Trusts/Wills

Advantages of Revocable Living Trusts.

• In a Revocable Living Trust (RLT), you state exactly how you want your asset distributed on your death, and to whom they are to be distributed. This includes all bank accounts, real property, and personal property. In other words, an RLT is just like a Will in this respect.
  
  Additionally, you appoint a person or persons who you desire to manage your assets according to your instructions in the event you are ever incapacitated. You may appoint a different person or the same person to make your health-care decisions according to your instructions. Therefore, whenever two licensed physicians, not related by blood or marriage, state in writing that you are NOT able to handle your own affairs, the person(s) named in Trust are AUTOMATICALLY able to take over and make decisions according to your instructions WITHOUT COURT INTERVENTION.
  
  In the event you have minor children, your RLT will provide for the person(s) who are to have physical control over your children and physically raise them. You will also name the person(s) you wish to manage the children’s money until they reach the age of majority or the age you state you want them to receive the money outright. Your RLT will provide detailed instructions, to insure that your children are raised and cared for according to your wishes. A COURT WILL NOT BE INVOLVED.
  
  Because an RLT avoids probate during incapacity, and on death, all of the costs of probate are also avoided.
• Revocable Living Trusts are inexpensive.
  
  When compared to the minimum costs of probate, RLTs are inexpensive. Since many different types of RLTs exist, it is difficult to say exactly how much your RLT will cost. You can download a free RLT from the internet, or purchase an "off the shelf" trust for $750.00 or less, or you can pay $2500 or more for a hard drafted trust to meet your particular needs.
• Revocable Living Trusts are private
  
  Unlike probate proceedings, which are open to the public, RLTs are private documents. As a consequence, only your successor trustees and beneficiaries will know the extent and degree of your assets, the number and amount of your debts, and what relatives or friends received what portion of your overall estate.
  
• Revocable Living Trusts avoid out-of-state probate.
  
  Your out-of-state land and all property will be a part of your California Revocable Living Trust. A new deed will be prepared in your name as trustee of your Trust and recorded in the county in each state of the union where your out-of-state property is located. Hence, when you die, your successor trustee will have all the power to sell, rent, etc., that you now possess over that out-of-state property
  
• Maximizes tax advantages.
  
  With the RLT, on the date of death of the first spouse or single person to die, the beneficiaries receive an automatic 100% step-up in basis in all of the real property, stocks, and bonds. Thus, the beneficiaries will have NO CAPITAL GAINS TAX TO PAY on the sale of said property, to the extent that the assets are protected by the Trust.
  
  Additionally, the RLT can double the Federal Inheritance-Tax Exemption from $2 million (2008) to $4 million (2008) if the clients' assets are over $2,000,000. Remember, that you could accomplish the same thing with a Will, by inserting a Trust into the Will (called a Testamentary Trust). However, if you choose to double the Federal Inheritance-Tax Exemption by inserting a Trust in a Will, you would first have to go through probate, and pay the cost of probate, in order to later establish this type of Trust. If, however, you have an RLT with a second trust inside the RLT, YOU WILL NOT HAVE TO GO THROUGH PROBATE TO DOUBLE THE FEDERAL INHERITANCE-TAX EXEMPTION.
  
  There is no increase in real property taxes to the extent you transfer your real property into trust. With regard to your home, the Supreme Court has ruled that the Due on Sale clause is inapplicable when a homeowner transfers title to his or her home into his or her RLT. This makes sense since there is no real "change of ownership" such as when you sell your home. The purpose behind the Garn St. Germain Act was to allow lenders to accelerate the mortgage when you sold your home, thereby "changing owners." Additionally, lenders traditionally have not called the loans due and payable when rentals are transferred into an RLT. However, in the case of rental property, our law office generally seeks the lender’s consent, to insure that the loan will not be called due. The reason for this additional precaution with rental property is that there is no Supreme Court decision on point, which specifically forbids lenders from accelerating the loan. Traditionally, the lenders agree to the transfer and charge a service fee of anywhere from $100 to $125 for the documentation.

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