The advantage of a revocable living trust, as opposed to a will, is that a court-supervised probate can be avoided. The cost of administration is usually substantially less and distributions can be made to your beneficiaries much sooner.
You can direct the disposition of your estate in either a will or a trust in much the same manner. The difference is the manner in which your estate will be administered at the time of your death. A will usually has to be entered for probate in the county of your residence at the time of death. Probate is a court-supervised procedure that can take anywhere from nine months to a year to complete. A notice to creditors must be published in the newspaper, a petition for probate must be filed with the court, and the court must authorize distribution of your estate following administration.
The primary purpose of a trust is to avoid probate. Typically, you would transfer your assets out of your name as an individual into your name as trustee of your trust. During your lifetime, you would have the power to amend or revoke the trust, add property to the trust, and withdraw property from the trust. All income would be payable to you during your life exactly as it is now. In addition, you could withdraw principal in such amounts as you deem necessary or appropriate.
There would be no income tax consequences to a trust during your lifetime. Income would continue to be reported by you using your Social Security number exactly as it is now. As long as you serve as the trustee, you would not have to obtain a separate tax identification number for the trust. The trust would provide, however, that upon your death, the person that you designate as the successor trustee would have the authority and would be required to follow your directions with respect to distribution. The successor trustee appointed by you would have that power without the necessity of probate or authority of a court.
Jack Brown, Esq. is with Lubrani & Brown, Attorneys at Law with offices in Murrieta and Riverside. For more information, call (951) 200-2020 or visit www.lubranibrown.com