Who Needs a Living Trust? Or Do You Really Need One?

A Living Trust is a really unique legal document. It allows the settlor, the person who creates the trust, to name another individual, the trustee, to manage his property when the settlor becomes incapaciticated or dies.

At death, a Living Trust essentially places a payable on death feature on your real property. In California, this is an important feature of Living Trusts as it avoids probate. Probate is financially and emotionally taxing on everyone involved. 

A Living Trust is only good if there is actually real property (your home or other real estate) titled into your Living Trust or your other assets like bank accounts or life insurance policies. Transferring title of your home or other real estate like rental property or timeshares is straightforward. No, property taxes will not increase as this type of property transfer is exempt from reassessment in property taxes. No, your mortgage will not be called in.

Anyway, a Living Trust is essential for those who:

1. Own real estate,
2. Have more than $100,000 in cash, or
3. Have a life insurance policy with a large death benefit (say, $50,000 or greater)

A Living Trust is also essential if you have children... especially minor children.

So, if you have minor children and own your home -- YOU NEED A LIVING TRUST. No way about it. A Living Trust will avoid probate if your home is transferred into your Living Trust. It will have provisions in there on who will manage the real estate and other money for your children until they become of age. You can decide when your children become of age whether it be 18, 21 or even 30. You can also decide to have distributions in different stages. Say, 25% of the trust assets at age 21 and the balance at age 27. Whatever you decide. You know your children best.

Regardless of your marital status, if you own real estate and have no children  -- YOU STILL NEED A LIVING TRUST. You want to be able to decide who should get your real estate when you die. Maybe it's your girlfriend, boyfriend or  same-sex partner. Maybe it's your Mom if she is still alive. Or maybe it's your sister or your nieces and nephews.

Some people actually do not need a living trust. In general those folks are those who do not own any real estate or have an estate worth less than $100,000. If you have a child and rent an apartment, you may not need a Living Trust. A competent attorney can review your assets and your situation otherwise to determine if you only need a Will and not a Living Trust.

Personally, as an attorney, I do not like to do work that does not need to be done. I often tell my clients -- this is fine, you don't need to pay the extra costs involved to set up a Living Trust or update your Will or Living Trust. Sometimes the estate planning documents already in place are fine. If that is the case, then I tell my clients that honestly.

From my point of view, what goes around comes around. Ever watch My Name is Earl? There is something about karma sometimes.