A Living Trust Lawyer Folsom CA Trusts Discusses Divorce and Revocable Trusts
A living trust lawyer Folsom CA residents trust from Yee Law Group, PC has helped many families prepare for their legacy to be passed on to future generations. A revocable trust – also referred to as a living trust – is a trust that allows the creator of the trust, known as a settlor, to place assets in the trust for the benefit of a beneficiary upon the settlor’s death, but has the right to revoke the trust at any time and put the property back into their own estate. Revocable trusts can be positive when someone is trying to avoid probate or keep any irresponsible beneficiaries from wasting trust assets.
However, as a member of our legal team can attest, a revocable trust can make a divorce case very complicated for the beneficiaries and settlers.
About Living Trusts
A trust is a way of keeping, overseeing, and distributing property. A living trust in particular is revocable, which means that the trustor has transferred assets into a living trust, and can obtain property back by revoking it. In the majority of living trusts that are established, the trustee, trustor, and beneficiary are the same individual. Living trusts can be a helpful tool in both estate and tax planning. The most common reasons for having a living trust are listed as follows:
- You own property in a different state
- You want to write other trusts within the living trust, so that court supervision is not required
- One or more of your beneficiaries are disabled, and you want to have funds set aside so that person has financial support
- You live in a state where probate is costly and time-consuming
- You want to plan just in case you become incapacitated and may be vulnerable to undue influence
The Probate Process
Probate is a court process that entails inheriting or transferring property, deciding if a will is valid, and resolving remaining debts of the deceased. As your CA living trust lawyer in Folsom may explain, property includes your cars, home, bank accounts, and anything else of monetary value. The court will supervise payment debts and then transfer property to beneficiaries. The probate court will appoint someone to act as the conversator, who manages the property and makes decisions about finances of the decedent.
Avoiding Probate Court
Your lawyer may advise that if you have significant assets upon your passing, your relatives will be better suited if you avoid your property from undergoing probate. In some states, probate can move quickly, but in others, the entire process can take up to a year or longer. Furthermore, probate can be expensive, and result in thousands of dollars in fees. In fact, because taxes on the estate are imposed during the transfer of assets during probate, this can cause up to 30%-50% taken out in fees from the property’s total value. But, the costs are lower if you utilize strategic estate planning tools that we provide at Yee Law Group, PC.
Additionally, probate is a public forum, so there will be records that can be viewed by anyone. Most families would prefer to have privacy in these types of matters, especially when in the midst of grief. If you want to learn more about how to avoid probate court for your loved ones in the future, call our law firm today.
Revocable Trusts in Beneficiary’s Divorce
When dealing with a divorce, every state has their own laws to divide the couple’s property. Most states do not allow the courts to divide any property that one party received as a gift or an inheritance. The beneficiary of a revocable trust has no legal rights to the trust principal or income because the settlor is able to revoke the trust at any time. Because of this, there is nothing for the family court to divide during a divorce. A revocable trust is seen as a beneficial way for a settlor to keep an ex-spouse of a beneficiary from receiving any income or trust assets, specifically in states where gifts and inheritances are able to be divided in a divorce.
Revocable Trusts in Settlor’s Divorce
A settlor is always able to revoke the trust and take back any assets. Because of this, those assets are able to be divided by the court if the settlor is going through a divorce. The legal title to the property in the trust may lie with the trustee, the right to take back all of the property and reclaim ownership has an actual value. If the trust was funded by the settlor using separate property while in an area that allows for separate property, the right to revoke the trust would also be viewed as separate. If the settlor is located in a state that allows for inherited or gifted property to be divided, having assets in a revocable trust will not prevent the court from dividing the property.
Income from a Revocable Trust in a Divorce
If a beneficiary receives income from a court, it is common that it can be used to calculate child support depending on the specific guidelines set by the state. Child support guidelines take into consideration all the different sources a parent receives income, which include a revocable trust. The revocable trust income can also be used to determine if the beneficiary needs to pay or receive alimony.
Irrevocable vs. Revocable Trusts
The settlor does not have any power over the trust assets in an irrevocable trust. In irrevocable trusts, the beneficiary has a type of entitlement to the trust property and income. During a divorce, an irrevocable trust will not be viewed as the settlor’s property in their divorce. Because the beneficiary is entitled to receive something from the trust, the beneficiary could lose some or all of their entitlement throughout a divorce case that does not acknowledge separate property.
For more details about how trusts can be a useful tool in your estate plans, contact a living trust lawyer in Folsom, California from Yee Law Group, PC to find out how we can help.