Pros and Cons of Revocable Living Trusts

San Diego Estate Planning Lawyer Explains

Video Transcript:

Vinny Casiano: 

Most people do not understand all the different things that they should be considering when they are going to draft an estate plan.

Molly Hendrickson: 

What is a revocable living trust? And what are the advantages? We're speaking with Attorney Vinny Casiano about that on today's Ask the Lawyer. Vinny, thanks for joining us.

Vinny Casiano: 

Always great to be with you, Molly.

Molly Hendrickson: 

One aspect of your practice, besides litigating probate and trust disputes is estate planning. Can you talk to us about your work and drafting trust documentation for your clients?

Vinny Casiano: 

Absolutely, I've had a, over 20 plus year career, and I started off drafting estate plans. And, at this point, I have literally drafted thousands and thousands of estate planning documents, from really simple documents to some somewhat complex documents, for multi-million dollar estates. And I believe that certainly has made me better at understanding what the responsibilities of various individuals in the lifecycle of a trust are the trustees, what are the rights of the beneficiary, so I can litigate these things. But having a quality and comprehensive drafted estate planning can actually avoid the disputes. And it's really, really essential. Most people do not understand all the different things that they should be considering when they are going to draft an estate plan. A lot of times they'll get a phone call, how much do you charge for a trust? And I say to those people, I have no idea how much I will charge you for a trust, 'cause I don't have one button that I push on my computer, and boom, it pops up a trust. There are so many different things you have to consider in that.

Molly Hendrickson: 

Although that button would be nice. Can you talk a little bit about what a revocable living trust is, and who might wanna consider this when doing some estate planning?

Vinny Casiano: 

Sure. A revocable living trust is the backbone of most estate planning documents for the 99% of the population. The reason why we use revocable... We use trusts or revocable living trusts in California, is because our probate system is so onerous, so burdensome, so time consuming, so expensive, that most people want to avoid the probate system. And in order to do that, the best way to do it is to take it... Create a trust that is comprehensive, has a whole bunch of provisions that will deal with lots of contingencies while you're alive. And then how the property is going to be dealt... How it's gonna be managed, first of all, while you're alive, how it's gonna be managed, once you die, and how it's going to be distributed out to the people that you love, your beneficiaries.

Molly Hendrickson: 

So what are some of the advantages of a revocable living trust?

Vinny Casiano: 

Well, as I said, one of the main advantages is the fact that it avoids probate. But that's when you die. But just as importantly, it nominates the person that you trust the best to serve as the person that's gonna manage the assets in your trust, everything in there if you become incapacitated, and I speak a lot of people I speak to, they're like, they're all thinking, "Oh, that's not going to happen to me." But I'll tell you, Molly, the bottom line here is the vast majority of us are going to live long enough, where we can't manage our stuff anymore, where we are subject to undue influence from unscrupulous individuals. So we need to make sure that we've appointed and that somebody is willing to serve the right to take over this role to manage our property and make sure that that property is being used for us while we're alive.

Molly Hendrickson: 

Yeah. It's something a lot of us don't wanna think about. What are some of the disadvantages of a revocable living trust?

Vinny Casiano: 

Well, the disadvantages of a revocable living trust are more in the fact that it's not a probate. So there are no court proceedings that are required. So a lot of trustees don't follow the rules. They don't give out information. People don't understand what their rights are. Even though there's laws that are supposed to be followed, notices that are supposed to be... Supposed to go out. But if you got this notice, you're not gonna understand what it means, you really need to consult with a lawyer at that point to figure out what are my rights. What can I say? One of the common complaints I get from people all the time when they get a notice somebody's passed away the trust becomes irrevocable, or in this case now in California when the people that created the trust are incompetent.

Vinny Casiano: 

There's also a notice that has to go out at this point. They look at this notice and it's a bunch of legal mumbo jumbo. That's what I call job security, by the way. [chuckle] They don't understand what it means. What are their rights. So what do they do? They call up the lawyer that sent it say, "Hey, lawyer from my brother, my cousin, my uncle, whoever you are, right? I just got this. Could you explain this to me?" And they say, "I'm sorry, didn't you see that sentence at the end of it? I can't give you any advice. I'm not your attorney." "What do you mean, aren't you the attorney for the trust? I'm a beneficiary." That's not the way it works. They have to get their own counsel to basically explain things. And this doesn't mean that anything wrong has gone on. It's just that you wanna make sure that things are being done the right way. The trust needs to be analyzed, what's supposed to happen, needs to be determined. And then you certainly, I don't wanna say hold the trustees feet to the fire, you just wanna make sure they're doing things right.

Vinny Casiano: 

And that usually does require the advice and counsel of an attorney. But people generally do not wanna spend money. "Why should I have to spend money on this?" Well, they wait, they wait, they wait until now there's a big dispute. And then obviously, some things that might have been able to be worked out are not done, because people didn't get the advice they needed early, soon enough, early enough. And they're also I just have to say this, Molly, there is a 120-day statute of limitations. When you get that notice that if you don't file an objection with the court, you're done. I mean, so if it's a fraudulent signature on the trust, if there were amendments done, where the... Say a parent was unduly influenced and changed everything, you have 120 days from the date the notice was mailed, not when you receive it, to file an objection with the courts, or you are dead in the water.

Molly Hendrickson: 

Procrastination, not your friend in these cases. Vinny, if someone was looking for immediate tax benefits, or asset protection, what types of trusts might work better for them?

Vinny Casiano: 

Well, certainly a revocable living trust, a lot of people think that it protects their assets, it does not. You need to create irrevocable trusts. And California is not a state that is very amenable to these types of trust. So a lot of times you need to go to a different state to form a trust. And one of the biggest things about this is you need to give up control, you need to have a trustee other than yourself, if you're creating it to be the trustee. And then at that point it becomes very expensive. So, in my opinion, you need to have millions of dollars before it makes any sense to create an asset protection trust, the way you can create asset protection though, is by if you have a business incorporating. And even before that, you have insurance, that's going to cover liabilities, and you have umbrella policy so that if anything happened, you would be covered for the liability that would occur.

Vinny Casiano: 

But trying to protect your assets, so you don't have to pay creditors, that is certainly not gonna work and trying to protect your assets, so you don't have to pay taxes. Well, anybody that believes that is kind of out of their mind. One thing I wanna add though, is that once that trust becomes irrevocable, once mom and dad, let's talk about, regular trust, once that grantor, the person who creates it dies, and it's going to go to the next generation, the beneficiaries. There can be provisions that are put into that trust, that will protect the assets for the beneficiaries. That's because it's not their money, they're not taking their own money and putting it in the trust, it's being given to them. And there's no obligation for that person to give it to them. So the person that gives it to them, like I said, mom and dad, whoever the trust door is, can put provisions in trust created for those beneficiaries, that will give a certain degree of asset protection. And I always recommend that my clients do that.

Molly Hendrickson: 

So how does somebody know and understand their options when it comes to estate planning, and you kind of touched on this, but how important is an attorney in these types of situations?

Vinny Casiano: 

Well, obviously, not to sound self-serving, but it's absolutely essential, you are out of your mind, okay, if you're not going to get an attorney involved, that's going to explain to you these different concepts, give you the options, you then decide what you want to include what you don't wanna include. It is critical. I'll be honest with you, in the trust and estate, the litigation that I get involved in. I can't tell you how many people have tried to create their own documents or tried to amend the trust that was done by an attorney, they use Legal Zoom or Rocket Lawyer or trust in the States because they don't wanna pay, the fees of an attorney. And it's sometimes they're not even valid. They weren't signed right, they're including provisions that don't make any sense. And it just creates a huge, huge problem. And to me it's actually insanity, in California you have a house, nobody blinks an eye, at paying a realtor $50,000 to sell their house. Right that's what you're gonna pay. But oh my God, pay $5000 or $6,000 to create a comprehensive estate plan, that's gonna deal with your property and your incapacity and when you die, "Oh no, we're not gonna pay that." It doesn't make any sense.

Molly Hendrickson: 

Vinny, always a pleasure to talk to you.

Vinny Casiano: 

My pleasure.

Molly Hendrickson: 

And that's gonna do it for this episode of Ask the Lawyer. My guest has been Vinny Casiano. If you wanna ask him about your situation, you can call the number on your screen. Thanks for watching. I'm Molly Hendrickson for Ask the Lawyers.

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