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In California, a revocable living trust is an extremely popular estate planning document that provides its creator(s), the Settlor(s), with beneficial real and personal property management functions during the Settlor(s) lifetime(s) and then, upon the death of the Settlor(s), it is used as an expedient and effective means to distribute those assets to the designated beneficiaries.

In accordance with California law, revocable living trusts are typically created to avoid California’s complicated and extensive probate process. Keep in mind that any person who resides in California and dies with or without a will and the gross value of their estate contains more than $150,000 in personal and real property or any interest in real property valued at greater than $50,000 (regardless to the value of their estate), their estate needs to be probated. So, creating a revocable living trust while residing in California is not just a good idea for the rich, but also a really good idea for the typical family or middle class or working class people.

As you may know, the California probate process is an expensive and lengthy Court supervised process which can take about a year or longer to complete and distribute the estate assets to the heirs.  However, distributing property to the named trust beneficiaries once the Settlor(s) have died is a much less expensive process.  Additionally, trust assets can sometimes be distributed to the trust beneficiaries within about four or five months from the Settlor’s death so distribution of assets through a trust is much quicker than probate.

A revocable living trust is established by a person with clear and specific guidelines for the management of their property and assets — both while they are alive as well as after their incapacity, should this occur during their life, and certainly upon their death. Here are some basic terms of who is who regarding revocable living trusts:

  • A Settlor, sometimes called a grantor, is the person who creates the trust. In a typical revocable living trust, the Settlor, once the trust document is created, gives or transfers real and personal property to themselves as the Trustee of the trust.
  • A Trustee is the named person in the trust that is responsible for managing the trust per the trust terms found in the trust document. Additionally, the Trustee is the person who holds bare legal title to the assets which are held in trust for the benefit of the Beneficiary(ies). Typical to a revocable living trust, the initial Trustee of the trust upon trust creation will be the same person as the Settlor.  And upon the incapacity or death of the Settlor/initial Trustee, the trust document will then name a Successor Trustee to take over and manage the trust per its terms.
  • A Beneficiary is the person or persons who are named in the trust to receive the benefit of the trust assets. Typical to a revocable living trust, the initial Beneficiary of the trust upon trust creation will be the same person as the Settlor/initial Trustee.  They will receive the trust benefits of creating it during their life.  Also, typical to a revocable living trust is that the trust document will name Remainder Beneficiaries who are the persons who will receive the benefits of the trust and the trust assets upon the death of the Settlor/initial Trustee/initial Beneficiary.

An important word in the phrase “revocable living trust” is the word “living.” Indeed, this is a trust that is created and administered while the Settlor is alive and well. It allows the Settlor the freedom to decide upon the management of their estate while they are alive and mentally capable of doing so. Sometimes, a revocable living trust is created in anticipation of a future incapacity, with incapacity defined as the Settlor’s inability to mental or physically take care of themselves.

“Revocable” is another key word to understand about a revocable living trust. The word revocable means that the Settlor has the power and free capability, during their lifetime, to amend or modify the trust and any trust terms and even to terminate the trust.

Without getting too complicated, typically, upon the death of the last Settlor of the trust, the trust will change from a revocable living trust to an irrevocable trust (but there are many exceptions to this rule).  When this occurs, the assets held within the trust will be distributed by the Successor Trustee to the Remainder Beneficiaries after creditors and applicable state and federal taxes have been paid.

Estate planning and required document preparation for any estate plan for a person residing in California is a complicated process and professional advice and assistance is essential to ensure that the wishes of the person who is creating the estate plan are fulfilled. Anyone considering estate planning and creation of a revocable living trust should contact the Chilina Law Firm or another California lawyer who practices in the areas of estate planning, trust administration, and probate for more information.

Authored by Karen Chilina and Co-Authored by Greg Chilina

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