What is a Trust?
A Revocable Living Trust (“RLT”) is a legal document created during your lifetime that allows you to leave your real and personal property to beneficiaries of your choice. A RLT is very much like a Will with one BIG exception: there is no Probate with a RLT. This means that your RLT and the property in it will not be made public or subject to court supervision.
Given the high cost of probate proceedings in California which can easily be 4-6% of the fair market value of the assets irrespective of the debt against the assets, this is reason enough especially if you own any real property. Also, there is a minimal time delay incurred in transferring assets to beneficiaries with a RLT because the assets are already in the trust. The only thing that changes after your death is the trustee of the RLT which you have already selected.
RLTs are called “living” because they are created while you are alive and you legally transfer your property to the trust when you create it. RLTs are “revocable” because you may at any time prior to your death, revoke or change them. In fact, as there are changes in your life including getting married, divorced, a beneficiary dies or your financial or property situation changes, you should have the RLT reviewed by an attorney in order to ensure the changes are properly reflected in the Trust.
While you are alive, you still own all of your property that has been transferred to the RLT. You can still sell the property in the trust, borrow against it, spend it or give it away. Assets in a RLT are treated much the same as direct ownership of property for income tax purposes. There are no additional taxes, tax returns or any necessity for separate tax payer identification.
Sometimes people say they are not concerned about probate fees because they are not going to be here. However, a RLT can be very important to you if you become incompetent due an accident or illness because there can be an easy transfer of management of your property and affairs without the necessity of a court appointed conservator .
If you have real property in the state of California or elsewhere, you should carefully consider how you are currently holding title to the property and whether a RLT may be a better idea for you.