Elk Grove Revocable Trust Attorney

Experienced Guidance for Creating and Managing Revocable Trusts

Are you concerned about helping your family members avoid the cost and expense of probate or worried about who will manage your affairs should you become incapacitated? One of the easiest ways to calm your fears and protect your family’s future is through comprehensive estate planning.

Revocable trusts are an effective way to help your family members have the financial resources they need without the legal complexities involved in the probate process. A revocable trust can also offer your heirs and beneficiaries a greater level of privacy than just leaving a will behind.

If you are interested in learning more about the benefits of creating a revocable trust or are ready to get started, contact our Elk Grove, CA revocable trust attorney to discuss your case.

What is a Revocable Living Trust?

A revocable trust is a legal entity and one of many estate planning tools that can be used to control your assets while you are living and to determine how they will be managed and distributed after your death. It is called a revocable trust because you can modify or cancel it at any point for any reason as long as you are mentally competent. The word “living ” is also used because it is created during your lifetime.

The grantor, the person who creates the trust, places their assets into the trust, which a trustee manages. The grantor can act as the trustee and also receive income or assets from the trust. A grantor will also name a “successor trustee” who will manage the trust should they become incapacitated or pass away.

What are the Legal Advantages of Creating a Revocable Trust in California?

One of the most frequent questions our clients ask is how creating a revocable trust can benefit them. In California, there are numerous legal advantages to be gained from creating a revocable trust, including:

Assets Bypass the Probate Process

Although there are numerous legal benefits, one of the most significant is that assets placed in a revocable trust are exempt from probate. In California, probate generally takes 12 to 18 months, often leaving families and other beneficiaries waiting to receive financial resources. In most instances, trust assets can be distributed much more quickly, with some beneficiaries receiving distributions within approximately six months after the 120-day contest window has expired.

 

Privacy Protection

Unlike a will that becomes part of the public record upon filing, the terms of a trust, including the names of beneficiaries and asset distributions, remain confidential, providing beneficiaries with an extra layer of privacy. A trust also helps protect beneficiaries from creditors’ claims.

Strategic Asset Management:

Unlike an irrevocable trust, as the grantor (the person who creates the trust), you retain complete control over your assets and can manage, amend, or revoke the trust at your own discretion as long as you are of sound mind.

Coordinating Diverse Assets

If you have diverse assets such as out-of-state property, investment portfolios, intellectual property, or high-value art or jewelry, a trust is an effective way to organize them into a single, manageable legal structure.

Incapacity Planning

If you become incapacitated, your designated successor trustee can step in and manage your assets without the need for the court to intervene and impose supervised guardianship. Depending on family dynamics, this aspect of trust can help prevent family conflicts and unnecessary pauses in handling your financial matters.

Distribution Planning and Control

A revocable trust allows you to structure or delay distributions to your beneficiaries. Customizing distributions is especially helpful if you have minor children or young adults who have not yet developed money management skills. A revocable trust also assists with tax planning by helping to reduce or eliminate capital gains tax for beneficiaries.

When Should I Consider Creating a Living Trust?

You have heard about the benefits of a living trust, but when should you seriously consider creating one? One of the many factors to consider is California’s overly complex probate process, which can be time-consuming and expensive. A living trust can not only allow your beneficiaries to receive their assets more quickly than if you left a simple will, but also give you peace of mind knowing their privacy is protected.

Some of the most essential reasons to create a living trust in California include:

Homeownership

If you own a home in California or real estate worth more than $69,625, you most likely can benefit from having a living trust. Although California has recently passed laws that allow primary residences valued at up to $750,000 to qualify for the small estate process, it can still be slow, and it can deprive your family of an essential financial resource.

Your Total Assets Exceed $208,850

Recent legal updates have adjusted the state’s small estate threshold to that of $208,850. Under the new laws, if the total value of your personal property, bank accounts, and investments exceeds this amount, your estate must go through the probate process. Retirement accounts with beneficiaries and vehicles are excluded from this criterion. Placing your assets in a trust reduces the value of your estate and excludes them from the probate process.

You Have Minor Children or Grandchildren

Although you can use a will to name a guardian for your minor children, it cannot ensure that any money you leave for them will be used appropriately for their care. If a trust is not established, the court may place a minor’s inheritance in a blocked account that the minor cannot access until they turn 18.

When you leave money in a trust, you can specify how your child or grandchild receives assets. For example, you can stagger distributions or designate them for a special event, such as paying for college or buying a home.

Privacy Concerns

Unlike a will that becomes a matter of public record once it is filed in probate court. After it is filed, anyone in the general public, including creditors, can access the document. Placing assets in a trust grants your beneficiaries an extra layer of privacy. It keeps them away from the prying eyes of creditors or others who may be interested in your financial affairs.

You Want to Plan for Incapacity

Regardless of whether you are a young parent or an older adult, you could suddenly become incapacitated at any moment. Suppose you are injured in a car accident or have a stroke and cannot make decisions for yourself. Without a trust, your family may have to pursue a court-ordered conservatorship, which can be time-consuming and cost-prohibitive.

A living trust allows your successor trustee to seamlessly step in and begin managing your affairs without having to seek legal permission from the court.

Do I Still Need a Will if I Establish a Living Trust?

Establishing a revocable trust is just one of several estate planning documents that you need to protect you and your family. Even if you have a revocable trust, you still need a “pour-over-will.” A pour-over will ensure that any assets not placed in the trust are “poured” into the trust, and it also names an executor and guardian for your minor children. Although a trust can assist with incapacity planning and help manage assets for minors, a will is the most commonly used estate-planning tool parents use to express their wishes regarding their children’s care.

It is also worth emphasizing that while a living trust remains in effect while you are living and is essential for avoiding probate, the terms of a will only apply after your death. For that reason, a will can also be used to clearly state your final wishes regarding your funeral and instructions on how to handle your email and social media accounts.

What is “Funding” the Trust?

Funding a revocable trust involves transferring ownership of your assets from your name to that of the trust. Assets typically placed in a revocable trust include bank accounts, real estate, stocks, and other valuable personal assets.

For example, if you place your home or other real estate holdings into the trust, they will need to be retitled into a new grant deed and recorded with the county. Once the new deed is recorded, the property will be the trust’s property. You will also need to do the same with your bank and brokerage accounts by contacting your financial institutions to have them retitled in your trust’s name.

If you are a small business owner or have an LLC, you can sign an Assignment of Interest, which transfers your interests into the trust, allowing them to be managed by the trustee.

For personal property such as artworks or jewelry, you need only sign a document called a General Assignment of Assets, which includes your belongings in the safety of the trust.

The most effective way to ensure that your business and personal assets are retitled correctly and are included in the trust is to hire a revocable trust attorney to assist you and help your beneficiaries avoid legal challenges after you pass away.

What Assets Should Not Be Placed in a Revocable Trust?

As critical as it is to understand what assets should be placed in a revocable trust, you should also be aware of those that should be excluded, including:

• Life insurance policies.
• Retirement accounts such as IRAs and 401(k)s.
• Health savings accounts lose their tax-exempt status if placed in a trust.
• Vehicles such as cars, RVs, and boats. Titling motor vehicles into a trust can lead to unnecessary insurance issues and potential liability issues if they are involved in an accident.
• Property owned as “joint tenants with right of survivorship,” which passes automatically to the survivor. These properties are exempt from probate and do not need to be included in a revocable trust.
• Active checking accounts or cash do not need to be placed in a revocable trust. Using a payable-on-death (POD) designation is the most effective way to ensure that your intended beneficiaries receive your financial resources.

Retirement accounts placed in trusts are treated as withdrawals and can trigger significant tax liabilities. Life insurance policies placed in a revocable trust can complicate distribution and be subject to creditor claims. Instead, the most practical solution is to title them in the trust’s name.

Does a Revocable Trust Offer Asset Protection?

A revocable trust offers many significant legal advantages, but it does not protect assets from potential creditor claims or lawsuits. Because assets held in a revocable trust remain under your control, allowing you to amend or revoke the trust, creditors may still pursue claims against those assets.

One of the most common questions many attorneys are asked concerns whether a revocable trust can protect their assets should they need to try to meet Medicaid eligibility requirements. If you are concerned about affording long-term care, the best option is to work with a skilled attorney who can create a Medi-Cal Asset Protection Trust (MAPT) to help you qualify for benefits.

A revocable trust only provides asset protection for your beneficiaries after you pass away if the trust document includes spendthrift clauses. Spendthrift clauses prevent beneficiaries from selling their future interests or having their assets seized by creditors.

What Happens to the Trust if I Become Incapacitated?

One of the most significant benefits of a revocable trust is that it helps avoid expensive and court-ordered conservatorship. Under the terms of a trust, your successor trustee can immediately step in and begin managing your assets should you be unable to do so. Under state law, an individual who has been determined to be incapacitated cannot amend or revoke a revocable trust.

Once your successor trustee takes over, the trust is deemed irrevocable. When this occurs, the trustee will abide by the terms in the trust document relating to your care and financial matters. A well-established trust document will define how incapacity is determined, so you must seek help from a knowledgeable attorney.

Once the transition has occurred, the successor trustee has a fiduciary duty to act in the beneficiaries’ best interest. The trustee will sign and have an Affidavit of Successor Trustee notarized, acknowledging their official acceptance of the role. Next, the successor trustee will present legal documents to financial institutions to gain access to your accounts, enabling them to pay your bills, taxes, and other expenses.

A new state law also requires that your successor trustee keep your “remainder beneficiaries” (those who will inherit after you pass away) well-informed about the status of the trust.

Can a Successor Trustee Make Medical Decisions if I Become Incapacitated?

Even though a living trust is ideal for incapacity planning, allowing your successor trustee to manage your assets, they are not authorized to make medical decisions. Your successor trustee has legal authority to pay bills and manage your property and investments.

If you are concerned about having someone to make medical decisions on your behalf, you will need to designate someone you trust as a healthcare surrogate or medical power of attorney. Your designated agent can make medical decisions, communicate with medical professionals, and authorize treatments on your behalf.

A qualified attorney can create a comprehensive estate plan that includes all the necessary legal documents that will give you and your loved ones the peace of mind you deserve.

What is the Criteria for Determining Incapacity in a Revocable Living Trust?

You may wonder what events have to occur for you to be considered incapacitated and for your successor trustee to take over and manage your affairs. In California, incapacity is generally determined by medical certification, typically by one or two physicians. These medical professionals must state that you are incapable of managing their financial affairs as outlined in the trust document.

Legal Criteria

A well-written trust document will specify the legal criteria for incapacity. Under state law, incapacity focuses on mental deficiencies such as memory, thought processes, or alertness that impair the grantor’s ability to understand consequences.

Disability Panel

Another more modern method of determining incapacity is through a “disability panel” which may consist of your spouse, children, and your doctor who vote on incapacity. Use of this private panel is generally faster than the time-consuming wait for two medical appointments to confirm incapacity.

If the trust documents do not specify how incapacity is to be determined, the court may need to take over. This can lead to conservatorship, defeating one of the most significant advantages of creating a trust.

No one wants their family dealing with needless legal proceedings if they become unable to manage their affairs. Due to the complexities involved with creating a trust and ensuring that you have adequate legal protections in place, it is best to hire a revocable trust attorney to assist you.

What Happens to My Revocable Trust After I Pass Away?

You created a revocable trust to help you manage your assets while you are alive, but what happens to the trust after you pass away? In California, your revocable trust becomes irrevocable upon your death, meaning it can no longer be revoked or its terms amended. Assets placed in the trust are exempt from the state’s complex probate laws, allowing for faster distribution to rightful heirs and beneficiaries.

After your death, your successor trustee assumes control and manages the trust. The trustee will then oversee trust administration, which includes:

• Inventorying and securing trust assets
• Paying debts and taxes
• Distributing assets per the trust’s instructions

The trustee must notify heirs and beneficiaries within 60 days of death that the trust has become irrevocable, and they have 120 days to contest its terms. The notice also informs them of their right to receive a copy of the trust documents and provides the trustee’s contact information.

Who Can Act as the Successor Trustee Who Will Manage the Trust After My Death?

You have decided to create a revocable trust to help your family avoid probate and plan for incapacity, but have you given any thought to who your successor trustee will be? Anyone you choose should be skilled in financial management and have exceptional organizational skills to ensure that the trust administration goes as planned.

Appointing a Successor Trustee

California law allows a successor trustee to be an individual or institution, depending on your preference. No matter who you choose to oversee trust administration, they should be someone who understands the complexities involved with trust administration and is willing to commit to their fiduciary obligations.

You may choose your spouse or adult children to be your successor trustee. Or, depending on family dynamics, you may decide that a trusted friend, attorney, trust company, or bank is a better option.

Location

Another point to consider is where the potential trustee lives. A successor trustee who lives far away may have trouble managing the trust, which can delay administration, asset inventory, and distributions.

Large or Complex Estate Considerations

If you have a large or complex estate or a trust that requires long-term management, it may be wise to have a professional act as the successor trustee to avoid unnecessary delays or legal conflicts.

No matter if you decide to choose an individual or corporate entity as trustee, it is in your best interests to also name an alternate successor trustee in case they are unable or unwilling to fulfill their role.

Contact Cava & Faulkner, Attorneys at Law, today to Learn More About the Benefits of a Revocable Living Trust

As with all legal matters, having a qualified attorney on your side is the most reliable way to ensure your estate plan accurately reflects your intentions. Given the sophisticated legal requirements, hiring an attorney is best as they assist you with creating, funding, and maintaining your living trust.

Cava & Faulkner, Attorneys at Law, is a law firm committed to helping individuals and their families plan. If you have questions about the benefits of a revocable trust, contact our law offices today at (916) 831-7565 to speak with a lawyer in Elk Grove who will gladly review your legal options.