In simple terms, a living trust is a document that provides for management of your assets for your benefit in case of your incapacity, names your beneficiaries, and details the ways in which they will receive their inheritance upon your death. The most important reason to have a living trust is to shield your estate from the long and costly process of probate, which allows the state of California to name your beneficiaries and decide how they will inherit your wealth.
How do living trusts work? Instead of holding the assets in your own name, you title them in the name of a trust for your use during your lifetime. You keep full control and can amend the trust at any time. You use your Social Security number for any trust relate transactions. During your lifetime, you are the sole grantor, trustee, and beneficiary of your living trust.
You appoint a person to handle your financial and property matters in case of your incapacity or death. This fiduciary is called a successor trustee. The successor trustee will pay your bills and take care of your property if you are ill and distribute it to your beneficiaries upon your passing away.
You will also designate your beneficiaries and set the terms of how they will inherit your property. You can let the beneficiaries receive the property in their own name or continue the trust for their benefit.
A living trust is effective at avoiding probate, reducing or eliminating taxes, and providing for your beneficiaries. It should be a part of every family’s estate plan.