Home > Finance > Living Trust – my conclusion

Living Trust – my conclusion

The main purpose of the living trust is to avoid probate – a process that the court decides what to do with your properties. Your heirs/relatives will eventually still get everything but at 3%-10% cost and may take up to 2 years.

If the house and bank accounts are under both of the spouses name, then the spouse automatically gets it without going through probate. So from this perspective, living trust is mainly for your children to get your assets quick and with minimum cost.

Bank accounts, IRA accounts, life insurance etc… as long as they have designated beneficiaries, they will go directly to the beneficiaries. Make sure you specify contingent beneficiaries, which should be all your children, in the event that your spouse also die. You need to ask your bank about adding beneficiaries to your saving accounts. They do not do that for checking account – Citibank told me the first person showing them the death certificate will get all the money in checking account after 60 days. They do saving and CD accounts.

A “will” will not avoid probate. And, title and designated beneficiaries take precedence over the will. Without the will, the court will decide who gets what. With the will, you decide, court executes.

A “living will” is mainly for medical purpose so that someone else can make decision for you (i.e. “pull the plug” so you can die naturally) – you may be interested at this. (In California, “advance health care directive / durable power of attorney for health care ” is used for this purpose.)

“Durable power of attorney for property”- someone to make financial decisions when you are not able to. Court most likely will specify your spouse if you don’t specify one. Not a matter if everything is co-owned.

A living trust will NOT protect you from the creditors, as long as it’s revocable (most are).

My conclusion:

For young couples who jointly own everything and don’t have much properties, and do not worry about estate tax ($2 m threshold for 2008 and will change later) , they do not need estate planing/living trust. Because if one of you dies, your spouse gets everything; if both of you die, your children will get the most liquidate part of your asset directly (maybe through a custodian account if under 18), and they will get your real estate soon or later. You should designate a guardian for your children through a will.

Some links:

Will report the software or other good ways to get a will/living will done shortly.

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Categories: Finance
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