Sunday, March 3, 2013

An Estate Planning Lawyer in California Advises What Assets Should and Should Not Be Transferred into a Living Trust


An effective legal mechanism to avoid probate is the living trust.  In a living trust, the assets of the estate owner (known as the “trustor” or “settlor”) are transferred into a trust.  When the trustor dies, the successor trustee handles the distribution of the assets of the trust – without going through probate.

                      However, having a living trust is only part of your effective estate plan.  You must fund your living trust by transferring your assets to it while you are still alive and can think clearly.  But take note: It is not appropriate to transfer all  your assets to your trust fund.  Also, there are different ways of transferring different  types of assets into your trust. When you have drafted your living trust, you must enlist an expert estate planning, lawyer in California to help you as you fund your living trust.,

                      For many assets, it is a simple matter of listing these under “trust assets.”  For other assets, this may involve transferring the title of that asset  from yourself as owner to yourself as trustee. Joint bank accounts with substantial deposits fall into this type.  An account under the name of “Adam Smith and Eve Smith”, for example,  should be transferred to  the name “Adam Smith and Eve Smith, Trustees of the Adam and Eve Smith Living Trust.”  The critical but subtle difference is that the former is a joint account while the latter is now a sole account under the trust.  If the joint bank account remains outside the trust, it may have unintended consequences when Adam Smith dies.  In such event, all his money will simply go to Eve Smith (assuming she survives Adam).  That may not be what Adam had in mind when he first set out to execute the Living Trust.   Thus, it is essential to have your estate planning lawyer review your California living trust from time to time.
                      Another  type of property which cannot be transferred by simply  listing them under “Trust Assets” is real property.   These must be  officially transferred from the name of the trustor into the trust by deed.  If you fail to do this,  then your real estate assets would have to go through Probate – which is what you wanted to avoid when you created your living trust in the first place.

As a rule, all  personal property with high appraised value should be officially transferred into the name of the living trust.

                      Still, it would be a costly mistake to transfer  some assets to the trust. Generally speaking, it is better not to include small bank accounts in a trust.  This will allow the survivors some liquidity to tide them over when the trustor passes away.  Likewise, pensions, retirement plans and life insurance policies are meant to be distributed directly to the designated beneficiaries of these savings facilities. Transferring these into the trust  may have negative results. Thus, you  will be better off when you collaborate with an experienced estate planning attorney in California in drafting and periodically  funding your living trust.