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Do You Have a Revocable Trust?

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Let’s face it, estate planning is not necessarily fun, but it is definitely critical, especially as you get older and acquire more assets. Fun or not, I urge all Santa Barbara homeowners to consider preparing a revocable trust if they don’t already have one.

READ: Aging at Home in Santa Barbara

The reason is simple. Clients return to me all the time asking to list a property that was left to them by a deceased loved one. In working with these clients, I’ve found that the majority of people in the upscale communities of Santa Barbara have a trust; but many neglect to actually place their assets into it. This can cause your loved ones months to years of unnecessary grief when the property goes to probate.

The Difference Between a Will and a Trust

A revocable trust is essentially a will replacement. That is why I recommend my discerning clients prepare a revocable trust or living trust because of the benefits it provides. Rather than directing assets toward the court system for probate administration — as is the case for wills — assets are directed to a private entity, called a trust. A revocable trust is just that: revocable. A revocable trust is flexible and can be changed or modified at any time during the lifetime of the trust’s creator.

READ: Downsizing Your Home: 5 Signs It Might Be Time

Revocable trusts should not be confused with irrevocable trusts, which are generally used to remove assets from an estate, often for tax purposes. Think life insurance policies or shares of family businesses.

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Revocable Trust Advantages

There are many advantages when it comes to having a revocable trust. Here are the top 4:

  • No Probate Court
    Skipping the probate court process is the number one benefit. Probate is the administrative court proceeding where your personal representative is appointed and the payment of debts and distribution of assets is supervised, generally by a judge. Probate can be time-consuming, cumbersome, public and quite expensive.

    By placing assets, such as a home, cabin or business interest in a revocable trust, or by naming the trust as the beneficiary on non-probate accounts, such as life insurance or brokerage accounts, your assets will be distributed according to your wishes, free from court supervision.

READ: Moving to a New Home: 6 Considerations for Families

  • Avoid Conservatorship
    Another great benefit a revocable trust provides is protection from going to court for control over your finances if you become mentally or physically incapacitated and incapable of taking care of yourself and/or your finances.Top of Form

    When you create a revocable trust with your spouse or partner, he or she has the authority over all the trust property. And, if you’ve made an individual trust, your successor trustee will step in and manage the trust property if you become incapacitated.

  • Flexibility
    As I stated above, revocable trusts are flexible, allowing you to make changes or amendments up until your death. Along with amending it, you can also name unrelated, out-of-town individuals to act as the administrator; something that can be pretty cumbersome with a will.

  • Privacy
    A revocable trust is not made public upon your death, and your estate will be distributed in private. It also allows money to be available immediately after death. The trustee will be able to use the money to pay for estate taxes, administrative expenses and debts.

Revocable Trust Disadvantages

On the other hand, you might want to discuss the following 3 disadvantages with your attorney or tax consultant:

  • No tax benefits
    Revocable trusts are not tax shelters and provide no tax benefits. What’s more, not every type of asset you own qualifies for inclusion in a revocable trust. Most notably, individual retirement accounts (IRAs) and other qualified retirement accounts cannot be placed into your trust. Trust planning for retirement accounts must be done very carefully. Failure to do so can create adverse tax consequences.

READ: Capital Gains Tax: 3 Dreaded Words When Selling Your Home

  • Retitling
    You must retitle all of your assets that are to be held in the revocable trust. While this can be time-consuming, it is the only way to reap the benefits of this type of trust. If you choose not to retitle an asset or you forget about one, it will fall outside the trust and will be handled separately.

  • Heirs have longer to contest a trust
    If heirs want to contest a will, most states have specific statutes that dictate who can challenge a will and for how long. This time period can be as little as 30 to 90 days. If your heirs want to contest a revocable trust, however, they typically have longer than three months or longer to do so.

Consult Your Attorney to Decide

Is a revocable trust the right estate planning vehicle for you? The best way to determine the answer to that question is to speak with an estate planning attorney about your situation. Your attorney will help set up your estate properly in order to take care of the people you love once you are gone. And while it is no fun to think about planning for your passing, planning who will get your assets and how will give you — and your loved ones — peace of mind.

Meanwhile, if you’re looking for a new property to add to your revocable trust in Santa Barbara, Montecito and Hope Ranch, I’ll be happy to help. Just check out my website. See something you like? Call me at (805) 886-9378 or email me at and allow me to do the rest. Once the transaction is complete, you can have the property added to your revocable trust and rest in the knowledge that your heirs will be protected.



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