Frequently Asked Questions

1. I have a will. Why would I need a living trust?

Contrary to what you’ve probably heard, a will may not be the best plan for you and your family–primarily because a will does not avoid probate when you die. Almost all distributions directed by a will must be processed and supervised by the probate court.

Also, because a will can only go into effect after you die, it provides no protection if you become physically or mentally incapacitated. So the court could easily take control of your assets before you die–a concern of millions of older Americans and their families.

Fortunately, there is a simple and proven alternative to a will–the revocable living trust. It avoids probate and lets you keep control of your assets while you are living and lets you direct who will handle your affairs upon your incapacity or death.

2. What is probate?

Probate is the legal process through which the court sees that, when you die, your debts are paid and your assets are distributed according to your will. If you don’t have a valid will, your assets are distributed according to state law.

3. What is so bad about probate?

It can be expensive. Legal/executor fees and other costs must be paid before your assets can be fully distributed to your heirs. If you own property in other states, your family could face multiple probates, each one according to the laws in that state.

It takes time, usually 8 months to 2 years. During part of this time, assets are usually frozen so an accurate inventory can be taken. Nothing can be distributed or sold without court and/or executor approval. If your family needs money to live on, they must request a living allowance, which may be denied.

Your family has no privacy in probate. Probate is a public process, so any “interested party” can see what you owned and who you owed. The process “invites” disgruntled heirs to contest your will and can expose your family to unscrupulous persons.

Your family has no control. The probate process determines how much it will cost, how long it will take, and what information is made public.

4. Doesn't joint ownership avoid probate?

Not really – it usually just postpones it. With most jointly owned assets, when one owner dies, full ownership does transfer to the surviving owner without probate. But if that owner dies without adding a new joint owner, or if both owners die at the same time, the asset must be probated before it can go to the heirs.

Watch out for other problems. When you add a co-owner, you lose some control. Your chances of being named in a lawsuit and of losing the asset to a creditor are increased and there could be gift and/or income tax problems. And since a will does not control most jointly owned assets, the end result may be that the asset ends up not going to the persons you would have wanted.

With some assets, especially real estate, all owners must sign to sell or refinance. So if a co-owner becomes incapacitated, you could find yourself with a new “co-owner” — the court — even if the ill co-owner is your spouse sometimes a conservatorship becomes necessary and the court now has to approve any decisions on the property.

5. Why would a court get involved if I become incapacitated?

If you can’t handle your own affairs due to mental or physical incapacity (Alzheimer’s, stroke, heart attack, etc.), only a court appointee can sign for you – even if you have a will. (Remember, a will only goes into effect after you die.)

Once the court gets involved, it usually stays involved until you recover or die. The court, not your family, controls how your assets are used to care for you. This public process can be expensive, embarrassing, time consuming and difficult to end if you recover. And it does not replace probate at death – your family could have to go through both a conservatorship and a probate. All that can be easily avoided with some simple estate planning.

6. Does a power of attorney prevent the court's involvement at incapacity?

A durable power of attorney lets you name someone to manage your financial affairs if you are unable to do so. However, many financial institutions won’t honor one unless it’s on their form. And, if accepted, it may work too well — giving someone a “blank check” to do whatever he/she wants with your assets. It can be very effective when used with a living trust, but risky when used alone.

7. What is a living trust?

A living trust is a legal document that, just like a will, contains your instructions for what you want to happen to your assets when you die. But, unlike a will, a living trust avoids probate at death, can control all of your assets, and prevents the court from controlling your assets at incapacity.

8. How does a living trust avoid probate?

When you set up a living trust, you transfer assets from your name to the name of your trust (which you control), for example, from “Bob and Sue Smith, husband and wife,” as individuals, to “Bob Smith and Sue Smith, as Trustees under the Smith Family Living Trust dated June 30, 2008.”

Legally, you no longer personally own what is transferred to your living trust (don’t panic: everything now belongs to your trust and you control the trust), so there is nothing for the courts to control when you die or become incapacitated. The concept is very simple, but it is this change of title to your assets that keeps you and your family out of the probate courts at death and avoids court supervision of your financial affairs upon incapacity.

9. Do I lose control of the assets in my trust?

Absolutely not. You keep full control. As trustee of your trust, you can do anything you could do before you have a trust — buy/sell assets, change or even cancel your trust (that’s why it’s called a revocable living trust). You even file the same tax returns. Nothing changes but the names on the titles.

10. Is it hard to transfer assets into my trust?

No. Some assets, like real estate, will be transferred for you by the attorney. For other assets like stocks, CDs, and bank accounts, you will need to change the titles, but the attorney will show how it is done. Most living trusts also include jewelry, clothes, art, furniture, and other assets that do not have titles, but not detailed lists are necessary.

Also, beneficiary designations on some assets (like insurance) should be changed to your trust so the court can’t control them if a beneficiary is incapacitated or no longer living when you die. IRAs 401(k)s, etc. can be exceptions. The attorney will explain how all this works.

11. Doesn't this take a lot of time?

It will take some time — but you can do it now, or you can pay the courts and attorneys to do it for you later. One of the benefits of a living trust is that all your assets are brought together under one plan. Don’t delay “funding” your trust. It can only protect assets that have been transferred into it.

12. Should I consider a corporate trustee?

You may choose anybody of legal age to be your successor trustee. However, in some cases, people select a corporate trustee (bank or trust company) to act as successor trustee or co-trustee. But this is usually only done if the immediate members of your family do not have the time, ability or desire to act as your trustee. If you feel your family situation will require having a corporate trustee, discuss it with the attorney at your first meeting. Corporate trustees are generally more expensive, but they are also more experienced as investment managers and are objective and reliable.

13. If something happens to me, who has control?

If married, you and your spouse are co-trustees, either can act and have instant control if one becomes incapacitated or dies. If something happens to both of you, or if you are the only trustee, your handpicked successor trustee will have authority to act on your behalf.

14. What does a successor trustee do?

If you become incapacitated, your successor trustee looks after your care and manages your financial affairs for as long as needed, using your assets to pay your expenses. If you recover, you automatically resume control. When you die, your successor trustee pays your debts and distributes your assets. All this is done quickly and privately, according to instructions in your trust, without court interference.

15. Who can be successor trustees?

Successor trustees can be individuals (adult children, other relatives, or trusted friends). You should name more than one in case your first choice is unable to act.

16. Does my trust end when I die?

Unlike a will, a trust doesn’t have to die with you. Assets can stay in your trust, managed by the trustee you have chosen – until your beneficiaries (including minor children) reach the age(s) you want them to inherit. You may also have an ongoing trust to provide for a loved one with special needs.

17. How can a living trust save on estate taxes?

Most of the time, savings from estate planning and living trusts comes from avoidance of attorney’s fees and probate expenses. However, there are significant estate tax considerations as well. While living trusts do not save estate taxes, in and of themselves, they do provide a planning vehicle to fully utilize each individual’s estate tax exemption or estate tax credit. The estate tax exemption as of January 1, 2011 shelters up to $5,000,000 from estate taxes per individual. That’s $10 million per married couple when planning is done properly. For now, the estate tax exemption is so high that it simply does not effect most of our clients. However, the $5 million exemption is not permanent. It was set to return to the 2001 amount of $1 million per individual, but Congress delayed that for two years. It is a bit confusing, but for now and through the end of 2013 the exemption is $5 million.

18. Doesn't a trust in a will do the same thing?

Not quite. A will can contain wording to create what’s called a “testamentary trust” to save estate taxes, care for minors, etc. But, because it’s part of your will, this trust cannot go into effect until after you die and the will is probated. So it does not avoid probate and provides no protection at incapacity.

19. Is a living trust expensive?

No, not when compared to all the costs of court interference at incapacity and death. See our pricing page.

20. How long does it take to get a living trust?

At Williamson & Gentilini, our normal work scheduling is about a week to prepare the legal documents after you make the basic decisions and have had your initial attorney consultation. However, in urgent situations and emergencies, documents can be prioritized and completed much faster.

21. Should I have an attorney do my trust?

Yes, but you need the right attorney. At Williamson & Gentilini, we have considerable experience in estate planning and will be able to give you valuable guidance and peace of mind that your trust is prepared properly.

You may see advertisements for “document assistants” or “paralegals” who claim to perform these services for an unrealistically small fee. They provide shoddy fill-in-the-name type forms that usually cause more problems then they solve. By law, these “document assistants” or “paralegals” cannot give you legal advice – doing so is a criminal act. If you have a trust that was drafted by one of these type operations, our office can fix it for you. Call for more info.

22. If I have a living trust, do I still need a will?

Yes, you need a “pour-over” will that acts as a safety net if you forget to transfer an asset to your trust. When you die, the will “catches” the forgotten asset and sends it into your trust. The asset may have to go through probate first, but it can then be distributed as part of your living trust plan.

23. Is a 'living will' the same as a living trust?

No. A living trust is for financial affairs. A living will is for medical affairs—it lets others know how you feel about life support in terminal situations. Living wills are no longer used in California. These matters are now provided for in an Advance Health Care Directive.

24. Are living trusts new?

No, they’ve been used successfully for hundreds of years.

25. Who should have a living trust?

Age, marital status and wealth don’t really matter. If you own titled assets and want your loved ones (spouse, children or parents) to avoid court interference at your death or incapacity, consider a living trust. You may also want to strongly consider encouraging other family members to have one so you won’t have to deal with the courts at their incapacities or deaths.

26. Summary of Living Trust Benefits

  • Avoids probate at death, including multiple probates if you own property in other states
  • Prevents court control of assets at incapacity
  • Brings all your assets together under one plan
  • Provides maximum privacy
  • Quicker distribution of assets to beneficiaries
  • Assets can remain in trust until you want beneficiaries to inherit
  • Can reduce or eliminate estate taxes
  • Inexpensive, easy to set up and maintain
  • Can be changed or cancelled at any time
  • Difficult to contest
  • Prevents court control of minors’ inheritances
  • Can protect dependents with special needs
  • Prevents unintentional disinheriting and other problems of joint ownership
  • Professional management with corporate trustee
  • Peace of mind

Have More Questions?

If you have questions that are not covered here please call our office at:

562-431-1956