Probate is the legal process for administering a will. That process in California is slow (9-18 months), costly ($10,000 and up) and public (involved public court hearings).
A revocable living trust (“trust”) is a legal document that eliminates probate. A trust manages your property during your lifetime and distributes it at death to your beneficiaries without probate. These are some of the benefits of a trust compared to a will.
How does a trust work? Your are the trustee of your own trust. This means that you control your own assets and have the ability to amend and revoke the trust at any time during your lifetime.
If you become incapacitated, then your successor trustee that you select manage your trust estate until you recover. Upon your death, your successor trustee distributes the trust estate to beneficiaries you select. Unlike a will, a trust does not require a probate and is generally administered privately.
Often the most important choices in creating your trust are (1) who you select as success trustee and (2) who you select as beneficiaries. A successor trustee is the person you choose to manage the trust when you are incapacitate or deceased. Beneficiaries are those people that you give your estate to at your heath. The options in creating your trust are nearly endless.
For example, a typical couple with two adult children will often select their children as successor trustees. A typical trust for that couple will distribute the estate in equal shares to grandchildren, friends and other family members. You may also choose to make gifts from your estate to charitable organizations.
There are two steps in creating a trust: (1) drafting the trust and (2) funding the trust. Drafting is the process of creating the trust document. Funding is the process of transferring your assets into the trust. For example, real estate is transferred into trust by creating a Trust Transfer Deed and recording it at the county recorder’s office. Most assets including all real estate, bank accounts and stock accounts (excluding retirement accounts) are generally transferred into trust.
In addition to a trust, an estate plan will include a Pour over Will, Durable Power of Attorney for Healthcare and a Durable Power of Attorney for Property. The cost to draft a trust is largely depended upon the complexity of your estate. An average cost is between $1500 and $2500.
Not everyone needs a revocable living trust. A young couple without significant assets probably doesn’t need a trust. Most families who own their home usually benefit from a trust. The more assets you have, the more important a trust is for you.
We strongly recommend that you consult with an experienced estate planning attorney to learn all options concerning your revocable living trust.