Understanding Living Trusts – Questions and Answers
What is Probate?
Probate is the legal process through which the court assumes management and control over the assets of an individual after their death. The court supervises the payment of taxes, debts, probate fees and distribution of the estate. The probate court can also take control if you become disabled or incompetent.
How Long Does Probate Take?
Generally, 9 months to 2 years. During which time, most assets are frozen for an accurate accounting. Most assets cannot be distributed or sold unless approved by the court.
Probate is Public Process!
This process invites creditors and any interested party or heirs to contest your will and make claims against your estate.
Loss of Control!
Your family has not control. Excessive costs, extended time frames and publicity are dictated by the probate court.
Cost of Probate?
Your estate may pay probate fees before any assets are distributed to heirs. The estimated costs to probate an estate generally are 10-15% of your gross estate value. If you own property in more than one state, probate will be conducted in each state property is owned.
My estate too small for Probate?
If you own real property in California and your real estate holding exceeds $50,000 or if the total estate, including personal effects, exceed $150,000, the estate will go through probate. If you hold real estate in another state your estate will go through probate in each state. If your estate is valued at less than these amounts you can avoid probate. However, since most people have assets that exceed the minimum limits, few people are spared from probate.
What If I hold my Assets in Joint Tenancy with my Children?
Entering into joint tenancy with your children creates an additional set of problems. The children’s share of property becomes subject to the children’s creditors, including people who may have a lawsuit judgement against them. If a child who holds title in joint tenancy with his parents is unable to pay his debts, the parent’s assets would be subject to the child’s creditors. Therefore, the parent could well lose his or her home to satisfy the child’s creditors or judgment!
I Have a Will, Won’t that do?
Contrary to what most people have heard or been led to believe over the years, a will is not the best way to plan your estate. A will does not avoid probate. In fact, a will is a one-way ticket to probate court. All wills must be verified by the court before they can be enforced. Also, because a will does not become effective until after you die, it provides no protection if you become physically or mentally disabled. This is of real concern to millions of older people who may become under the control of the probate court before they die. Fortunately there is a traditional alternative to wills and probate. It is called Revocable Living Trust. It avoids probate and makes sure your plan will not be altered by the courts or relatives upon your death or disability.
What Is a Living Trust?
A living trust is a legal entity in which you hold and control your assets. Unlike an individual, a trust does not experience physical death; therefore, it is not subject to probate. Property held in a trust, passes to your heirs avoiding probate, expensive court proceedings, costly delays and public exposure. Your privacy is preserved, and the emotional stress on your family is minimized. It reduces and/or eliminates estate taxes, is extremely hard to contest, and makes a very effective pre-nuptial agreement.
Who needs a Living Trust?
If you own property you will benefit from a living trust, especially if you have young children. To ensure that your that your loved ones will be spared from probate when something happens to you, you should consider a living trust.
Do I lose control of my Property?
You absolutely do not lose control of your assets. As a trustee of your trust, you could do everything with your assets before. You still manage and oversea your accounts. You can still buy and sell property, make changes, and even cancel your trust at any time.
Is it hard to Transfer Property into my Living Trust?
No. Talk to a lawyer for assistance in transferring title on all your assets into the name of your living trust. If you do not have a properly funded trust your estate will go through probate. Your living trust should be part of a complete integrated estate plan.
*Information provided by the Law Offices of Miranda C. Franks.
**Please consult an attorney before making any major financial decisions.