So you’ve heard that you need a living trust, but why? Just because your mother had one, or a legal flyer said so? Here are five answers for you.
Avoid Probate. Probate is the court of inheritance that exists to transfer assets to the legal heirs of a deceased person. There are laws of who inherits, and those courts are bound by those laws. There are many problems with the Probate Court. First, it is expensive. Most estates lose about 10% of their assets in the process. Second, it is slow. There were 50,000+ probate filings in 2018 and only 3 judges. It takes a long time to get anything done. Lastly, if you want to deviate from any of the inheritance laws, and make sure the ones you want to receive actually receive, then you must avoid the Probate Court.
The reason that a trust avoids probate is because it is a private administration that takes the place of the Probate Court. The trust acts like a box, and all of your assets are placed in the box. Then when you die, for probate purposes only, you do not own anything, your trust does. In place of the judge, you have a Trustee to administer the assets to your chosen beneficiaries.
Privacy. The Probate Court is a Superior Court of California, and that makes every proceeding open and public record. If you value your privacy, if you want to keep the world from knowing what you had and where it’s going, then you want to create a private administration through a trust.
Control. The inheritance laws are set in stone. The heirs that the law chooses are the recipients, and the creditor’s that the law says to pay are the rightful takers of your inheritance. Many people are very specific about who they want to receive. The only way to ensure that they actually receive their inheritance is through a living trust.
Mental Health. Both for mental health issues, and for peace of mind, a living trust can be beneficial. If you are incapacitated by dementia or Alzheimer’s Disease, having a pre-arranged plan of succession and control will help. Making sure that someone you trust takes over for you when you cannot make your financial or medical decisions is important. This can give both you, and your loved ones, peace of mind should such mental deficiencies become present in your family.
Minor Children. If you have minor children, they must be provided for. We as parents spend our whole lives providing for our children, and we must make sure they are provided for upon an untimely death. A living trust is the instruction book. Who will be guardian? What funds will they have? Will they be able to stay in the home, or will they have to move away?
These are five (among many) reasons to have a living trust. Don’t wait until the last minute, or upon tragedy to befall, before getting one done for you and your family. Remember, catastrophe happens mostly from a lack of planning.
By Andrew Stilwell, Esq. Attorney at Contreras Law Firm