What Are The Points of Failure In a Living Trust?

There are plenty of advantages to using a living trust as a significant piece of your overall estate plan. In fact, any Orange County estate planning attorney who doesn’t at least mention this option is behind the times.

The worst thing that could happen is if your trust fails and when this happens, your trust isn’t in the best place to help you, your family, or your beneficiaries.

Before you can understand the points of failure in a living trust, it’s worth exploring how these trusts even work.

Living Trust: Defined

A living trust isn’t too far off from a standard will, but it has many different advantages. Ultimately, trust can help you avoid the costs and time lost during the probate court process.

Unlike various other trusts, living trusts allow you to manage them yourself so long as you are alive and able.

Trusts can be full of property, bank accounts, real estate, and more. While you are managing this trust, you can add assets, transfer ownership of assets, add or remove beneficiaries, change the trustee to manage your trust, or cancel it altogether.

Some of the most significant benefits of using a living trust are the following:

• 
  Naming a person or multiple people to inherit your property.
• Distributing your assets the way you want without a court making those decisions.
• Passing assets onto minors.
• Minimizing estate taxes, thus maximizing your inheritance
• Avoiding the time and cost of probate court

Ultimately, a living trust gives you more control of how your assets are managed, which should result in saving loads of money. Make sure you consult an Orange County estate planning lawyer to completely understand how a living trust fits into your estate plan.

The Biggest Point of Failure

While your estate planning attorney in Orange County may have various points of failure to discuss with you, there is really only one major point of failure that matters.

Essentially, the biggest way your living trust can fail is if It’s not properly funded.

What is Funding?

Funding a trust is just another way of saying you’re adding assets into the trust. This task typically involves retitling your assets into the name of the trust. 

Instead of you owning your house, for example, the trust technically owns the house while you live in it. You may also have to retitle or set up life insurance policies, bank accounts, or other elements of your estate to fit into your trust.

This is when the help of an experienced estate planning attorney in Orange County CA , really comes into play.

Once your living trust is funded with your assets, your trustee is able to manage those assets if you become incapacitated. This is important as the trustee can use your assets to help pay for medical expenses you incur while you are incapacitated.

A power of attorney (POA) may provide similar powers to a person of your choosing; it doesn’t come with any of the other benefits.

Keep Gas In The Tank

A living trust isn’t much different than your car needing fuel. For your car, you stop by the gas station and fill up the tank. In a living trust, you properly fund it. If there is no gas, you’re stuck on the side of the road. In the same way, if your trust isn’t properly funded, it won’t be much help to you, your family, and your beneficiaries.

An insufficiently funded living trust could result in time spent dealing with the probate court. The end result is that it will take much longer and cost much more to not properly fund your trust.

The other part of your car’s fuel system that is often overlooked until it’s needed is the fuel gauge. This indicator lets you know how much gas is in the tank. Keeping your trust updated and accurate is akin to keeping your eye on your fuel levels.

A Word of Caution

While it might seem like a good idea to run out and start throwing property and titles into your living trust, that may not be the best option. The last thing you want to do is lose money on your assets because of fees or taxes. That could mean negating the benefit of the trust altogether.

Before you transfer things into the name of your trust, make sure to see how the transfer takes place, and if there are any fees or issues you should consider.

Here are some of the most common areas that could prove problematic when you’re transferring assets into your trust. Mistakes here could result in the failure of your trust as well.

Real estate . Some homeowner associations (HOA) require that you get their permission before transferring your home’s title. They may even charge fees. Some states may require a tax or treat your home as if you sold it when you transfer the title.

Personal Property . It’s often worth transferring the title of personal property into your trust. Things like cars, boats, motorcycles, etc., are great candidates. Make sure to check if transferring ownership will result in fees.

Untitled Property . Property that doesn’t have an official title can still be transferred into the trust. Your estate planning lawyer in Orange County can help you understand this process. It is crucial that you describe the property in enough depth that no one can question which item is which.

Retirement Accounts . Transferring your 401(k), IRA or qualified annuities often requires a process of withdrawing any funds in the account, opening a new account, and then putting the money back. The problem is that emptying a retirement account typically comes with some massive fees, not to mention having to count that money as income on your tax return.

Start Your Estate Plan Today

Regardless of how big or small your estate is, it’s always worth thinking about your future. A living trust offers benefits that you won’t find anywhere else, but it does take a little work.

Before making any significant decisions, make sure to meet with an estate planning attorney in Orange County, CA. It’s time you protected your life’s work.

For the best estate planning team around, schedule your free initial consultation with us at Parker Law Offices. Contact us at (949) 385-3130.

from Estate Planning Blog - Wills, Trusts & Probate Law in California https://www.estateandtrustlawyer.com/what-are-the-points-of-failure-in-a-living-trust

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