Living Trust FAQ
What is a Living Trust?The Living Trust is a valuable tool designed to keep you and your family out of probate court. It is a legal document which allows for the continued management of a persons assets during their lifetime (usually by the person who sets up the trust), continued management should incapacity occur and the orderly distribution to beneficiaries upon death without the delays and expenses usually associated with probate court and a regular will. A properly drafted Living Trust will often consist of 30 to 55 pages of legal provisions.
What are the main benefits to a Living Trust?The avoidance of Probate, conservatorships, maintains privacy, possible reduction of taxes if married, reduces the possibility of someone contesting the estate.
Who needs a Living Trust?At the Cobb Planning Group, we offer free consultations to make sure a Living Trust is appropriate for a client. A normal guideline for residents of California, however, is anyone who owns real estate, has minor children or, if they have personal property which exceeds $100,000 (gross value). Usually a Living Trust will benefit these families, married or single. Although, not everyone may need a Living Trust.
How are assets transferred to the Trust?First, a general assignment is prepared to transfer personal property such as furniture, appliances, electronics, clothing, jewelry, etc. to the trust. Second, each institution where you maintain an account such as banks, brokers, mutual funds need to be notified to change the account registration to the name of the trust. You complete change of beneficiary forms for retirement accounts and life insurance. Third, a new deed is prepared for each parcel of real estate, including most timeshares.
Who controls the assets of my Living Trust?When the trust is created, you will appoint a Trustee to control all of the assets in the trust. If you are single, that usually is yourself. If you are married, most often the husband and wife will control together as Co-Trustees. Assuming then if you are your own trustee, you do not give up control to anyone else.
What other documents should I have in addition to my Living Trust?
In addition to the Living Trust, the Cobb Planning Group provides each client with the following:
Pour-over Will – a regular will which revokes old wills, appoints guardians for minor children, “pours-over” any forgotten assets to the Living Trust through probate.
Durable Power of Attorney: Appoints an “agent” to handle assets not in a Living Trust should the person be incapacitated and unable to handle their own financial affairs.
Advanced Health Care Directive: Appoints an “agent” to handle health care decisions should the person be unable to speak for themselves in health care matters. It tells physicians and family your wishes to not prolong the process of dying if it is determined you are terminal.
Property agreement: If married, fulfills legal requirement to declare a married couples property as community property for a “step-up” in basis to occur when the first spouse passes away.
HIPAA Medical Authorization Form: This important document gives medical authorities the written permission they need by law to communicate with your chosen health care agents, successor trustees and agents for your power of attorney.
Do I need a Living Trust if I am single?Very Possibly. If you own real estate and or have assets over $100,000, then a Living Trust may benefit you by avoiding probate and allowing you to appoint a trustee to manage your affairs should you become incapacitated. If minor children are involved, a Living Trust will help to handle their inheritance until they are older. A Living Trust may also aid in keeping your property as separate property should a single person then marry.
How often should I review my Living Trust?At the Cobb Planning Group, we offer a free review every three years to our clients. A review of the Trust’s beneficiaries and distribution, the successor trustees who are named as well as making sure all assets are properly titled in the name of the trust. Free phone calls are also offered to our clients anytime a question should arise.
How much does an estate plan including a Living Trust cost?Depending on who you ask, prices will vary according to the quality of the documents prepared and the amount of services offered. You can download Living Trust “forms” free from the internet, buy books, kits and software to do your own for less than $50. (See question 12 for more on this) Attorneys and other legal firms charge anywhere from $495 to over $5,000 for their documents. In Orange County, when comparing like documents, services and fees for a quality estate plan, $1,500 to $2,500 is about normal. Exact fee quotes and plan features for clients of the Cobb Planning Group are fully disclosed at our free “Living Trust” Seminars and/or our free initial consultations. Generally most clients will pay less than $1,600 in total fees for their plan.
What about the ads I see for Living Trust for $495?Be Careful! Most firms offering so called bargain trusts are no bargain! They usually consist of little more than the documents you could buy in a kit. For more about this, see We Fix $495 Trusts!
Should an attorney prepare my Living Trust?Without question. If a non-attorney prepares a Living Trust for someone else, they are guilty of the unauthorized practice of law. If they are breaking the law, how thorough do you think they are being with the documents? Only a licensed practicing attorney may prepare these legal documents for their clients.
What about the Do-It-Yourself kits, books and software for Living Trusts?This is everything you have worked your entire lifetime to save and accumulate. Does it now make sense to rely on a do-it-yourself kit? If you make a mistake or some needed provision is not included, when will you discover it? When it is much too late and your family ends up in probate anyway. Sometimes a poorly prepared trust is worse than no trust at all. Please seek out a professional estate planning firm.
I want a Living Trust, what do I do now?First, we suggest you attend one of our free “Living Trust” Seminars. There you will learn the facts about the Living Trust in a warm friendly atmosphere. Second, schedule a free consultation where you can determine if a Living Trust is appropriate for you, answer any questions you may have and provide suggestions for your estate plan. Assuming you are then ready to proceed, we will gather the necessary information needed for the preparation of your documents. About two weeks is needed for the attorney to prepare your legal documents, then step three, you will meet directly with the independent attorney we have referred you to, this time to review and sign your completed documents. Remember, you may call us at anytime with any questions you may have at no additional charge!