The Law Offices of Sevag Nigoghosian.

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Glendale, CA  91203

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Living Trusts

Living Trusts

The Law Offices of Sevag Nigoghosian works to avoid the high cost of probate and to avoid confusion at the time of an unexpected death. Perhaps you are concerned with what will happen when you pass on and how your estate will be distributed to your loved ones? A Living Trust may be the answer you are looking for and our professional and experienced living trust attorneys can help you.

We have expertise in the drafting and implementing of Living Trusts including Pour Over Wills, General Powers of Attorney, Durable Powers of Attorney for Health Care and Medical Directives as well as AB Trusts, and other property dispositions.

Living or inter vivos trusts are trusts you create while you are alive. These are different forms of testamentary trusts which you create in a will. One of the advantages of a living trust over a testamentary trust is that living trusts avoid probate while testamentary trusts do not.

The most common form of living trust is the revocable living trust. This kind of trust can be amended in any way or fully revoked while you are alive. By contrast, an irrevocable trust cannot be amended or terminated once it has been created.

The person who creates a trust is generally called the trust "settlor" in California. The person legally entitled to manage the trust property is the "trustee." The person for whose benefit the trust is created and managed is the "beneficiary." The settlor, trustee, and beneficiary can be the same person or persons, or they can be different persons.

Trusts can be created by multiple persons, for example couples (married or otherwise), or one person.

Revocable living trusts are very useful in states such as California where probate is a burdensome process. By creating and implementing a living trust you can avoid a probate. At death, trust assets are distributed according to your instructions in the trust by the successor trustee named in the trust instrument without court involvement. Trust provisions need not become public.

Generally the settlor is the trustee (and beneficiary) of a revocable living trust during life. Thus the settlor retains complete control over and ownership interest in the trust assets. Both spouses generally act together as co-trustees of a joint trust. When one spouse becomes incapacitated or dies the remaining spouse can be the sole trustee.

When the settlor/trustee becomes incapacitated or dies, the successor trustee named in the trust instrument takes over management of the trust property without court involvement. The successor trustee(s) can be children or other relatives or friends who are responsible and in whom the settlor has confidence. The successor trustee can also be a bank. This is called a "corporate trustee." If the successor trustee is also the beneficiary of the trust at the settlor's death, the successor trustee's only duty may be to distribute the property to him- or herself at that time.

As mentioned above, should the settlor/trustee become incapable or unwilling to manage his or her assets during life, the successor trustee named in the trust instrument can take over the management of the assets without a court having to appoint a conservator.

After death, assets which would otherwise be paid outright to beneficiaries can continue to be held and administered in one or more irrevocable subtrusts according to the trust instructions, for example, for minor or disabled children. The subtrust can remain in existence for the entire life of the beneficiary or terminate with the trust property being distributed outright to the beneficiary at a specified age. Holding property in trust for a minor or incapacitated beneficiary can avoid a court-appointed guardian or conservator for that beneficiary.

If a living trust is used in an estate plan it is essential to "fund" it; that is to transfer assets into it during the life of the settlor. If this is not done the probate-avoidance advantages of a living trust may not be realized. The attorney who prepares your living trust should assist you in the funding process. Assets can be added to or taken out of trust at any time without having to amend the trust instrument.

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Will I Lose Control Over My Assets if I Do a Living Trust?
No. Establishing a Living Trust in no way affects your ability to manage or control your assets. You can actually do business in the name of your trust. You have complete control of your assets and can do anything with your assets after the trust is created that you could do before the trust was formed.

Isn’t My Estate Too Small to Do a Living Trust?
One of the main reasons to do a Living Trust is to avoid Probate. Probate takes a considerable amount of time and can be very expensive. Probate fees are calculated on the “gross” amount of your estate. Therefore, if you own a home in California, you are most likely an excellent candidate to do a Living Trust. This is one of the biggest misconceptions about Living Trusts.

What Will Happen to My Assets if I Die Without a Will or Living Trust?
California law sets forth a statutory scheme as to how your assets will be divided upon your death in the event you die without a Will or Living Trust. If you are married, your assets can transfer to your spouse. If you are unmarried and have children, all of your assets will pass to your children. However, there may be hurdles your heirs must deal with in order to facilitate the transfer of your assets.

What Will Happen to My Children if I Die without a Will or Living Trust?
The Court will decide where your children go in that instance. By completing the appropriate estate planning, you can express your intentions in writing before you die as to whom you would like to be the Guardian of your minor children should you die prior to the time they reach 18.

If My Assets are Held in Joint Tenancy, Can I Avoid Probate?
It depends. However, if your property is held in joint tenancy, upon your death, your tax basis in your property will only receive a one-half step up in the tax basis to the fair market value. With appropriate estate planning, you can assure a 100% step up in the tax basis to the fair market value upon your death. This could avoid any unnecessary capital gains issues. Furthermore, upon the death of the last joint tenant, the property will have to go through Probate unless the last surviving joint tenant died with a Living Trust.

If I Do a Living Trust, Do I Also Need a Will?
Yes. This is called a “pour over will.” Basically a pour over will directs that any assets you have not put into your Living Trust will be divided according to your instructions in your Living Trust. However, the downside is that those assets will have to pass through the Probate Court process, but at least they will go to your named beneficiaries in your Living Trust. This is the reason to still do a Will in conjunction with your Living Trust.

Do I Have to File a Separate Tax Return for a Living Trust?
No. You continue to file your taxes as you always have prior to the creation of the trust with your social security number. Since a Living Trust is revocable , it does not need a separate tax identification number and it does not file a separate tax return of its own.

Will the Property Taxes on My Home or Other Real Property be Reassessed?
No. As long as you file the appropriate documents with the county assessor’s office, your property taxes will not be reassessed in California. This is a significant issue to understand in light of Proposition 13 in California.

Does a Living Trust Protect My Assets From Creditors?
No. It provides no protection from creditors, lawsuits, or judgments.

Will a Living Trust Protect My Assets If I Go Into a Nursing Home?
No. Many people have this misconception. Creating a Living Trust and putting your assets in your trust does not protect your assets nor does it help you qualify for Medicaid. Since a Living Trust is revocable and under your complete control, you have not given any assets away.

Can I Borrow Against the Assets in the Living Trust?
Absolutely. The trust does not restrict your ability to borrow on your assets in any way.

Do I Have to Go Back to the Attorney if I Buy or Sell Any Assets?
No. All you must do is take title to any newly acquired assets in the name of your living trust.

What Do I Do if I Want to Make a Change to My Living Trust?
It is a relatively simple and inexpensive process to make changes to your trust. You simply make an “Amendment” to your trust and incorporate the changes into your original trust.

Can a Living Trust Minimize My Income Taxes?

What is a Springing Durable Power of Attorney?
This is an estate planning document where you appoint someone to make financial decisions for you in the event you become incapacitated for any reason. Thus, the appointed person can pay your bills, deposit your checks, etc. without the need of a formal conservatorship. A conservatorship can be a burdensome and expensive process overseen by the Probate Court.

What is a Durable Power of Attorney for Health Care?
This is an estate planning document where you appoint someone to make health care decisions for you in the event you become incapacitated for any reason. Thus, the appointed person will make all health care decisions for you, with the assistance from your physician, during your period of incapacity. This avoids the need of a formal conservatorship which can be a burdensome and expensive process overseen by the Probate Court. In this document you can also designate whether or not you want life support systems in the event you are in an irreversible comatose state.

Can’t I Just Add Another Person to My Accounts or Title to Property to Avoid Probate?
Yes you can, however, it is rarely suggested. This is an invitation for problems. The person you add may have (or in the future may have) creditors or a spouse that may try to levy or claim an interest in those assets. Furthermore, there are oftentimes, gift tax issues or tax basis issues that arise by simply putting another person on title to your assets.

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