Understanding A Living Trust and Its Advantages

Everyone talks about having a will or some type of legal document specifying how they would like their assets distributed either through a will or through any variety of living trusts. Did you know that only 20% of Americans have a living trust?

Here we discuss the best reasons to consider putting one in place.

How is a Living Trust different from a Will?

In the simplest explanation, a living trust, (or revocable trust), is a legal entity that protects your assets while you are alive, for your use and is later distributed to your designated beneficiaries per your wishes and instructions upon your demise. You maintain control of your assets throughout the whole time you are alive. You may withdraw assets, add assets, etc. It is a "living" document. (2)

A will is a legal document that specifies how you wish your assets to be distributed upon your demise. Nothing happens until you pass.

Is a Living Trust Right for You?

1. Avoiding Probate

The most popular aspect of a living trust is that it avoids court processing (probate). With a will, your assets will go into probate, whereby the court ensures that your assets are distributed your assets according to your instructions by the executor.

Since a living trust bypasses probate, the distribution of the assets goes much quicker. Your named successor trustee ensures your debts are paid and distributes your assets accordingly. (3)

2. Steps Involved

Remember, a living trust is a far more complex document than a will and will cost you more on the front end. The attorneys at James C. Shields can handle all the details and will help make the transition seamless. There are many steps that need to be covered-- why leave anything to chance? The Shields law firm can help with such things as:

  • Transferring your assets: stocks and bonds, bank accounts, certificates, etc. There are complex arrangements to "funding the trust"
  • Naming the trust as the beneficiary to your life insurance policy
  • Dealing with your 401(k) & IRA Accounts
  • Creating pour-over wills" --this document protects assets that were inadvertently excluded or that may have been acquired after the living trust was created but before your death. Pour-over will go through probate

3. Saving You Money Long-Term

  • As mentioned earlier, the trust will not have to go through probate, therefore there would be virtually no court costs.
  • Additionally, should someone contest the will and the distribution of your assets, a living trust is more than likely to hold up better; you could run into heavy court costs contesting a will
  • Income and estate taxes are essentially the same in either scenario; joint living trusts may provide savings for married couples.
  • Living trusts provide no benefit to those with no significant assets or young marrieds with no children.

4. Privacy Levels

  • Keep in mind that a living trust is private; upon your death, your estate will be distributed privately
  • A will is a public record and all transactions made public
  • Out of state property will have to go through probate in its own state; a living trust helps you avoid probate.

5. Other benefits

  • In accordance with living trusts, in the event you become incapacitated, your successor trustee takes over and manages your affairs without having to deal with the court system. Also, if you disputed your incapacitation, re can regain control yourself.
  • If only a will without a durable power of attorney exists, the court will oversee the estate by appointing someone to handle your financial affairs; the appointee reports to the court for approval of expenses, sales of property, etc. (this can be avoided by drawing up a durable power of attorney that includes health care decisions).

Most tax planners agree that the larger the estate value the greater the need for a living trust.

Revocable vs. Irrevocable Living Trusts

Once the property is put into it an irrevocable trust, it belongs to the trust and you cannot retrieve it. This property is not evaluated for estate tax purposes. This is one of the biggest benefits of an irrevocable trust. (1)

Gift tax, estate task, etc.

In establishing trusts, keep in mind that there may be tax consequences such as gift tax, estate tax, and state inheritance tax. For a comprehensive guide to your estate planning, call the Law Offices of James C. Shields.

Article Resources

(1) https://www.legalzoom.com/articles/revocable-vs-irrevocable-living-trusts-which-one-is-right-for-you?li_source=LI&li_medium=AC_bottom
(2) https://www.forbes.com/sites/christinefletcher/2018/08/16/9-reasons-why-you-should-consider-a-living-trust/#583dc73335df
(3) https://www.nolo.com/legal-encyclopedia/living-trust-faq.html

At the California Law Offices of James C. Shields, we offer clients tailor-made solutions for their estate planning, probate and debt relief problems. Entrusting a law firm with critical financial and legal issues is a big decision. 

Our attorneys have decades of combined experience dealing with all aspects of estate planning, probate and bankruptcy law. We are accessible and responsive, and always keep our clients up-to-date on the latest developments in their cases.

Contact James
21707 Hawthorne Blvd.
Suite 204
Torrance, CA 90503



When Should I Begin Estate Planning?

I was recently asked the question, “How old should I be when I start my estate planning?” It’s a great question, and the answer surprised her:

Estate planning should begin as soon as someone legally becomes an adult (18 years old).

At 18, you don’t need complicated estate planning, but there are several documents that all adults ought to have. You have likely heard of the Health Insurance Portability and Accountability Act (HIPAA). This Federal law (and its California equivalent) made it illegal for health care providers to share medical information with someone other than the patient without specific authorization. Similarly, an adult’s financial information also is protected from disclosure. These privacy laws are great, but what if you (or your adult child) are unable to make medical or financial decisions?

These three documents allow an adult to designate someone to make medical and financial decisions for them:

1) Advance Health Care Directive
An Advance Health Care Directive is a document that names an agent who is responsible to make health care decisions for you. There are several different versions, but at Thatcher | Law Group, we use a form that allows you to also make important end of life decisions as well. 2) Durable General Power of Attorney
A durable General Power of Attorney allows an individual to name an agent to make financial decisions on your behalf in the event you are unable. Each specific type of financial decision is identified separately. This document can either last indefinitely (“durable”) or it can be given an expiration date. 3) HIPAA Disclosure Authorization
This document provides specific written authorization for medical health care professionals to release your medical information to the person you have designated.

A young adult may also consider writing a will. If a young adult has little or no assets, no children of their own, and wants their possessions to go to their parents, California’s laws of intestacy will likely cover their needs. If your situation is more complicated than that, then a written will or trust may be appropriate.

If you have any questions, or want to begin the estate planning process, please contact Thatcher | Law to schedule a consultation.

Wishing you peace.

I began practicing law in 1997 as a litigation attorney. When my father passed away in 2009, my mother and I had the space to simply grieve because they had prepared their estate plan years before. I started my own estate planning practice to help other families have the peace of knowing that they are prepared for the uncertainty that the future may hold.

Contact Laura
(310) 305-4646
Hawthorne Boulevard, 2nd Floor Torrance, CA 90503