Do You Need a Living Trust? Estate Planning Mistakes

estateplanningIf you own real property or other assets, then quality estate planning is something you’ll benefit from. To ensure good estate planning you’ll need proper guidance from a San Diego lawyer to draft and implement your wishes. You’ll want someone who is experienced in:

  • Minimizing taxes.
  • Knowing how to avoid probate.
  • Is able to prevent the courts from taking control of all assets upon your death, or if you should become incapable of handling your own affairs.

Implementing an estate plan is not difficult, but it is very easy to make major mistakes when attempting to do it yourself. The most common is not creating a “Living Trust” until it’s too late. Below we’ll look at some of the major mistakes than can be made.


Making assumptions which are not accurate may cause people to think that having a living trust is unnecessary. People sometimes believe that, because their children are on the deed of a property or are a joint tenant, they can avoid having to go through probate. This leaves your estate open to problems of creditors using your home as a way to recover a child’s debt, making it part of a bankruptcy proceeding and making it part of a divorce or part of a lawsuit. It also puts your family at risk of losing their stepped-up cost benefit after your death, which could lead to capital gains taxes which could otherwise be avoided.

A Will is Not a Living Trust

LIVINGWILLSMany believe that having a legal will is the same as having a living trust. It’s important to know that wills are subject to probate, whereas a living trust is not. As well, having a will provides no protections if you’re incapacitated for any length of time. If incapacitated, you will need a Power of Attorney given to a designated person, in order for them to handle your finances, property and necessary medical decisions. If this does not exist, then it may be necessary to have a conservatorship drawn up and overseen by the courts, which is expensive and complicated to arrange.

Don’t Try to Do It Yourself

Trying to save money by doing your own estate planning is a recipe for disaster. There’s a good reason lawyers go to school to understand this process. They are adept at helping clients avoid the mistakes which may lead to problems in the future. After your death these mistakes cannot be corrected, thereby putting your real wishes at risk. Living trusts need proper drafting, funding and attention to detail, that only a qualified estate planning attorney can provide. By doing it yourself, you’re putting your plan at risk of becoming worthless after your death.

An estate planning lawyer has a fiduciary duty to their clients to ensure that all documents have been properly prepared to protect the client. Using do-it-yourself online software or a paralegal service offers you no protection if mistakes are made. You’ll have no recourse if the documents are not correctly prepared. There will also be no further communication, which advises you of any changes in the law or of critical new legal developments in the future. Is this a risk you really want to take with your estate?

If you live in California you need to have documents that are specific to the laws and procedures of California. There is no such thing as a “one size fits all” when it comes to your estate planning. You need documents which address you and your family’s specific needs. With estates valued at a higher level than the threshold of estate tax exemptions, any omission of language specific details will result in payment of taxes which could have been avoided with proper estate planning.

For instance, many people do not know that the proceeds from life insurance are not subject to income tax, but can be subject to estate taxes. Understanding a small detail such as this is how an estate lawyer in California protects you.

How to Properly Fund a Living Trust

When your estate documents have been prepared and signed, they are still not complete. For these documents to be complete it’s necessary for assets to be transferred into the Living Trust. Without this being completed the plan is not valid. You need to ensure that the trust owns all financial assets, and that the trust is named as the primary beneficiary or as the contingent beneficiary in the case of deferred retirement accounts. It is very important that you fund the living trust with all:

  • Bank accounts.
  • Investment accounts.
  • Real estate holdings.
  • Business
  • Naming the insurance beneficiary to the trust.

If for any reason you need to transfer ownership of your property away from the trust for a temporary period of time, it’s important that your California estate planner know about this and for you to ensure the bank handles all the paperwork correctly and in a timely fashion. This often needs to occur when you are going to refinance a mortgage. If you hold property in a LLC it needs to be transferred to your living trust.

Choosing the Correct Type of Trust & Drafting Issues

OLYMPUS DIGITAL CAMERAIt’s important to understand the difference between specific gifts and the percentage being allocated to others. Leaving specific dollars designated to someone can result in funds not being available, or no longer existing at a later date. As well, specific properties may no longer exist or may be worth less than when the living trust was initially drafted. Using a percentage allocation helps resolve any issues later and avoid potential problems further down the road.

When drafting a living trust it’s important to designate how inherited assets in the living trust should be distributed, in the event that the beneficiary is deceased. As well, you may want to designate who should handle the distribution of assets in the case of heirs, who are not able to properly manage them or who are likely to squander the inheritance. In some cases you will want to protect a beneficiary from creditors who seek funds from and ex-spouse. You’ll also want to discuss with your estate planner how to handle choosing a trustee and a successor trustee, should the original trustee not be able to handle the duties of trustee.

Having an A/B split of the living trust may be necessary if a spouse dies, in order to reduce their exposure to estate taxes. When it comes to issues of estate taxes your estate planner will work to ensure you fully understand all the implications of taxes, and will show you ways to delay decisions being made until the surviving spouse is ready to deal with any situation that may arise.


Your California estate planner is a specialist in the handling of a living trust and will ensure that all issues are understood and resolved. With your input they’ll ensure it is properly drafted, funded and that you have notified beneficiaries or a successor trustee. The estate planner will ensure you have put the trust somewhere where it may be easily located as well as keeping a copy for you in the office. It’s important to have a very knowledgeable estate planner who will make sure that your wishes are taken care of.