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Law Office D. Popineau: Trusts and Estate Planning

Law Offices of Debra Popineau

Information about Living Trusts and Estate Planning

What is a living trust?

A living trust is a layman’s term for an inter vivos revocable trust.  This is a trust created and funded during a persons lifetime, which can be changed (or amended) or revoked during that lifetime by the creator (trustor or settlor).  The opposite is a testamentary trust, which only comes into existence when it is funded through a testamentary transfer (i.e., a will) after the creator (the testator) has passed away.

A living trust is usually part of an overall estate plan, which might include a living will, pour-over will, durable powers of attorney, certification of trust, abstract of trust, and related documents.

Why would I want a living trust?

  • To avoid probate
    • if the total gross value of all your property (house, cars, cash, CDs, stocks, etc.) is worth over $100,000, probate is required.  See When is probate required? for details.
    • avoid the lengthy process of probate (approximately one year for a simple estate)
    • avoid the lack of privacy of probate
      • All probate documents are public records, disclosing the decedent’s assets, bills and heirs
    • avoid the expense of probate
      • For a $100,000 estate, probate fees are at least $6,800
      • For a $1,000,000 estate, probate fees are at least $42,800
      • For details on probate fees, see How much does probate cost my estate?
  • To avoid other problems with estate management via a living trust in a combination estate plan
    • Has one spouse been married more than once?
    • Are any family members potential troublemakers?
  • To avoid a conservatorship
    • A conservatorship is a legal process wherein someone else is appointed to look after you and manage your property and affairs.
    • Do you know who would act for you if you were incompetent?  Consider the management of your:
      • financial affairs
      • personal arrangements
      • medical decisions
    • Are there medical problems or potential medical problems?
  • Federal estate tax planning
    • The federal government (and in many cases state government) taxes estates when people pass away.
    • The marginal estate tax rate starts at 34 percent and goes up for larger estates.
    • But a certain portion of your estate is exempted from taxes, and only the portion above that exemption is taxed.
    • If your estate’s net worth is more than the current federal estate tax exemption for one person, it is advisable to set aside all or a portion of that exemption in trust on the first spouse’s death so that the exemption amount will pass estate tax free to the next generation (i.e., your children).
    • The federal estate tax exemption amount is changing:

 

Federal Estate Tax Exemption
Year For One Person For Two Persons
1998 $625,000 $1,250,000
1999 650,000 1,300,000
2000 675,000 1,350,000
2002 700,000 1,400,000
2004 850,000 1,700,000
2005 950,000 1,900,000
2006 1,000,000 2,000,000

How much does a living trust cost?

Not surprisingly, costs vary depending on the complexity of your situation.  In almost every case, a living trust will cost a small fraction of the fees that probate will cost your estate.  Please contact us for an estimate.

Is there any reason I might not want a living trust?

Depending on other circumstances, if your estate has a gross net worth less than $100,000 and will not be probated, usually there is no need for a living trust. But it is best to go over all of the factors of your life situation with an estate planning attorney to be sure.

You don't give up any control over your property when you create a living trust.  You have full control and ability to manage and spend its assets.  Only when you die do the provisions for passing along property become active.  You can change or even revoke a living trust at any time during your life.

What's the difference between a living trust and a living will?

A living will is the document under the Natural Death Act which tells the hospital and your physician not to keep you on life support under certain conditions, roughly translated as you are about to die anyway.  A living trust is a formal legal document in which you place title to your assets and in which you designate someone to act for you when you can’t (either through incompetency or through death).

What you need to create a living trust

You must be over the age of 18, own property, be of sound mind and under no undue influence.

If you are interested in creating a living trust, you should consider and collect the information below:

  • Your name(s)
  • Date(s) of birth
  • Social security number(s)
  • List of assets, such as
    • House
    • Bank accounts (institutions and account numbers)
    • Stock and mutual funds -- account numbers
  • Information on those who may receive property from your estate -- children, other relatives, institutions, etc.
  • Potential trustee(s), executor(s) and agent(s)

We recommend that you bring copies of title documents to  your property (e.g., grant deeds, tax bills, bank statements, stock certificates, etc.) to your first appointment along with your address book.

What other aspects of estate planning should I consider?

  • Family gift programs
  • Insurance trusts
  • Business buy-out arrangements
  • Charitable planning
  • Estate and tax planning after death
  • Conservatorships

If I already have an estate plan, when should I consider amending it?

  • Change in family
  • Change in assets
  • Change in state of residence
  • Does your trust contain the following documents?
    • Declaration or Agreement of Trust
    • Pour-over Will(s)
    • Living Will(s)
    • Springing Durable Power of Attorney for Health Care
    • Springing Durable Power of Attorney for Financial Management
    • Springing Durable Power of Attorney for Personal Care
    • Abstract of Trust
    • Certification of Trust
  • Has the trust been funded?
    • real property deeds
    • personal property transfers
      • Contents of your residence
      • Businesses
      • Stocks and Bonds
      • Bank accounts, CDs, etc.
  • Who should the beneficiaries be?
    • life insurance policies
    • tax-deferred retirement plans
  • Who prepared trust (software, attorney, paralegal, other group)?

Our services

  • Sophisticated estate planning and trust administration
  • Efficient and orderly transfers of business interests and other assets with
    • minimal estate and gift tax exposure
    • minimum income tax consequences
    • minimum or no real property taxes
  • We accomplish this through the use of lifetime planning vehicles such as
    • living trusts
    • family gift programs
    • insurance trusts
    • business buy-out arrangements
    • charitable planning
    • estate and tax planning after death.
  • We also work with our clients to avoid conservatorships whenever possible, or obtain and administer them in the most cost-effective manner when they can not be avoided.
  • If probate cannot be avoided, we work with our clients to simplify and to assist them through the process.

For more information or an appointment, please contact us at (760) 242-6527, or send us an e-mail message.

Disclaimer

This Web site contains only general information about the topics covered.  None of the above should be construed as legal advice, and should not be used to prepare or execute legal documents.

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Created by BBaker | Last update September 02, 1998