First, a quick review of who needs a trust: If you die in California, assets in your name alone having a gross aggregate value of over $150,000 will be subject to probate. Probate is a legal procedure wherein a personal representative is appointed, any will is approved, creditors are notified, assets are identified and evaluated, creditors’ claims and administrative expenses are paid and the balance is distributed to the decedent’s beneficiaries or heirs.
Probate takes about a year in Los Angeles County, is a matter of public record and costs thousands of dollars (mostly in attorney’s fees and personal representative’s commissions).
To avoid Probate, you hold your assets in the name of the Trustee of your revocable living trust. There’s no probate of such assets when you die, because they are not “owned” by you at the time of your death.
Estate planning documents include:
1. The Trust Agreement
2. A Summary of Trust
3. A pour-over will, which provides that if there are any assets in the decedent’s name alone, they should be distributed to the trustee of the decedent’s Trust
4. A Power of Attorney (for management of non-trust assets)
5. An Advance Health Care Directive
6. A letter of instructions, directing the bankers, brokers and insurance agents how to vest title to property or benefits.
Once the estate planning documents have been executed, you must fund the Trust. Documents to accomplish this include:
1. A Trust Transfer deed for each piece of real property, typically transferring title from the owner to himself/herself as trustee of his/her Trust, along with a Preliminary Change of Ownership Report, to prevent reassessment of the property.
2. An assignment of personal property to the trustee of the Trust.
3. Signature cards and other transfer documents at financial institutions, establishing title in the trustee of the Trust.
Does out-of-state property also get transferred to the trustee of the Trust? The answer (as is often the case in legal matters) is, “it all depends.” In some states, probate is so fast, easy and inexpensive that people don’t bother with trusts. In other states, the use of trusts as a probate-avoidance device is common. Deeds and other transfer documents for such property can easily be prepared by attorneys licensed in such states.
There. That wasn’t hard, was it?
Jerry Kessler practices law in Santa Clarita. He may be reached at 661-255-1001.