This depends on the size of your estate.

Generally, any estate with a gross fair market value in excess of $166,250 will benefit from a Living Trust. This is because the primary purpose of a Living Trust is to avoid probate.

Estates with a gross value of $166,250 or more usually require probate. Thus, if you have an estate with a gross fair market value of more than $166,250 you are probably best served with a Living Trust. An estate under $166,250 can get often by with a simple will and/or account titling. Note that the “gross value” is the full fair market value of the estate, and not just the equity. In other words, a $400,000 house with a $300,000 mortgage is in fact a $400,000 probate! Also, please remember that the amount where a Living Trust becomes beneficial is $166,250…not the estate tax exemption amount. People often confuse these two numbers.

There are essentially four reasons to avoid probate:

Probate is expensive. Fees and costs often eat up 5 to 10 percent or more of the value of your estate. Note that fees are based on the gross estate, not just the equity.
Probate is time consuming. With probate there is often a six month to two year delay until your heirs receive their inheritance.
Probate is public. Anyone can look in your court probate file to see the intimate details about your family and finances.
Multiple Jurisdictions. Probate is usually required in every state where you own real estate.

Yes. However, there are some grave dangers involved with putting your child on your deed. One, he or she becomes an owner of the house, and has the right to sell and mortgage. Two, your child’s creditors could take the home to satisfy your child’s debts, bankruptcy, divorce or lawsuits. Three, your family looses the advantage of receiving the stepped-up cost basis on your home at your death.

In short, putting a child on a deed may cost your family many thousands of unnecessary tax dollars, and could even cost you your home!

No. With your attorney doing most of the work, your involvement is often as little as reviewing and signing the legal documents, making a few phone calls, and a trip to the bank.

What is more difficult, however, is understanding your Living Trust. One of the most—or possibly the most—important part of an attorney’s job in preparing you Living Trust is to educate the client as to what exactly he or she is signing. Always demand that your attorney answer all of your questions!

No. A Living Trust is generally a “revocable trust” with you as the trustee. This means you have complete control. Also, just like a will, you can change or amend the trust as often as you like.

However, please do not try to change your trust on your own. A trust amendment is a formal document that must satisfy many legal requirements. Always seek professional advice before trying to amend your trust.

Age is surprisingly not a primary factor in determining whether one needs a Living Trust.

While it is obvious that an older person or couple (with a statistically shorter remaining life expectancy) needs Estate Planning, it is also appropriate for families to set up a Living Trust while their children are very young. For them, a Living Trust is the best way to ensure a safe supply of money for the support, maintenance and education of their children in case the parents die.

In fact, for families with minor children, a Living Trust makes an excellent beneficiary for Life Insurance and some retirement plans when you want the proceeds to be held for your children and used for their support without a formal court supervised financial guardianship. With a Living Trust, there is much more flexibility, control, cost savings, and the final distribution to your children can be delayed until they reach an appropriate age.

In any event, procrastination is dangerous. I’ve had far too many calls from adult children whose parents are incapacitated (recent stroke, etc.) who want to know if we can now prepare a Living Trust. “I’m sorry,” I must reply, “it’s just too late…”

No. First of all, Living Trusts have been around since old English Common Law. The very wealthy have always used trusts.

Recently, however, trusts have become more popular for the “common folk” because of increased property values. While in times past most estates were valued under $166,250 and thus passed without probate, such estates are now the exception. Simply put, most Californians who own real estate are now faced with probate, and thus will save their family hassle and expense with a Living Trust.

Another reason for the sudden “popularity” of Living Trusts is because a new generation of attorneys and more permissive attorney advertising rules has allowed the old secret to get out: Only probate attorneys make money on probates!

Yes. Always! You need a special type of will called a “Pour-Over Will”. This will acts as a “backup” to your Living Trust in the event any property is left out of your Living Trust. It also disposes of tangible personal property, and nominates guardians for your minor children.

Yes and no. For a married couple a Living Trust can reduce or eliminate estate taxes by taking advantage of both spouse’s estate tax exemption, however, under the current estate tax law, there are often easier ways to achieve this goal.  For a single person, a Living Trust will not save estate taxes. There are, however, numerous other tools available to achieve this goal.

No! The current (2022) estate tax exemption is $12.08 million per person.  In reality, this means most families will never pay any estate taxes. However, keep in mind that this law could be changed at any time. Therefore, although a modern Living Trusts should allow for flexible tax planning options in the future, the basic need for a Living Trust—Probate Avoidance and Possible Estate Tax Savings—remain intact.

No. Your real estate will not be reassessed and your property taxes will not increase. Your income taxes will be reported and paid as usual.

No. With a Living Trust you can spend your assets, and therefore your creditors can reach these assets as well. The purpose of a Living Trust is to avoid probate and minimize taxes, not to avoid paying debts.

Good question, but hard to answer.

When I was about seventeen, I changed the oil on my car for the first time. Unfortunately, I didn’t know that you have to check to be sure the old rubber gasket is off before screwing on the new oil filter (you mechanical types will know what I mean). Well, the oil leaked out while driving on the freeway, and $1,200 later, I learned a valuable lesson: “Do it yourself is great…but only if you know what you are doing”.

I caution anyone doing their own Living Trust (or any legal document) to be sure they are absolutely certain that they know what they are doing. Do not rely on the do-it-yourself books and software. Often they are not California specific nor up to date, and even if they are, there is no such thing as one-size-fits-all Estate Planning. They often fail to address trust funding (meaning that your trust is an empty, useless shell).

You are unique, and your Estate Plan must address your specific needs, desires, assets, family dynamics, tax situation, etc.

Finally, watch out for the trust mills. These are companies that are, quite frankly, usually practicing law without a license. They are often one step ahead of the Attorney General and County District Attorneys.

Trust mills are usually telemarketers who contact you by phone, send a representative to your house, and sell you a package that includes some off-the-shelf legal documents as well as a variety of financial and insurance products. In fact, they are generally even more expensive than a local attorney!

You use a local doctor, a local dentist, a local CPA. Use a local lawyer as well. Don’t trust your family’s future to a 1-800 number or a website!