Personal Finance: Ask the Experts

Get advice on money matters from The Bee's Claudia Buck and a panel of local experts

November 5, 2012
Do I need a revocable trust?

Q: When is it best to have a trust set up? My assets are 4 cars, household goods (no house), under $100,000 in savings, and a FERS retirement account. What type of trust would you recommend, and how does one select a firm to set one up? Thank you. -- Scott, Ione, CA

A: Different types of trusts are used for different purposes, but for basic estate planning, most people use a revocable living trust (sometimes called a revocable inter vivos trust). This type of trust can be changed or revoked by the person creating it during his or her lifetime. After the creator's death, the trust becomes irrevocable and can no longer be changed. At that point, the assets held in the trust will be distributed in the manner provided by the trust itself. When you create a revocable living trust, it is very important to fund it by titling your assets in the name of the trust. Otherwise, court proceedings may be required at your death in order to move assets into it.

Revocable living trusts are typically used for the following reasons: (1) to avoid probate; (2) for privacy; (3) to plan for beneficiaries who need assistance managing their assets; and (4) for incapacity planning.

In California, no probate is required if a person's assets that are not otherwise handled (such as by beneficiary designations or joint accounts) do not exceed $150,000. Additionally, cars are not included in this amount.

In your case, your savings account and household goods are under the $150,000 limit. Provided that you remember to name beneficiaries (with alternates) on your FERS retirement account, your estate would not have to go through the full probate process, even without a revocable living trust in place. You could execute a will to set forth who should receive your assets, and a probate would not be required.

Another reason people like trusts, even if their estate would not require a probate, is that trusts are more private than probates. Probate proceedings are public, so anyone can find out about your estate plan and your assets. With a trust, the only people who receive a copy are your heirs, the beneficiaries of the trust, and the trustee.

People also use trusts if they have family member or other beneficiaries who need assistance in managing assets, including minor children, young adult children, or others who have difficulty managing money. You can name a trustee to manage the assets for them. There are other ways to accomplish this with smaller dollar amounts, however, such as custodial accounts or joint accounts.

Finally, revocable trusts are useful for incapacity planning. They provide a mechanism for you to name someone to assist you with your affairs over time, and then handle your affairs after your death.

If you are interested in setting up a trust, or if you would like to learn more about your options, I recommend consulting with an experienced estate planning attorney. If you haven't worked with an attorney before, ask trusted advisors, friends and family for referrals. Alternatively, the California State Bar provides a listing of licensed attorneys on their website, and you can search by location or practice area.

If you speak with a lawyer who is not taking new clients or whose fees are out of your price range, he or she may be able to give you a referral to another lawyer in the area. Your goal is to work with an attorney who is knowledgeable, competent, responsive and trustworthy.

Remember that you also need powers of attorney (for health care and for general financial matters) as part of a complete estate plan, in case you become incapacitated.

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Meet Our Financial Experts

Claudia Buck

Claudia Buck is The Sacramento Bee's personal finance columnist. Read all her columns here. Contact her at cbuck@sacbee.com

Terri Carpenter

Terri Carpenter offers advice on job hunting, retraining and career counseling. Carpenter works at Sacramento Works Inc., the career and job training arm of the Sacramento Employment and Training Agency (SETA). With 15 years in the field, she has hands-on experience with everyone from first-time job seekers to career professionals seeking advice after a layoff or looking for a mid-career change. Ask her a question.

Carlena Tapella

Carlena Tapella is a partner in the law firm of Webb & Tapella Law Corp. in Sacramento. The firm specializes in estate planning and probate, such as estates, trusts, conservatorships and litigation. She is a past president of the Sacramento County Bar Association's Estate Planning & Probate Section. Ask her a question.

Kimberly Foss

Kimberly Foss, certified financial planner, is the founder of Empyrion Wealth Management in Roseville. With nearly 30 years in the financial industry, her clients include women in transition, small business owners, retirees and "pre-retirees." Ask her a question.

Jesse Weller

Gregory Burke, a CPA and tax expert with John Waddell & Co. in Sacramento since 1984, worked as an IRS tax auditor for six years. He’s a past chairman of the California Society of CPAs. Ask him a question.

Daniel Tahara

Daniel Tahara takes your questions about California taxes. Tahara, a spokesman for the state Franchise Tax Board, has 10 years of experience as a tax auditor. Ask him a question.



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