take them there yourself. A living trust is not intended as a substitute for a will, but rather to augment one in order to ease the burden on your beneficiaries after your passing.