Many people believe estate planning is only necessary for the wealthy. In reality, a revocable living trust can be a valuable planning tool for many families.

For most people, the reasons are practical: avoiding probate, maintaining privacy, keeping control over their assets, and providing peace of mind for their family.

Avoid Probate — Save Time and Expense
One of the most important benefits of a living trust is the ability to avoid probate for assets that have been properly transferred into the trust.

Probate is a court-supervised process for administering and distributing a person's estate after death. In California, a typical probate proceeding can often take approximately 12 to 18 months, and complicated estates may take even longer.

Probate can also be expensive. California law provides statutory compensation for both the attorney and the personal representative based generally on the gross value of the probate estate—not the net equity after mortgages and other debts. The statutory compensation rate begins at 4% of the first $100,000 and decreases as the value of the estate increases. Court filing fees, appraisal fees, and other administrative expenses may also apply.

For your family, this can mean less time, lower administrative costs, and fewer complications during an already difficult period.

Maintain Your Privacy
Probate is generally a public court proceeding. Information concerning the estate, its assets, beneficiaries, and administration may become part of the public court record.

A living trust, by contrast, is generally administered privately without the same public probate proceeding.

For individuals and families who prefer to keep their financial and family affairs private, this can be an important benefit.

Maintain Flexibility and Control
Creating a revocable living trust does not generally mean giving up control of your property. During your lifetime and while you have capacity, you typically continue to control the trust and its assets.

You can generally buy and sell assets, add or remove property, change beneficiaries, amend the terms of the trust, or revoke the trust entirely.

In other words, you can put an estate plan in place while continuing to maintain control over your assets.

Peace of Mind for You and Your Family
A living trust is not only about what happens after death.

It can also establish a plan for managing your financial affairs if you become unable to manage them yourself. Your designated successor trustee can step in and manage the trust assets according to the instructions contained in your trust.

After your death, the trust provides a roadmap for who will manage your assets, who will receive them, and when and how they should be distributed.

Having these decisions made and documented in advance can reduce uncertainty and make the administration of your affairs easier for your family.

What a Living Trust Does NOT Do
While a revocable living trust offers many important benefits, it is equally important to understand what it does not do.

It Does Not Provide Creditor Protection
A revocable living trust is generally not an asset-protection vehicle. Because you continue to own and control the assets and can generally revoke the trust at any time, placing assets in your revocable living trust ordinarily does not protect those assets from your creditors.

It Does Not Reduce Estate Tax
A revocable living trust is also not an estate-tax planning tool. Transferring assets into a revocable living trust generally does not remove those assets from your taxable estate or, by itself, reduce potential estate taxes.

For individuals and families with substantial estates who may be exposed to federal estate tax—sometimes referred to as the “death tax”—additional estate-tax planning may be necessary. Such planning may involve different types of trusts, lifetime gifting strategies, or other specialized estate-planning techniques.

If you have a substantial estate or believe estate tax may be a concern, you should consult with an experienced estate-tax planning professional to determine whether additional planning is appropriate.

This newsletter is intended for general informational purposes only and does not constitute legal or tax advice. Estate-planning needs vary depending on individual circumstances.