Living Trusts are the most popular way to avoid Probate and Estate Taxes. If you own a home a Last Will and Testament must go through the Probate process. Living Trusts create a legal entity designed to avoid Probate.
To illustrate how a Living Trust works imagine a wagon. The wagon holds toys just like your Trust holds assets. The person who owns the wagon can tell others who can pull the wagon and what can be done with the toys. If the owner of the wagon falls down, someone else can pick up the handle and read the instructions about what to do with the toys.
One of the most common reasons a family ends up in Court when their loved one has a Living Trust is that assets aren’t put into the Trust. (This is called funding the Trust). If title to an asset is not in the Trust and is in your name when you die, typically your estate ends up in Probate Court this is so common the Petition we file has a name a “Heggstad Petition”. The first thing you need to make sure is up to date is to make sure your assets are in your Living Trust.
Have you changed?
If you have a diagnosis of a disease such as Alzheimer’s, Dementia, Stroke, Cancer, Parkinson’s, Congestive Heart failure etc. You should update your Trust. If you are worried that you might not be able to pay your own bills or take care of yourself, you may want to consider updating your trust so you have a Co-Trustee as a backup. You may even need to consider a New Asset Protection Trust designed so you can get assistance from the Long-Term Care Medi-Cal program that was designed to help middle class families when their Medicare stopped paying. (Medicare pays for a maximum of 100 days of Skilled Care).
Has the law changed?
Yes, there are many law changes but two that impact you and your Trust:
- One is the Estate Tax Laws, they changed radically in 2013. If your trust is older than that it is probably time for an update.
- The second law change is Proposition 19. Under Proposition 19 anyone over 55 can sell their home and transfer their low property taxes thanks to Proposition 13 to a new home, that is the good news and why people voted for it. Unfortunately, Proposition 19 changed the rules so that the lower property taxes only pass to your children if they make your home their personal residence. If you want to pass your home and your lower tax base to your children you will need to update your trust with specific language to accomplish this result.
Has your family changed?
Birth, death, divorce and remarriage, all change how property passes. If any of these events in your life it is time to update your Living Trust, to make sure the right people get the inheritance.