Living Trust (CA)

Living Trust (CA):

What's a consumer to do? It's true that for some people, a living trust can be a useful and practical tool. But for others, it can be a waste of money and time. What is a living trust, anyway, and how does it differ from a will? Who should you trust when it comes to estate planning? And how can you tell which tools and strategies will work best for you particular circumstances?

The Federal Trade Commission, the government agency that works to prevent fraud, deception and unfair business practices in the marketplace, says that it helps to learn the terms that are used in this aspect of financial planning before you begin conversations about it.

Probate is a legal process that usually involves filing a deceased person's will with the local probate court, taking an inventory and getting appraisals of the deceased's property, paying all legal debts, and eventually distributing the remaining assets and property. This process can be costly and time-consuming. Many states have simplified probate for estates below a certain amount, but that amount varies among states. If an estate meets the state's requirements for "expedited" or "unsupervised" probate, the process is faster and less costly.

A trust is a legal arrangement where one person (the "grantor") gives control of his property to a trust, which is administered by a "trustee" for the "beneficiary's" benefit. The grantor, trustee and beneficiary may be the same person. The grantor names a successor trustee in the event of incapacitation or death, as well as successor beneficiaries.

A living trust, created while you're alive, lets you control the distribution of your estate. You transfer ownership of your property and your assets into the trust. You can serve as the trustee or you can select a person or an institution to be the trustee. If you're the trustee, you will have to name a successor trustee to distribute the assets at your death.

The advantage of a living trust? Properly drafted and executed, it can avoid probate because the trust owns the assets, not the deceased. Only property in the deceased's name must go through probate. The downside? Poorly drawn or unfunded trusts can cost you money and endanger your best intentions.

A will is a legal document that dictates how to distribute your property after your death. If you don't have a will, you die intestate, and the law of your state determines what happens to your estate and you minor children. The probate court governs this process.

A living trust is different from a living will. A living will expresses your wishes about being kept alive if you're terminally ill or seriously injured.

And, the FTC advises, proceed with caution. Because state laws and requirements vary, "cookie-cutter" approaches to estate planning aren't always the most efficient way to handle your affairs.

To learn more about estate planning strategies, talk with an experienced estate planning attorney or financial advisor, and check out the following resources.

Information deemed reliable but not guaranteed.
Information found at www.ftc.gov (10/2004). Contact your Local County Tax Assessor for more information.