Benefits of Transferring Your Property to a Living Trust
By Michael K. Elson, Attorney at Law
There are many significant benefits to transferring your property and other assets to a living trust. The obvious benefits are that you will select the executor, or rather successor trustee, of your estate, and you will decide who are the beneficiaries and exactly what assets they will receive. However, there are many other important consequences to consider.
First of all, property inherited through a trust avoids probate. Probate is the lengthy court procedure which culminates in a judge’s order as to how your assets should be distributed. The process includes mandatory newspaper publications to provide notice of the probate action to the public, written notification to all possible heirs and creditors, and long statutory wait periods which invite anyone to file a claim to the estate. The expenses are very high and probate is usually required in every State where you own real property. The cost and time delays of going through probate in two or more States can be quite undesirable. The benefit of utilizing a living trust to avoid probate is that assets can be quickly distributed to beneficiaries and without the costs of probate. In contrast, a will does not avoid probate.
Unlike a will, implementing a living trust estate plan avoids court control of your assets, not only in the event of your death, but also if you are temporarily or permanently incapacitated, and avoids public disclosure thereby providing maximum privacy. Additionally, the distribution of your property to your beneficiaries is much more difficult to contest. Since probate can take a long time, sometimes several years, the benefit of a living trust is that your family will not have to deal with a long period where there would be very limited or no access to your assets. And having a disability plan in your trust will allow your family to avoid the need for a conservatorship if you become disabled.
Without the proper estate plan, who would take care of your rental property, and be able to legally enforce timely tenant rent payments, and handle your banking in the event of your death or incapacity? If your property is transferred to a well drafted living trust, then upon your death or incapacity, your successor trustee would be able to immediately step in to manage your property and financial affairs.
Other benefits of having a living trust estate plan are ensuring family assets remain in your family, and if desired, ensuring your son-in-law or daughter-in-law will not be able to redirect your grandchildren’s inheritance to a new spouse or children of another marriage. The living trust can also prevent unintentional disinheriting and other hidden pitfalls associated with joint ownership.
In addition, you can substantially reduce or eliminate estate taxes though the use of an A-B living trust, and also allow flexibility, through the use of an Disclaimer A-B living trust or powers of appointment, to ensure step-up in cost basis on your property to reduce or even eliminate capital gains taxes. You can avoid reassessment on your home and your real property taxes will not increase due to transfers to your living trust.
Furthermore, you can set up an alternative to your heirs receiving 100% of inheritance outright. You can regulate the transfer of assets (including principal and/or income) to heirs who are prone to mismanagement, who may quickly squander their inheritance, or who may be subject to creditors or an ex-spouse. And proper trust provisions can protect dependents with special needs while also ensuring their continued qualification for government assistance and benefits. Finally, as of January 1, 2017, assets held in a living trust, which do not have to go through probate, are exempt from Medi-Cal reimbursement, provided the recipient died on or after January 1, 2017.
In conclusion, the benefits of transferring your assets to a living trust are that you will be taking care of the people you love the most at time of your death, by ensuring their inheritance is protected from the costs of probate, unnecessary taxes and exposure to creditors and other claimants, major time delays, and numerous hassles. The benefit to you of a well drafted custom estate plan is peace of mind. The author of this article is a Los Angeles living trust attorney.
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