I’ve had friends ask me about Family Trusts so I decided I better write a short blog about it.
I want to use this blog to stress to everyone that from my perspective, a Revocable Living Family Trust (especially if you have children) is worth the money. Why? Here’s just one example:
While I was dealing with my mother’s first catastrophe (breaking her hip at home) I found out that my parents did a very smart thing. They had set up a Living Family Trust years before this incident occurred. As part of the trust creating process, they assigned me as their “Power of Attorney” What is a “Durable Power of Attorney?” It’s a legal document that puts someone in charge of all the medical and financial decisions for someone in case that person becomes incapacitated. It could happen! All it takes is one car accident for example. Because I had a “Durable Power of Attorney” letter with me, I was able to sign my mom’s checks for the medical bills that incurred, sign all of the hospital paperwork and get my dad (who was completely incapacitated) into an assisted living facility very quickly while my mom was in the hospital. I would not have been able to do any of this had I not had that letter.
What happens if someone does not have POA letter and a relative becomes incapacitated? You will have to go before a court and ask to be assigned as the conservator (adult guardian) for this person. This can be a lengthy and expensive process… so I’ve heard.
Advance Health Directives are also helpful to have in case someone has to make major medical decisions for you. An Advance Health Directive has specific medical care wishes of the person who becomes incapacitated. Hospitals and skilled nursing facilities always ask for this document. My mom and dad’s Advance Health Directive was included in their Living Family Trust.
Here is what could happen if you DON’T have a Living Trust set up and you and your spouse were to pass away:
As I understand it: If your net assets (including property) exceed $150,000 then these assets are subject to a lengthy and very expensive probate court process unless the assets have an assigned beneficiary or the assets are in a joint bank account with someone who is living. Any assets that are not in an account under the name of the Living Trust are subject to probate. This means all bank accounts, investments and property should have the name “__________ Family Trust on it. Yes, even investment accounts!
A Will can be used to express the wishes of the deceased, but are still subject to probate. A Revocable Living Trust is not subject to probate court because the courts have already pre-approved it so to speak. After my parents wrote their trust with their estate lawyer, the lawyer sent the documents to the county court house to be approved and a Certificate of Trust was given to them by the court. I used this Certificate of Trust to add my name as a Trustee to the bank accounts after my dad passed away and my mom was declared incapacitated by doctors. Because the trust is “Revocable”, I was able to remove my mom as a Trustee. The new amended trust also went through the county courthouse. So it’s like everyone knows about the Family Trust ahead of time and there will be no surprises or questions later on about who receives the assets. It makes for a very quick and straight forward process after both grantors pass away.
A Revocable Living Trust can be very broad. What I mean by this is that it can state that all real estate, banks accounts, investments, etc.. are assigned a beneficiary or beneficiaries and trustees to manage these assets while at least one person who owns the trust (The Grantor) is alive. A trustee or multiple trustees will have the legal responsibility to manage and invest the assets until both Grantors are deceased. Then the assets go to the beneficiary with no fuss.
A Will is included in the trust so that the wishes of the grantors are expressed in more detail. An executor is assigned in a Will. Also, guardianship of children are written in a will. The will usually states (but I think this can be customized) that the children of the parents will receive the funds in an even split between them and that the funds will be managed by an executor until the children reach a certain age. The lawyer for our own family trust suggested age 25 for our kids. That’s when most children reach actual adulthood and can manage money responsibly. LOL! But again, a will itself can’t stand alone. It’s still subject to probate depending on the circumstances.
If you are now considering having a Living Trust drawn up for your family, you need to make an appointment with an Estate Lawyer. Most of these lawyers charge between $200-$500 AN HOUR in California. I think our trust cost us around $3,000 plus we had an amendment made when our daughter was born. Additional children did not trigger an amendment because the trust was written in a way that included additional future children down the road so no future amendments would be necessary with each additional child…if that makes sense.
Hope this helps!