Revocable Living Trust

Why a Living Trust?

A Living Trust is the best, and safest, way to avoid probate. If you have had a family
member or a close friend die and their estate was subject to probate, then you are
aware of the value of a Living Trust.

For those that have no experience with probate, a brief primer:

When someone dies without a Living Trust, their estate is settled by the court in a
process called “probate.” This settlement includes all assets that require a signature to
transfer ownership including real estate, bank accounts, brokerage accounts, mutual
funds and other titled accounts.

The law states that estates worth more than $150,000 in personal property and $50,000
in real property are subject to probate. However, the practical fact is that if a signature is
required, then probate is required. Exceptions to probate are: life insurance, annuities,
retirement accounts with a named adult beneficiary and most automobiles.

Probate fees average about 6% of the gross estate.
Probate can often take 1 to 2 years to complete.
Probate of a complex estate may take longer and be more expensive.
Probate is a matter of public record.

A number of years ago, most state legislatures, including California’s, added the
concept of Revocable Living Trusts to their probate code. Trusts have been used for
centuries. However, Revocable Trusts, in which changes can be easily made during the
trustee’s lifetime, are a form of Trust that is only about 50 years old.

How it works

During your lifetime you (or you and your spouse) establish a Revocable Living Trust
and place all titled assets into that Trust.

In your Revocable Living Trust you will:

Name your Successor Trustees (The person(s) that will distribute your estate)
Name your heirs and beneficiaries.
Set the distribution age and method.
Define who gets a beneficiary’s share if that beneficiary should predecease you.
Define who is not to get a share.
Designate special gifts that are above and beyond the normal distribution (for example,
a specific piece of jewelry).

As Trustee(s) you remain in absolute control of the Trust assets and can make changes
to the Trust throughout your lifetime.

When you die, the Trust “owns” everything, and the estate thereby avoids probate. The
Successor Trustee that you have named distributes the Trust assets according to the
guidelines that you have defined without any court involvement or fees.

Are There Additional Benefits to a Living Trust?

A Living Trust is “tax neutral” while you are alive but becomes an entity when you dieand,
therefore, has some potential tax and liability benefits, for example:

A Living Trust can provide two federal tax exemptions for a married couple.
Once you die, your Trust becomes irrevocable. This means that it is a separate entity
and has liability protection from the debts of your children.

Still, the most important reason to create your family’s Living Trust, and by far its
greatest benefit, is to avoid the costs, delays and potential complications of probate.

Your Living Trust Portfolio

Your Living Trust Portfolio, from the Law Offices of Scott Grace, comes complete with
the following documents:

Your Family’s Revocable Living Trust
Pour Over Wills
Powers of Attorney for Assets
Health Care Directives
HIPPA Agreements
Trust Transfer Deeds
Funding Letters
Extract of Trust
A Comprehensive Trustee Manual

Pour Over Wills
These Wills revoke all previous wills and agreements. The “pour over” will works to
move unfunded assets into the Trust after the Trustee dies. If the funding process has
been properly executed and maintained there will be no assets outside of the Trust and
the will is never needed.

Powers of Attorney
The Asset Power of Attorney appoints an agent to act on your behalf if you are
incapacitated. It will cover assets that are not funded to the Trust. It is a “Durable”
Power, meaning that it is still effective in the event one is deemed incompetent;
however, it is not effective after death.

Advanced Healthcare Directive
The Advanced Health Care Directive was created by the State Legislature and replaces
the previous Health Power. With it you will designate an agent and grant that agent the
power to make health care decisions for you, during your lifetime, in the event you
become incapacitated due to an accident or illness. The Health Care Directive also
allows you to record decisions you have made regarding end of life issues.

HIPPA Agreement
This agreement grants your agent the right to access and distribute your medical
records in the event you are incapacitated.

Trust Transfer Deed
This is a recordable legal document that can be used to transfer title of real property to
your Trust. A copy of the current deed will be essential in the creation of this document.

Funding Letters
Once you have decided to create your Living Trust, it is of vital importance to follow
through and “fund” the Trust. Funding the Trust is simply the action of re-titling and
transferring items into your Trust. Real Property is funded into the Trust with a Trust
Transfer deed, as described above. Other titled property such as financial accounts, will
be transferred to the Trust by requesting that the vendor (Bank, Brokerage, Mutual
Fund, etc.) re-title ownership in the name of your Trust. In most cases a written request
(Funding Letter) along with an Extract of Trust (explained below) is all that is needed to
complete the process. The Funding Letters are created to encourage and help facilitate
the all-important funding process.

Extract of Trust
During the funding process and at various times throughout your life, it will be necessary
to prove the existence of your Trust. The Extract of Trust is a two-page, notarized
document that is generally accepted as proof that you have established your Revocable
Living Trust.

Trustee Manual
The Trustee Manual, presented as part of your Living Trust Portfolio, is recommended
reading for all Revocable Living Trust owners AND designated Successor Trustees. The
manual is designed to help you and your successors better understand the important
duties and responsibilities of being a Trustee. For those seeking a more in-depth
understanding of the Revocable Living Trust, a recommended reading list is included.

Following is a list of documents to gather and points to consider as you
prepare to create your Family’s Revocable Living Trust
Documents:

Please provide copies of statements from all of your titled accounts. This
includes brokerage, mutual funds and bank accounts. If you hold stock
certificates outside of a brokerage, please provide a copy of the certificates.
Please provide copies of statements for life insurance and annuity contracts that
you own.
Provide copies of the Grant Deeds for your real property both in California and
outside of the state.
In most cases passenger cars will not be placed in your trust. If you own a
collectable car or a vehicle with an unusually high value, please provide
registration information.
Please provide copies of any promissory notes.

Points to consider:

Please consider who will serve as your successor trustee, executor of your pour
over will, power of attorney for health care and power of attorney for assets. In
most cases spouses will serve for each other in first position; we would like you
to name at least one and as many as two alternates in each case. Remember
that while successor trustees can serve jointly, the executor of your will should be
persons serving one at a time.
Please consider any items such as jewelry, artwork, collectibles, etc., that will be
left to a particular person above and beyond the normal distribution of your
estate.
Please consider who is to be included as an heir to your estate and the percentage
interest of each.
If applicable, please consider who will serve as guardian for your minor children,
and at what age minor children will have access to any inheritance.
Do you have funeral arrangements in place? Have you decided on cremation or
burial? Please provide information if arrangements have been made.