What is a Revocable Trust and Do I Need One?
One of the key responsibilities of life is to ensure that your wealth and assets are securely passed on to your loved ones after you’re no longer there. A revocable trust – sometimes also referred to as a revocable living trust – is an estate planning tool using which you can make sure your assets are managed and passed on to your beneficiaries exactly according to your wishes in the event of your death.
How Does a Revocable Living Trust in California Work?
A revocable trust usually involves three parties – the grantor (the party that forms the trust), the trustee (the party that manages the trust), and the beneficiaries (the parties that benefit from the trust).
Under the law, the grantor can also be the trustee, which means you can manage your own trust for as long as you want to or until you become incapacitated or die. You can designate a successor trustee, who will take over your duties and manage your trust in the event of your incapacitation or death.
Once you set up a trust, you are required to transfer your assets into it. You can choose to transfer assets in and out of your revocable living trust any time you want.
As the grantor, you have the right to decide how the assets in your trust should be managed, how the income generated from the trust’s assets should be distributed, and how the assets should be divided and passed on to your beneficiaries in the event of your death. You can amend or change the terms any time you want, for any reason.
Why You May Need a Revocable Living Trust
Avoiding Probate
The primary reason for creating a revocable living trust is to avoid probate in the event of your death. Probate is a legal procedure wherein a court-appointed executor will settle your debts (if any), pay your tax obligations (if any), and divide and distribute the rest of the assets among your beneficiaries.
The problem with probate is three-fold:
- First, it is a public process. The information related to your estate will be entered into court records and can be accessed by the public.
- Second, it is a time-consuming procedure. On average, it can take anywhere from 12 to 18 months for an estate to go through probate in California. If there are any legal complications, it can take much longer.
- Third, it is expensive. California is only of the few states where probate attorneys are allowed to charge what is called a statutory fee, which is a percentage of your estate’s value. If your estate is worth $15 million or more, the attorney might charge 0.5% of the estate’s value or even more, which can be quite significant.
On the other hand, if you set up a revocable living trust, your successor trustee will step into your shoes in the event of your death and make sure your assets get distributed exactly according to your wishes – without any legal intervention from the probate court.
Avoiding Legal Intervention in the Event of Your Incapacitation
In the absence of a legally valid trust, the probate court will intervene in the event of your incapacitation and appoint a conservator to manage your assets. The person chosen by the court might not be someone you would have wanted to manage your assets.
On the other hand, a trust allows you to designate a successor, who will manage your trust exactly as per your wishes in the event of your incapacitation. You can also designate an alternative, who can manage your trust if the successor is unable or unwilling to manage the trust.
Having Control over How Your Assets Are Divided in the Event of Your Death
A revocable living trust allows you to dictate terms regarding how your assets should be managed, divided, and distributed after your death. If you want to give someone a larger share, give someone else a smaller share, remove someone as a beneficiary, or want to make sure your beneficiaries only get a share of the income generated by your assets and not inherit it outright, or impose any other kind of restrictions – you can put it all in your trust document.
Need to Set Up a Revocable Living Trust? We Can Help
If you have substantial assets, it is important for you to have an estate plan in place, failing which your estate will have to go through probate in the event of your death. At Garmo & Garmo, we have experienced estate planning attorneys who can help you make out a will, advanced healthcare directive, revocable trust, or an irrevocable trust – depending on your needs.
With over 80 years of combined experience and legal knowledge, we are well-equipped to handle all your estate planning needs. To discuss your needs with one of our lawyers, call us today at 619-441-2500 or contact us online and schedule a free consultation.
