Setting Up a Living Trust

iving trust and estate planningA living trust can be an important part – in many cases, the most important part – of a person’s estate plan. Not everyone, however, may need a living trust. The greater the risk of incapacity or death, the greater the need for a living trust. The greater the value of your assets, particularly if they include real estate, the greater the need for a living trust.

A young, healthy person with few assets probably does not need a living trust right now. An individual or real estate investor who is often buying, selling, or refinancing his or her real estate holdings want not a living trust to hold those assets. On the other hand, many people recognize that a living trust will be helpful in the future, and so they set up a living trust ahead of time to have it in place in the event of an accident or sudden illness.

When a living trust has been properly established and an individual has put their assets in the trust, the living trust will enable the estate to avoid probate in California.  A living trust will also avoid the necessity of a court conservatorship should an individual who has established a trust become incapacitated. There are many benefits of having a revocable living trust, and this estate planning tool should be considered by individuals and couples who own real property or whose assets exceed $166,250.

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Nuts and Bolts of Setting Up a Living Trust

A living trust is a legal document established during a person’s lifetime which specifies how their property will be managed before and after their death, as well as provides a plan for how those assets, and the income earned by the trust, are distributed after his or her death. Once the trust is established, all the assets of the person who created the trust ought to be transferred into the trust. Joint living trusts are also possible. They simply combine the assets of a husband and wife into one single trust, governed by one single trust document.

Trusts are usually revocable, which means that the person establishing the trust can make changes to the trust at any time as long as they are competent to do so. In most situations, the person establishing the trust is the Trustee – the person who manages the trust. The trust also names a successor trustee. If the person establishing the trust should become incapacitated or disabled, the trust is in place to manage his or her financial affairs, and the successor trustee can then take over the management of the trust. A living trust is not subject to probate.

The biggest benefit of having a trust is that it avoids probate. In California, estates with real property or estates valued over $166,250 usually have to be settled through some type of formal court probate process. This process is very costly and can take from 5 to 7 months to complete. With a trust, administration of a trust after the death of the trustee is relatively simple and inexpensive. Another benefit of having a trust is to manage the property if a person becomes incapacitated. A revocable living trust allows your successor trustee to take over whenever you become incapacitated. There is generally no interruption in the management of your property, and there is no requirement for a court-appointed conservator.

The three basic types of revocable living trusts include:

  1. A probate-avoidance trust for an individual;
  2. A probate-avoidance trust for a couple who own property together; and
  3. A probate-avoidance and estate tax-saving AB trust for prosperous couples, typically couples with a net combined estate worth over $1.5 million.

No law specifies the form a living trust must take. Some attorney-created forms contain vast amounts of legal words, which serve little real-world purpose except to generate attorney’s fees.

Special Needs trusts are established to leave money or property to a loved one who has a disability, without jeopardizing that person’s ability to receive Supplemental Security Income (SSI) and Medicaid benefits. Instead of leaving property directly to your loved one, you leave it to the special needs trust. The trustee named in the trust will have complete discretion over the trust property and will be in charge of spending money on your loved one’s behalf.

Your loved one will have no control over the money; as a result, SSI and Medicaid administrators will ignore the trust property for program eligibility purposes. The trustee can’t give money directly to your loved one, but can spend trust assets to buy a variety of goods and services for your loved one such as personal care attendants, out-of-pocket medical and dental expenses, physical rehabilitation, education, home furnishings, vacations, recreation, vehicles, and other incidentals.

Sometimes clients find the words and terminology used in their estate documents to be a little confusing. This blog article covers common terms used in wills and trust and will help you understand the meanings of words you may see in estate planning documents. We also have many other articles on our website covering living trusts, including this convenient estate planning checklist. To download a booklet published by the California State Bar on Trusts, click here.

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A People’s Choice can save you hundreds of dollars by preparing your living trust documents instead of an expensive attorney!

Description of Will Documents (Notary fees additional)Price
Will (individual)$200
Codicil to Will$125
Will package (individual) includes Will, Healthcare Directive and Financial Power of Attorney$250
Will package (couple) includes 2 Wills, 2 Healthcare Directives and 2 Financial Powers of Attorney$399
Other ServicesCall for Quote
Description of Trust Documents (Notary fees additional)Price
Revocable Trust or Restatement of Revocable Trust (Individual) Trust or Trust Restatement only (you must have an existing revocable trust)$300
Revocable Trust or Restatement of Revocable Trust (Couple) Trust or Trust Restatement only (you must have an existing trust)$400
Revocable Trust or Restatement of Revocable Trust Package (Individual) Includes Trust, Pour-over Will, Certificate of Trust, Healthcare Directive, Financial Power of Attorney and estate folder$499
Revocable Trust or Restatement of Revocable Trust Package (Couple) Includes joint trust, 2 Pour-over Wills, Certificate of Trust, 2 Healthcare Directives, 2 Financial Powers of Attorney and estate folder$650
Revocable Trust or Restatement of Revocable Trust (Couple) Trust or Trust Restatement only (you must have an existing trust)$375
Special Needs Trust Designed for beneficiaries with physical or mental disabilities.$700
Irrevocable Medi-Cal and/or VA Planning Trust$700
Trust Transfer Deed and Preliminary Change of Ownership (California property)$200 ($100 discount w/trust pkg)
Trust Transfer Deed (Out-of-State property)$275 ($150 discount w/trust pkg)
Trust Transfer Deed (Timeshare)$275 ($150 discount w/trust pkg)
Description of Individual Documents (Notary fees additional)Price
Healthcare Directive$125
Financial Power of Attorney$125
Codicil to Will$125
Trust Amendment$200 and up
Trust Transfer Deed and Preliminary Change of Ownership (California property)$200
Trust Transfer Deed (Out-of-State property)$275
Trust Transfer Deed (Timeshare)$275
Other ServicesCall for Quote