Do I Have to Put All My Assets in My Trust?

The primary purposes of a Living Trust are to protect your assets from court, taxes, and young or foolish heirs. Trusts can protect the inheritances of problem children and the disabled and also protect their inheritances from lawsuits and creditors.  Trusts can eliminate capital gains taxes, family feuds, and public spectacles.  But to accomplish this, your trust must own your assets.

You may be tempted to leave some of your assets out of your trust. Maybe you’ve secretly been hoarding a bank account for a favorite relative, or think that little condo in Hawaii that no one knows about should stay with its current occupant. Or, maybe you’ve just forgotten to include something, no big deal, right? Wrong!

Trust me, once you die, there are no secrets.  Uncle Sam or a meticulous family member will find all of your “secret” assets, subjecting them to lengthy and expensive court battles. It’s best to put them all in your trust, list them as trust assets, then clearly state who gets them on your death.

Real Estate

Nothing will change by adding your real estate holdings to your trust.  The title will transfer from your name to your trust’s name; with you are trustee.  As you are the owner of the trust, it’s still your property and you still have complete control.  Because a normal living trust is revocable, transferring real estate to your trust should not disturb your current mortgage or property taxes.

Property without a Title

Personal belongings like your coin collection, sports memorabilia, jewelry, electronics and art should also become part of your trust so that you can leave binding directions on how they should be allocated. Placing them in the trust ensures your wishes will be unequivocally carried out. This is done by simply assigning these items to the trust, normally as part of your trust asset schedule. A trust should always have a current, signed and dated, asset schedule!

Bank and Brokerage Account

The owner of all bank and brokerage accounts should be your Trust if you want to ensure that the funds will be available, upon your incapacity or death, to cover your expenses, then distributed per your wishes.

Items You May or Must Leave Out of Your Trust

Automobiles

In most states, automobiles are exempt from probate and can easily be transferred upon your death, so it’s best to leave title in your name(s) unless they are very valuable and substantially increase the value of your estate.

Retirement Accounts

For tax purposes, you should normally always name your spouse, then competent adult heirs, as beneficiary of tax deferred accounts, to avoid having these accounts taxed, upon your death. Normally a trust will only be a beneficiary of you have age restricted or handicapped heirs.  Your attorney and financial advisor will assist you with designating the proper IRA beneficiaries.

Life Insurance

Life insurance is normally not owned by a revocable living trust, but should almost always name the trust as the primary beneficiary.  Annuities often follow the same rule, but are more complicated, and should be discussed with your financial advisor before naming beneficiaries.

Assets You Don’t Own

It’s not uncommon for people to make gifts of assets they don’t own, naming them as gifts in their trust, because they feel that they morally have a right to the asset.  This is usually not recommended.

If you have further questions  or need help with your Trust, contact us for a consultation today at 925-757-4605 or email us.

The Top 6 Estate Planning Myths Debunked

Put simply, a Living Trust ensures that once you’re gone your final wishes will be known and properly implemented. What surprises many young people and elders alike is how many families can benefit from having a Living Trust.

Below I debunk six of the most common myths about Living Trusts.

  1. Estate Plans don’t need updating. There are dozens of reasons your Living Trust could become invalid or outdated over time. For example, your asset schedule could be out of date, there could be changes in family status, financial status, name changes, dead executors or beneficiaries, new grandchildren and many more changes that can affect your estate plan. It’s a good idea to review your Trust with an Estate Planning attorney every five years.
  2. Estate Plans are only for rich people. A Living Trust is much more than a plan for how to divvy up your estate, it leaves instructions for loved ones on who will be responsible for taking care of minor children, who will take care of your affairs should you become incapacitated and who will get your prized possessions. A Living Trust can even protect your assets from nursing home expenses and protect your heirs from creditors. It’s also a good idea to leave instructions to survivors about how you want your social media accounts managed and by whom. As you can see, nearly everyone can benefit from a Living Trust, not just rich people.
  3. Estate Planning is to be done as part of your retirement plan. Many of the clients we meet for the first time are preparing their Living Trust as part of their retirement plan. Waiting this long can be a huge mistake for your family! The best time to create your first living trust is when you first start a family, as a trust is the best way to protect your children in case of your incapacity or death.
  4. Estate Planning is only for old people. As I stated in #3, Living Trusts safeguard young families should the unthinkable happen. Think of a living trust as your voice after you’ve passed away or become unable to make decisions for your children, finances or your own healthcare. Having a valid Living Trust in place will prevent your loved ones from having to make difficult decisions – guessing at your intentions- should something happen to you. It also can prevent lengthy, drawn out, expensive and contentious court battles over things like custody, debt, inheritance, etc. Most people don’t actually want a young person to control a lot of money – with a trust you can appoint a responsible person or bank to manage the finances of your children (or grandchildren) until they are older and more responsible.
  5. Estate Plans, Trusts and Wills are expensive to set up and maintain. Living Trust estate plans are normally set up for a modest, fixed fee. There is no annual maintenance fee. This cost is nominal compared to the cost of probate. Probate is the process surviving family members and loved ones must go through to settle your estate in court in the absence of a valid estate plan. This process can take years and can cost tens of thousands of dollars. In some circumstances trusts can also reduce or eliminate capital gains taxes, gift taxes, and offer other protection for your assets.
  6. Trusts don’t come in pretty colors (true story!). Living trusts aren’t pretty, quick, fast or as easy as some online estate planning services would lead you to believe. A Trust is perhaps the single most important legal document you will every create. Do you really want to leave that to chance, working with a faceless chat box on an estate planning website, a paralegal or other non-attorney? Sure it may seem like a good idea to save a few bucks, but in the end, it could cause years of hardship, expense and legal battles for your surviving loved ones. Don’t be fooled by showy online resources that over-promise and under-deliver. Hire an attorney who is a State Bar Certified Specialist in trusts.

If you have questions about getting started with a Living Trust, Estate Plan or Will in California or would like your existing plan reviewed contact us to schedule a consultation.

The Truth About Living Trust Fees

One concern that may be holding you back from creating a Trust – or worse – leading you to one of those online legal services or a document preparer, is the idea that it may be expensive to create and maintain one through a real Attorney. The fact is, it’s probably more affordable than you think.

To help you take that step to plan for your family’s future once you’re gone, here is a breakdown of what you can expect to invest in creating and maintaining a Living Trust:

Creating the Trust

The only expenses in creating a trust are the Attorney fees associated with creating it and a small recording fee for new property deeds. The cost for an attorney to draft a living trust can range from $1,500 to $2,000 for individuals and $2,000 to $2,500 for married couples. Simple or complicated plans can affect this estimate. The cost of recording property transfer deeds is approximately $20 per deed. Note that living trust estate plans always include a back-up or “pour over” Will, financial power of attorney, advance health care directive, and other related documents.SeniorMoney-262x300

Changing the Trust

Events like marriage, divorce, death of a spouse, beneficiary or trustee, changes in financial or residency status and new tax laws can affect your Living Trust and require changes. Changes are usually billed hourly by your attorney. Basic changes to asset and gift schedules can sometimes be done by you, so long as your share your changes with your attorney.

Reviewing the Trust

It’s a good idea to review your trust with your attorney at least every five years, unless one of the changes listed in #2 occurs, then you should get it reviewed at the time of the event. Reviews, like changes are usually billed by the hour.

If you have an old Trust or Estate Plan and would like to have an Attorney review it – or if you don’t have one yet, contact the Law Offices of Joel Harris and schedule your consultation today.

5 Important Reasons to Review Your Estate Plan

Despite the world still having 100% mortality rate, planning for the inevitable is rarely something we look forward to. No one wants to think about their own mortality – and our families can be even worse; choosing to bury their heads in the sand rather than think about losing us.

Senior couple doing the income tax declaration online

That’s why many put off estate planning – or worse – never get to it at all.  And for those who do it, oftentimes, it gets done, you think it’s over and you shove it in a drawer and never think about it again. Sound familiar?

Not reviewing your estate plan on a regular basis can be almost as bad as not having one at all. Changes in your family, finances, investments, and laws can make the best laid estate plans, wills, and trusts, moot. Leaving your family with exactly what you wanted to avoid; questions, confusion – and worse, lengthy and costly probate.

Here are 5 reasons you need to review your estate plan:

1.   Family changes. It may be obvious that if you get a divorce, lose a spouse or child, or adopt a child (or disinherit one) that an estate plan review is in order. But did you know that this also applies to your children and other heirs?  If THEY get married, change their names, get a divorce, adopt children, or have any other changes in their family, it might be a good idea to take a look at your plan and see if any changes need to be made. This is also true in the case of incapacitation of a spouse (yours or your heirs’).

2. Changes in income. Whether it’s retirement, bankruptcy, inheriting money, winning the lottery (nice problem to have!), buying investment property (especially if it’s out of state), this is a huge reason to get your plan reviewed.  If it’s not included in your plan it opens your family up to expensive probate and other problems once you’re gone. 

3.  Changing state of residency. Trust and estate planning laws can vary by state – especiSenior couple in love during retirement - Happy elderly conceptally if moving from a common law to a community property state. So if you move be sure to contact your estate planning attorney for a review. 

4.  Changes in the law. You can’t possibly know every law and how it    affects your estate plan, and you especially aren’t expected to keep up  on changes in the law! A good estate planning attorney will do that for  you – and should contact you for an estate plan review if changes in the  law affect you.  We update our clients by email.  If you would like to add  yourself or your friends and family to the list, please click here.

5.  If you’re in doubt. If you are ever in doubt about anything, it’s best to check with your estate planning attorney to find out if you need to review your plan. It’s always better to be safe than sorry.