Revocable Living Trust Planning: Strategies For Asset Protection And Beneficiary Care.pdf

Trust Planning - Key Factors for Creating a Revocable Living Trust

This summary outlines key considerations when establishing a revocable living trust.

Objectives:

The primary goals of a living trust are to:

Provide for loved ones: Offer immediate or staged access to assets for beneficiaries.
Avoid probate: Transfer assets into the trust to bypass the probate process, protecting them from public disclosure and potential creditor claims.
Choose a wise trustee: Select someone trustworthy and capable of managing the trust's assets according to your wishes.
Prevent family drama: Structure the trust to minimize conflicts among beneficiaries.
Optimize tax planning: Utilize trust provisions to reduce or eliminate estate taxes at your death.

Providing for Loved Ones:

Outright Gifts: Direct gifts made by the trustee to beneficiaries after death. Advantages: Immediate access; disadvantages: Lack of protection from creditors and potential loss by beneficiary.
Staggered Gifts: Distributions in increments over time based on age or discretion.
Lifetime Subtrust: Assets remain in trust for a beneficiary's lifetime, preventing them from owning/controlling the assets but allowing them to receive income/principal. Advantages: Asset protection; disadvantage: Beneficiary never owns the assets.
Family Pot Trust: Distributes assets to a pot held by the trustee for all children until a designated age, with discretionary distributions based on individual needs.

Avoiding Probate:

Asset Transfer (Funding): Crucial for avoiding probate. Ensure proper transfer of ownership using appropriate legal documents (grant deed, warranty deed, etc.).
Considerations:
Existing agreements preventing transfer (pre-nuptial, post-nuptial, property agreements).
Tax disadvantages (e.g., rollovers vs. direct transfers).
Family circumstances involving minor beneficiaries of POD accounts.

Choosing a Trustee Wisely:

Key Factors:

Someone capable of implementing your wishes and managing complex details.
Age similarity to beneficiaries for better understanding and communication.

Options:
Family Member: Can offer insights into family circumstances but may introduce conflicts.
Professional Fiduciary: Impartial, efficient, and experienced in trust administration.

Co-Trustees (Avoid if Possible):

Advantages: Rarely used; only advisable when absolutely necessary.
Disadvantages:

Constant disagreements between co-trustees.
Increased risk of litigation.

Alternatives: Use a Trust Protector to remove non-cooperating co-trustees and incentivize reasonable compensation for timely administration.

Important Legal Considerations:

Trustee's Discretionary Power: Can be "sole," "absolute," or "uncontrolled." Must act in accordance with fiduciary principles (P.C. 16081).
Trustee Compensation: Incentivize reasonable compensation for trustee services.
Probate Code Section 16013: Requires co-trustees to participate actively and prevent breaches of trust.