July 6, 2006

Ask The Lawyer

Common questions about revocable living trusts

This week’s question:
I have lots of questions about living trusts, so many that I don't know where to start. My wife believes they are the way to go, but I'm not so sure until I have some answers. Can you please go over some of the basics, even though you think I should know some of this information? That would really help me make a decision.

Lance L.
Almaden Valley

Dear Lance:
I can sympathize with you about this topic, Lance. It can be rather bewildering, but let's give it a try. Probably the best way to answer your question is to address it just like that—frequently asked questions (FAQs) about living trusts.

Here we go with common questions about living trusts, not necessarily in any particular order of priority.

- If I transfer real estate into my living trust, will my property tax go up? No. Transfers into a revocable living trust have no effect on your property tax under Proposition 13.

- If I am only a part owner of property, can I transfer my share into a trust? Yes. Your share can go into the trust without changing the shares owned by others.

- Can I name trustees and beneficiaries who live out of state? Yes. There is generally no limitation on where your trustees or beneficiaries reside.

- Will I have to consult my attorney every time I buy new assets or get rid of old assets? No. Once your current assets are transferred to your living trust, you take title to all new assets in your name as trustee of the trust and they will automatically be owned by your trust. You will also want to update Schedule "A" to the trust, i.e., a list of all trust assets.

- Does my living trust need to be registered or recorded anywhere or filed with the court? No. The revocable living trust is a private document, which is not recorded or filed with the court. However, if you own any interest in real estate, the new deeds showing trust ownership will be recorded.

- Can I sell assets owned by my living trust without complications? Yes. You sell assets in the same way you currently do. You will, however, add the word “Trustee” after your signature and the name and date of the trust. This is very simple.

- Can I change the terms of the trust? Yes. While you are alive and mentally competent, you can change the trust or even revoke or cancel all or parts of it without penalty at any time.

- Can I transfer real estate into my living trust? Yes. In fact all real estate usually is transferred into your living trust. Otherwise, upon your death, there probably will be a probate in every state where you own real property. When it is owned by your living trust, there generally is no probate anywhere and your beneficiaries potentially save thousands of dollars—and a lot of grief and time.

- Is the living trust just a tax loophole that the government will close down? No. I have read that the living trust has been authorized by the law for centuries. The government has no interest in making you go through probate or a conservatorship. Those proceedings only clog up the court system and cost money.

- Is it difficult to transfer assets to my trust? No. Generally speaking, all your assets except IRA and pension benefits (e.g., 401k accounts), which have beneficiary designations, should actually be owned by your living trust. Your attorney generally transfers your California real estate for you. You typically would transfer your non-IRA type stocks, bonds, bank accounts and the like. In most cases, there is no bank or other fee for changing title to these assets. A simple beneficiary change is used for “Tax-Qualified” plans such as IRAs, 401Ks and pension benefits. You may want your CPA to advise you in this area.

- Can I transfer my separate property as well as my community property into the living trust—and keep my separate property as such? Yes. All your assets both separate and community are typically transferred into your living trust, but they are not commingled. Separate property assets retain their separate property character while in your trust. If there is a divorce or dissolution of marriage, all assets come out of your living trust in the same way they went in—community property is divided between the parties and separate property is returned to the party who originally owned it.

- What if I move to another state, is the trust still valid? Probably yes. I have read that the living trust is valid in all 50 states, regardless of the state where it was originally created. However, I am licensed to practice law in only California. So, it is advisable to have your documents reviewed by an attorney in that state. Only he or she is qualified to render such an opinion.

- Is a living trust only for the rich? Absolutely not. A living trust can help anyone who wants to protect his or her family from unnecessary probate fees, attorney’s fees, court costs, and estate taxes. In fact, if your total estate is greater than $100,000, a living trust can offer substantial protection for your estate.

- Is a living trust a good idea for a single person? Yes. If you are widowed, divorced, or unmarried, a living trust offers significant protection for your estate. It completely eliminates probate and conservatorships and you can pass $2,000,000 free of estate tax under current law.

- Are there any major disadvantages to a revocable living Trust? No. Because you have complete control of all assets in your trust, you are free to manage your trust in any way you choose. Also, because your trust is revocable, you have the right to make any changes in it while you are alive and mentally competent.

I hope that this helps you understand a little bit about living trusts, Lance. Be sure to see your own attorney about this for further information and advice. I am sure it will turn out well for you!

Donald J. DeVries
Almaden Valley


Donald J. DeVries is an attorney practicing law in Almaden Valley. If you would like him to answer your question in his next Almaden Times column, you can reach him by e-mail at don@almadenvalleylawyers.com, fax at (408) 268-6502, telephone at (408) 268-9500, or mail at, 6475 Camden Avenue, Suite 200, San Jose, CA 95120. Your matters are personal and private, so of course, he will not disclose your identity or any details about your situation. To view Almaden Times columns since 1986 visit www.almadenvalleylawyers.com. DeVries writes this column to provide you with general information about important legal matters affecting California residents—not to give you legal advice about your specific matter. No attorney-client relationship is created by these articles. The law is complex and constantly changing and varies from state to state. So you should consult an attorney before taking any action that would affect your personal or business matters.