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LIVING TRUST IN CALIFORNIA

BENeFITS OF A LIVING TRUST

A revocable or living trust has many benefits, both financial and personal.

A Trust Can Save Taxes And Protect Assets.

Following passage of the 2010 estate tax law, a bypass trust is no longer required to protect each spouse's five million estate tax exemption. (You still need to have an overall living trust to avoid probate.) In many cases, however, a bypass trust can still be a valuable estate planning tool. Consider the following:

	If you are in a second marriage or if you want to make sure that your spouse doesn’t change the named beneficiaries after you die, you need an irrevocable bypass trust to lock in beneficiaries for your portion of the estate. If you have a bypass trust, it becomes irrevocable on your death and your surviving spouse will not be permitted to change the beneficiaries you have designated for your portion of the estate, no matter if there is subsequent marriage or for any other reason. A bypass trust may also come in handy to protect rapidly appreciating assets in the deceased spouse’s estate. If the deceased spouse’s assets are expected to appreciate in value at a more rapid rate the inflation index, you can utilize the bypass trust to protect those assets from future estate taxes on the amount that exceeds the indexed exemption rate. For example if your spouse dies in 2011 and has a $5 million estate you could shield all of those assets from future taxes regardless of how much their value appreciates in future years by use of the bypass trust. If you didn’t use the bypass trust and just transferred the assets and the unused exemption to the surviving spouse, then the surviving spouse would have to pay 35% estate taxes on the amount that the deceased spouse’s estate appreciated in excess of the index. Consider the case in which the deceased spouse’s estate had a value $5 million when he died and it appreciated to $8 million six years later. At a likely index inflation rate of 3%, the indexed estate tax exemption would be about $6 million. Therefore, when the surviving spouse passed away, the estate would incur a tax of 35% of the added $2 million, i.e. $700,000. In this case, using the bypass trust would be very valuable.

A Trust Avoids Probate Costs and Delays.

One of the major advantages of having a living trust is that you don’t have to go through Probate, since the trust owns the assets. Probate refers to the court process that is required if you have a simple will or no will, i.e. dying intestate.

	• Going through probate takes an enormous amount of time, often when it can least be afforded. In most cases going through the probate process takes 1 to 2 years or more. • Avoiding probate saves money. Probate can costs up to 8% of the estate value. (See table in the “California Wills” section.) You don’t need to give this money away needlessly.

With a living trust assets can be distributed to your beneficiaries within a few months rather than years

A Trust Provides Maximum Privacy.

There is no required publication as there is with a simple will. With a trust, only your heirs, beneficiaries and your successor trustee have a right to know what is in the trust.
A Trust Brings All Assets Under One Plan.

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