What Is a Living Trust and Why You Should Have One

Join Thomas Binetter, an attorney at the Law Offices of Hollander and Hollander PC, as he delves into the crucial world of estate planning in California. Discover what a living trust is, why you should have one, regardless of age or financial status, and how a living trust can be the cornerstone of your plan.

Estate planning is something that often gets overlooked or postponed. But it’s essential to ensure that your wishes are carried out and your loved ones are taken care of when you’re no longer around. While many people are familiar with wills, or advanced health care directives, living trusts are less common, but just as, if not more, important.

So, what exactly is a living trust? A living trust is a documented relationship that is used to hold your assets, such as investments, bank accounts, real estate, and valuable personal property. It provides a way to transfer those assets to your beneficiaries without the need for probate, which is the legal process of validating a will, or if you don’t have a will, intestacy, and distributing your assets through the court system.

A living trust can be beneficial, especially for those with large estates, married couples, or individuals with specific testamentary intentions. With a living trust, you’re not only the grantor, but you’re also the trustee. And you’re the beneficiary while you’re alive. If desired, you can appoint your spouse as a co-trustee, and you can also assign a trusted relative or a professional trustee, such as from a financial institution, or an attorney. You retain control of your assets during your lifetime. And depending on the type of trust, you can have the flexibility to move them in and out of the trust as needed. Upon your death, the trustee ensures that your instructions, as outlined in your trust, are carried out based on the powers that you have given them.

There are two main types of living trusts: revocable and irrevocable. A revocable living trust allows you to make changes at any time during your life whilst you have capacity. On the other hand, an irrevocable trust transfers ownership of your assets out of your estate into a standalone trust, making it very difficult to modify or cancel. In both circumstances, you name a successor trustee who is able to step in to manage your affairs, avoiding the need for court involvement.

In either case, one crucial component that goes alongside a living trust is the creation of a pour-over will. This document automatically transfers any assets not already included in your trust, into the trust upon your death. This works for any assets that don’t have title, such as your household effects, and it demonstrates your intent to hold those assets in your trust. For anything on untitled, they still need to be retitled into the name of your trust in order to avoid a probate.

As you contemplate the formation of your living trust, there are a few important questions to consider. What is the most important reason or purpose for creating the trust? Have you clearly communicated the purpose of your trust to your beneficiaries? What outcome Do you want this trust to achieve? How will the existence of this trust impact the life of your beneficiaries? What are the maturity and responsibility levels of each of your beneficiaries? Will the trust be a benefit or a burden?

A living trust can provide peace of mind ensuring that your assets are distributed according to your wishes. And there’s a host of other benefits as well. For individuals with larger estates, numerous assets, or complex family situations, a living trust is always the preferred option over a simple will.

If you are interested in learning more or discussing your specific circumstances, please contact us at the Law Offices of Hollander and Hollander PC.