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Benefits of a Trust for Single Individuals
The Advantages of a Living Trust for a Single California
Resident
Even without children or a spouse, there are still reasons for
a single person who lives in California to establish a living
trust. While their trusts don't enjoy the same tax benefits
of one established by a couple, their estate can still avoid
probate. If a single person has a living trust and becomes incapacitated,
the trust helps avoid a conservatorship of the estate.
The federal government has established the United States
Estate Tax, often referred to as a "death tax,"
which is based on the assets someone owns at the time of his
or her death. Depending on the year of death, each individual
can have up to a $3,500,000 exemption, reverting to a $1,000,000
exemption in 2011. While married couples may pass any amount
of assets to a surviving spouse who is a US citizen, all assets
passed to a qualified charity by anyone are also exempt. Amounts
exceeding the exemption are subject to the estate tax at a
rate of 46-55%.
Unlike a living trust established by a
couple, the federal government taxes all of the assets
in a trust created by a single person. A living trust
that was established by a single person has no affect
on the estate tax, and neither eliminates or reduces those
taxes. While all assets owned by a single person, both
inside and outside the trust, are subject to federal taxes,
the State of California has abolished the California Inheritance
Tax.
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The legal proceeding where a will is validated and where the
person or persons who are to receive the assets are designated
is known as probate. No one welcomes this process, which can
take nine to eighteen months to resolve. In probate,
the court will appoint an executor to administer the estate
and handle its assets. Both this executor and the attorney will
receive a fee based on a percentage of the assets. The fees
are set by law and typically run 5-6% of the estate's assets.
Probate can be avoided by holding the assets in joint tenancy,
which allows the assets to pass to the survivor without any
legal procedures. While this is effective for husband and
wife, difficulties can arise when assets are put into joint
tenancy with other people, including with children. Any assets
held in joint tenancy are available to creditors if any member
of the joint tenancy defaults on his or her debts, files bankruptcy,
or becomes the defendant in a lawsuit. Assets, however, may
be added as a gift to existing joint tenancy accounts.
| Probate can also be avoided by establishing
a living trust, even if the trust is created by a single
person. The trust specifies in a written agreement a trustee
who will receive the assets, so there's no need for the
probate process. The assets will be controlled by the
trustee in accordance with the written trust document
until the trust terminates. The trust may continue even
after the person who established it dies, and a new trustee
is named if the trustee dies. When the creator of a living
trust dies, probate and its associated problems are entirely
avoided. |
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Another legal proceeding, a conservatorship, frequently occurs
when someone becomes incapacitated and when all of that person's
assets are held in his or her name. Conservatorship is much
like probate with the appointment of a trustee and associated
court and attorney costs, but isn't triggered
by death.
Conservatorship is eliminated by a living trust, just like probate.
In the event of incapacity, the court does not get involved
since the trust's assets are managed by a trustee. A new trustee,
named in the trust, takes over if the trustee becomes incapacitated. THE MAMOLA LAW FIRM, APC is conveniently located throughout Orange County. For additional information, please contact us at (949) 333-6543.
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| CAUTION: This website is to provide visitors with basic information.
Every legal situation is different, and no information on this website
is to be construed as legal advice on any specific question. Additionally,
the information on this website is for informational purposes, no
warranty is made as to the accuracy of any information contained therein,
or its applicability to any particular situation. This website must
not be used as a substitute for legal advice from qualified lawyer
or legal counsel. No attorney & client relationship or privilege
is formed by visiting this site or by sending my office any unsolicited
e-mail. Therefore, initial emails must not contain any confidential
information. I may already represent parties adverse to you and cannot
advise or represent you until I check for conflicts. I am licensed
only in California, and may offer my services only to those residing
or doing business in California, unless associated with local counsel
or lawyer in accordance with other states' laws. The Mamola Law Firm, APC is not currently licensed to practice in the
State of Nevada.
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