A Revocable Living Trust Helps You Protect Your Beneficiaries by Allowing Maximum Flexibility and Control Over the Distribution of Your Estate.
There are three options when it comes to estate planning:
1. Do Nothing.
2. Execute a Will.
3. Execute a Revocable Living Trust as the Basis of Your Estate Plan.
If you choose to DO NOTHING, this will happen on your death:
- California law will kick in and will determine who inherits from you, how much they inherit, and when they inherit;
- Your estate (if valued at more than $150,000) will have to go through a formal probate before it can be distributed, which will eat up your beneficiaries’ time and money;
- Your beneficiaries may have to pay a hefty estate tax bill upon inheriting from you.
If you EXECUTE A WILL (and no revocable living trust), this will happen on your death:
- Most likely, your minor beneficiaries will receive their entire inheritance, no strings attached, upon reaching the age of eighteen;
- Your estate (if valued at more than $150,000) will have to go through a formal probate before it can be distributed, which will eat up your beneficiaries’ time and money;
- Your beneficiaries may have to pay a hefty estate tax bill upon inheriting from you.
Executing a REVOCABLE LIVING TRUST allows you to avoid the pitfalls described above for people who either take the “do nothing” approach or who only execute a will. In addition to avoiding probate and minimizing estate taxes, a thoughtfully prepared revocable living trust empowers you to determine who inherits from you, how much they inherit, and when they inherit. This is particularly useful if you will have minor children or young adults as beneficiaries.
In the absence of an estate plan that says otherwise, a minor child beneficiary will inherit their full share upon turning eighteen years of age. As you can imagine, receiving a large inheritance at a young age could actually harm that child by perhaps railroading plans for continuing education, not to mention encouraging unwise spending practices. This is also often the case for young adult beneficiaries. For many young adults, they are set up for success if they receive an inheritance spread out over a number of distributions, e.g., 1/3 upon earning a Bachelor’s degree or reaching the age of twenty-five years, 1/3 upon reaching the age of thirty years, and 1/3 upon reaching the age of thirty-five years. For many young adults, wisdom and maturity develop with each successive distribution, and lessons are learned, thereby inspiring confidence in handling money and a setting them on a path toward a lifetime of success with handling finances.