While living trusts are a great estate planning tool, there are some misconceptions concerning California living trusts held by some people.  The following attempts to set the record straight.

Income Taxes: living trusts have no effect on the income taxes of the trust makers – the people creating the living trust.  Anyone who thinks otherwise is incorrect.

Medi-Cal Qualification:  A lot of people used to think that having a living trust would make it easier to qualify for Medi-Cal.  Not true.  In California it is of no benefit.

Protection from Lawsuits: A revocable living trust in California will not provide any protection from a lawsuit because the trust maker has complete control of the assets in the revocable living trust.  On the other hand, an irrevocable trust might!  The reason for that is that under an irrevocable trust the person who has set it up, has given up control of the asset.

Refinancing: In California, when people refinance their house, they are often required to sign a deed taking the home out of the trust.  This is fairly easy to do and usually the mortgage broker or lender will cause the paperwork to be prepared.  The problem comes after the refinancing is complete and the lender has failed to create a deed transferring the home back to the trust.  Now it is outside the trust and quite possibly is subject to probate.

Amending the Trust: People often want to change their trust.  This is fine as long as it is done properly.  Many people attempt to self-amend the document.  This can ultimately lead to problems as there may be a dispute as to what the amendment is attempting to accomplish and/or whether it was properly executed.  In California, it is best to go to an attorney and have the attorney prepare the amendment.

Most problems concerning living trusts are not really problems.  It is always best to speak with a qualified living trust attorney and if you live in the Los Angeles area it is very easy to find such an attorney.