Many people believe that trusts are for the extremely wealthy or people who have considerable assets. But anyone who owns a home in California should have a living trust. Living trusts are also referred to as an ‘inter vivos’ or ‘revocable’ trusts.
When a person passes on, all of their assets have to go through an official legal procedure called probate. This process, which administers the estate of the deceased either with or without a formal will, can be quite lengthy, taking up to a year or more.
By placing your home and other high-value assets in a living trust, they can be distributed to your beneficiaries without having to pass through the costly and time-consuming probate process. A trust can also avoid conservatorship, yet another expensive and drawn-out practice where a judge-appointed person manages the financial and other affairs of someone who is otherwise unable to do so themselves.
The top three benefits for a living trust include:
- Avoiding probate. A living trust means faster distribution of assets to heirs from months or years to just weeks.
- It may save you money. Depending upon your individual financial and marital situation, a living trust can avoid the cost of probate and possibly reduce or eliminate federal estate taxes.
- Privacy. Unlike a will, which is considered a public record, living trusts are kept private after death.
At the outset, drawing up a living trust is more complex and expensive than that of a will. It involves ‘funding the trust’ by transferring assets such as bank accounts, stocks, bonds and property into the trust and changing the beneficiaries on life insurance policies and retirement accounts to the trust. All of these require separate paperwork to ensure they are properly managed by the trust. A living trust can also impact things such as title and homeowners insurance.
As always, it is wise to consult the necessary professionals, in this case an attorney as well as your financial advisor, to determine if a living trust makes sense for your specific situation. But, if you own a home, a living trust is definitely something you should take time to investigate, as it could save you and your family time and money in the long run.