REVOCABLE (LIVING) TRUST
An individual or husband and wife may avoid for the surviving spouse and other beneficiaries the aggravation of probate by establishing a revocable, often-called living, trust. A trust instrument is very similar to a will. Additionally, a short will -- called a pour-over will -- must be signed. A pour-over will transfers to the living trust any assets not already transferred.
A living trust serves the same function as a will but, for assets transferred to the trust prior to death, probate is avoided. An asset is transferred to the trust by changing title to the asset to the names of the trustees of the trust. For example, a husband and wife may transfer their community property residence to their living trust by changing title to the property to Mr. and Mrs. John Doe, Trustees of the Doe Family Revocable Trust. An agreement or assignment may be signed to transfer such items as household furniture, etc., to a living trust. Assets not properly transferred to a living trust may have to be probated. Thus, funding a trust is very important to attain one's goals.
On the death of a spouse, the surviving spouse or other trustee steps in and administers the decedent's portion of the trust. The assets, much like in the case of a will, are distributed to the intended beneficiaries, but without probate administration. Expenses of transferring the property and estate and inheritance taxes are paid the same as when a will is used. When a properly funded trust is used, the payment of expenses and the transfer of property can generally be done in a shorter time period and certainly with less bureaucracy of filing petitions, etc., with the Probate Court. Attorney fees may be 25% to 75% less than if a probate administration is required, depending on the complexity of the decedent's estate.
Importantly, the administration or the transfer of the decedent's assets is accomplished in privacy without having to file with the Court documents that can be viewed by the public. Thus, the unscrupulous are not put on notice of wealth received and neighbors will not be able to pry into the personal and financial affairs of a decedent.
The cost of properly preparing a living trust will generally be more than the cost of a will. The principal reason is that the additional steps of drafting documents to fund and actually funding a trust must be taken. In large estates this may be time consuming and, thus, costly. The fees vary from locality to locality and lawyer to lawyer. An attorney experienced in estate planning, perhaps an expert, should be employed. The general practitioner does not have the experience needed in many cases. In large metropolitan areas such as San Francisco, the cost will generally be at least $1,800, often much more. Some attorneys advertise to set up living trusts for less than $1,000. The documents are generally correct but little planning is done and boilerplate documents are often used. Such documents may not result in the best overall tax or family results because estate planning opportunities may not be discussed and given due consideration.
