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ONE of the most common estate planning strategies is to create a living trust. A living trust is a legal entity which owns property that is controlled by a trustee (usually the person who created the living trust).
After the trustee’s death, the trust distributes the property it owns quickly, directly and simply to the beneficiaries. The most important benefit of a living trust is the avoidance of probate.
In order to take advantage of the living trust benefits, personal and investment real estate deeds must be properly transferred to the living trust. If real estate is not transferred and retitled to show the legal name of the living trust, it will eventually have go through the costly and time consuming process of probate.
According to the State Bar of California, transferring title or ownership of real estate property to a living trust is a very crucial step in estate planning that, unfortunately, most people don’t do.
Although you do not need to transfer real estate held in "joint tenancy" or "tenancy by the entirety" because it automatically transfers to the other person if one owner dies, it may still be a good idea to transfer this type of property into a living trust. This is because both owners could pass away in a common disaster, or the surviving owner could forget to place the property into a living trust at a later time. You should read your home deed to determine how the property is owned.
Property that is of little value need not be placed in a living trust, because it may be exempt from probate or subject to a streamlined probate process. Other items that usually need not be included are:
• Personal Checking Accounts.
• Property that you buy or sell frequently: This is especially true if you do not expect to own the property when you die.
• Cars: Most cars are not terribly valuable and most insurance companies may be reluctant to insure a car owned by a trust. If, however, you do own a valuable car, it may make sense to check with your insurance company to see if it will insure cars owned by trusts.
• IRA’s, 401(k)’s, etc.: Technically, such accounts or funds cannot be owned by a trust. You can still avoid probate on these monies if you directly name a beneficiary to receive the funds in those accounts when you die.
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