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UNDERSTANDING REVOCABLE LIVING TRUSTS Frequently Asked Questions Revocable Living Trusts are legal documents drafted by an attorney with your specific wishes and instructions for your Trustee to follow once you become incapacitated or die. Revocable Living Trusts provide an effective way to avoid probate, the judicial process for administering an estate after someone dies. Many people believe trusts are just for the very wealthy. This is not true. For many, just by owning a home, you can significantly benefit from a Revocable Living Trust to protect your loved ones from the expensive and lengthy probate process. A well-designed estate plan will protect your heirs from this intrusive proceeding, as well as protect your assets from unnecessary estate taxes - and it is all simpler than you may think. Many believe that if they have a will, their estate will avoid Probate. This is untrue. Even with a will, the Probate Court has jurisdiction over the administration of your estate and the distribution of your assets to your heirs after you die. If you own property in multiple states, your heirs will be subject to probate proceedings in each of those states. Today, trusts and wills are prepared to work together to protect all aspects of your wishes during your life and after your death. How Much Does Probate Cost? The cost of probate is based on the value of the decedent’s estate and is governed by the California Probate Code. The value of your estate includes all your assets, minus your debts, and is required to be calculated as of the date of your death. Once this value is determined, the California Probate Code states that the personal representative and attorney each get an equal fee, calculated at 4% of the first $100,000 ($4,000), plus 3% of the next $100,000 ($3,000), plus 2% of the next $800,000 ($16,000). Additional fees are compensated for estates over $1 million. For example, an estate valued at $800,000 would carry fees of $19,000 for the personal representative, plus $19,000 for the attorney, for a total of $38,000 in fees. In addition to these fees, the Probate Referee will be paid one-tenth of 1% of the value of the estate, plus any expenses to value the estate. Compared to the average cost of a trust, this is a significant amount that will be deducted from your Estate prior to distributions to your heirs. What Is The Difference Between a Will and a Trust? Wills include appointment of guardians for minors in the event of your death, as well as direct the disposition of your assets after your death. However, a trust protects your assets while you are still living, if you become incapacitated, and also after your death. A complete estate planning package includes both a will and a trust that together address all your needs. What Happens If I Become Incapacitated? As many of us are living longer, incapacity is becoming an important part of estate planning, which many of us will experience at some point in our lives. A trust includes your wishes for your care during incapacity, but a will does not, it only goes into effect after you die. Therefore, should you become incapacitated, your trust directs your chosen representative, called a Trustee, how to care for you and manage your assets. This can be handled directly by the Trustee, avoiding the court’s involvement called conservatorship. If an incapacitated person does not have a trust to direct these wishes, the court requires an expensive and time-consuming conservatorship proceeding. What If My Assets Are Jointly Owned? Most assets, if you hold title as joint owners (typically with a spouse), will pass to the surviving spouse upon the death of the first spouse to die. However, probate is just postponed until the surviving spouse passes away. If both spouses pass simultaneously, the Probate Court will have jurisdiction over the entire estate. Additionally, if one spouse becomes incapacitated without the protection of a trust, and the court becomes involved through a conservatorship, the healthy spouse just added a new joint tenant to their assets - the Court. Doesn’t a Durable Power of Attorney Prevent All This? No. A durable power of attorney names someone to manage your financial affairs if you are unable to do so yourself. This document is just one part of the well-designed estate planning package. This document can be used by your designated agent during your life, but becomes invalid once you die. These documents, coupled with a revocable living trust, are very effective in protecting your assets. How Are My Assets Protected If I Have A Revocable Living Trust? Once your attorney completes your Revocable Living Trust, your assets are transferred to the trust giving the Trustee(s) of your trust (usually yourself) complete control of the assets. You don’t lose control of any trust assets because you are the Trustee. Nothing changes except the name on the title to these assets (i.e. deeds, bank statements, stock certificates, etc.) Only assets transferred to your trust will be protected by the terms of the trust. Some assets are not transferred to your trust, such as life insurance and IRAs because of specific tax advantages for these types of assets. Your attorney will advise you regarding your specific situation and the best way to name beneficiaries in the most tax-effective manner. Can I Choose Who Will Be The Trustee Of My Revocable Living Trust? Yes. You have complete discretion in selecting the individuals you name as Trustee. You may decide to be the Trustee(s) of your own trust. However, you may prefer to name a trusted family member, friend or a professional trustee to act as a co-trustee with you, or alone if you feel you don’t have the time, ability, or desire to manage your own assets. If you name a co-trustee to work with you, and then you become incapacitated or die, the co-trustee can continue management of your care and assets for you, acting alone, or, if you wish, you can name a successor co-trustee to work with the continuing co-trustee. If you are ill, and then recover, you may resume your position of Trustee if you wish. When Does My Trust Become Irrevocable or End? When you are single and die, your trust becomes irrevocable. If you are married, your spouse continues to be protected by the trust until they die and then the trust becomes irrevocable. However, the trust can continue to exist, managed by the Trustee, for as long as necessary to fulfill the wishes you outlined in your trust. For example, you may have named a beneficiary who is still a minor at the time of your death, and the minor’s share of the trust estate is not due to be distributed until the child reaches a certain age, the trust continues under the management of the Trustee until all beneficiaries reach the age of distribution. Sometimes, your trust estate is to be distributed to someone with “special needs” requiring the trust to continue to be managed for the benefit of the special needs individual for their lifetime. Can I Revoke or Change The Terms of My Trust? Yes. Revocable Living Trusts are just that - revocable. You may revoke your trust any time you wish for whatever reason you wish. You can make changes to your trust by having your attorney prepare amendments to the trust, modifying or changing just the specific terms that you want changed while the rest of the trust remains enforced. How Does My Trust Protect Me From Estate Taxes? If  you or your spouse are fortunate enough to have a sizeable estate, ‘death taxes’, or the Federal Estate Tax, are a real threat to passing along your wealth.  The rate of estate tax is between 18% and 40%.  Many individuals do not believe that they need to make an estate plan, because the ‘threshold’ amount of money which one needs in an estate before the Estate Tax is applied (barring gifts and other details), is $5.45 million.  But there are important facts to know and apply to your own situation, that might someday affect the exclusion you are entitled to have applied to your estate, prior to facing that high tax  burden.  One of these is a trust designed to take advantage of a double benefit to married couples, another is ‘portability’.  It just makes sense to review this situation with your attorney to understand the concepts in case the Estate Tax changes, and to avoid as much tax as possible upon your passing. How Long Does It Take To Prepare a Revocable Living Trust? Some time and effort on your part is expected, but considering the benefit of the trust, it is well worth your time. Typically, after your initial appointment with the attorney to discuss your wishes and estate planning goals, your personalized estate planning documents can be prepared in approximately 4-6 weeks. Once prepared, you will meet with the attorney to review the documents and have your signature(s) notarized. This is the date your Revocable Living Trust becomes effective, protecting your assets from Probate. Do I Need An Attorney To Prepare My Revocable Trust? Yes. Attorneys specializing in Estate Planning are experienced with the complex issues of estate planning and are trained to give valuable advice regarding your specific situation. Sometimes, financial planners and insurance companies, as well as Internet-based companies, offer estate planning services. These types of services are usually sales-related and don’t always evaluate your specific needs to prepare the best plan for you. Additionally, these options are unadvisable, as these people are not permitted to provide legal advice to clients; only bar-certified attorneys can do this.

Anne M. Campbell, Esq.

Call to make an appointment in Northern California counties: (707)449-0800 For appointments in Central California or with other questions: (805)594-1669 Anne@AnneCampbellLaw.com State Bar # 114687
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