Revocable Living Trusts

You can create a living trust simply by preparing and signing a piece of paper. Once the trust is created, it has the legal capacity to own property, and you can transfer property to it. The person actually in charge of the property owned by the trust is called a trustee.

When you create a living trust, normally you make yourself the trustee, so you don't give up any control over the trust property. When you die, the person you've named in the trust to take over as trustee (called the successor trustee) distributes your property to the people you want to get it. It's fine (and common) to name the person who will receive the bulk of your property as the successor trustee.

Successor trustees are designated in the trust documents (such as a son or a daughter), and carry out trust provisions after the death of the survivor spouse, or earlier, if the survivor wishes. Powers of attorney are executed as a part of the trust documents so that this process can be expedited at a time when it may be impossible for an elderly person to hand over such responsibility on his or her own. Again, the trustee is able to act promptly and efficiently after the death of the survivor spouse to distribute the property in accordance with the terms of the trust. Best of all, none of this needs to be taken to a probate court, with all of its attendant costs and delays.

Even when a trust is set up, wills are prepared so that any property left out of the trust for any reason can quickly be transferred into the trust. These documents are sometimes called "Pour-Over Wills." Special provisions may be placed in trusts concerning the distribution of estate property, order of inheritance, and provisions for setting up trusts for beneficiaries who are minors.

A living trust can be created without a lawyer, and can be updated any time. You are always free to change your mind about what property you want in the trust or who you want to get it at your death. But because it does require some paperwork to transfer property to the trust and conduct transactions in the trust's name, some paperwork to transfer property to the trust and conduct transactions in the trust's name, some people don't bother with a trust until they are older and more concerned with avoiding probate at their deaths.

Revocable Living Trust Advantages:

• Avoids probate. Basic probate fees in California run from $6,300 on an estate of $100,000 to $26,300 on $600,000. They can be much higher if there are problems and the average time required to complete the process is two years. Other states vary in costs of probate and court delays.

• You retain greater control of your estate because changes are easy to make.

• Property can be distributed immediately without all of the delays associated with probate such as advertising for creditors.

• Trusts are rarely challenged in court, and are rarely overturned. Wills are often challenged in court and it is not unusual to have challenges upheld. Part of the reason that trusts are difficult to challenge is that by the time someone gets around to it, the property is already distributed to the heirs.

• The details of your estate remain private because there is no public disclosure.

Disadvantages

• It is more costly to set up a trust. Costs can vary from about $600 to several thousand. The average is probably close to $1,000. The document can run to many pages.

• Not every attorney is able to draw up a trust. Very few are expert at the process. One needs a good referral for this purpose. There are estate planning firms that provide the service under the supervision of an attorney. You need to know something of the reputation of the firm before signing an agreement. You need to remember that one of the most lucrative activities of attorneys is in handling probate. Even their minimum fees are set by law.

• All titled property needs to have changes of title filed with the appropriate company or government agency. The most difficult case is to change the title of real property. Property is listed as "Doe Family Trust." With the exception of real property, there are no particular costs to this process, but it takes time and trouble.