Trusts are an important part of most California estate plans and are used more commonly nowadays than wills. A trust can ensure a smooth transfer of property outside of court and legal proceedings. There are various types of trusts but a revocable trust is one of the most common types used due to its flexibility and ease of setup.
With a trust, you are able to direct how your assets are distributed after your death similarly to what a will does but with certain benefits not afforded by a will. Remember a trust can only control property that is owned by the trust and administered by the trustee, so any assets that have not been transferred to the trust at the time of your death may not be included. To avoid that, you should have a pour-over will to posthumously transfer any of your remaining assets into your trust. As an experienced estate planning attorney, Andrew Fesler will make sure you have a pour-over will to work with your trust.
Usually, the top reason why trusts are popular and commonly included in an estate plan is a trust can help you avoid probate. Probate is a process by which the court makes sure your assets are distributed according to your last will and testament. But it is often lengthy, expensive, and stressful for your beneficiaries as they have to wait to get their inheritance. This can be very problematic if they really need the assets to survive financially.
A trust allows assets to transfer smoothly to designated beneficiaries. A trust allows you to decide how your hard-earned assets are distributed after you are gone. You decide your beneficiaries but can also instruct when and in what amounts assets are distributed. For example, you may want to specify that your son or daughter receives a certain amount of money when they graduate college and then another amount when they reach a certain age you deem mature enough to handle their financial wealth.
Finally, a trust keeps your information private. Since probate is a public process, anyone can access the information in your will. What your estate was valued at, what properties you owned, and who your beneficiaries are all private with a trust.
Because there are different types of trusts, it’s helpful to be familiar with some of the types of trusts that can be created such as:
Also sometimes referred to as a Living Trust, a Revocable Trust allows you, as the person who created the trust, to continually make changes to the terms of the trust as long as you are alive and mentally competent. It can be modified, changed, or terminated at any time without the approval of your beneficiary(ies).
The terms of your revocable trust can be changed depending entirely on your wishes, allowing greater flexibility in your estate planning. For example, if you have your spouse as a beneficiary and then get divorced, you can replace the beneficiary. You can also add and remove assets, add or remove other beneficiaries, change your trustee, and generally make any number of changes as needed at any time.
An irrevocable trust is by its very nature less flexible and cannot be modified or changed by you. Only your beneficiary can grant permission to change the trust. You revoke your rights to the trust when it is created. You may want an irrevocable trust to protect your assets from creditors, to minimize your estate taxes, or if your beneficiary is a recipient of government benefits like Medicaid which have strict limits on income.
Also sometimes referred to as “will trusts,” this type of trust does not go into effect until you, the creator of the trust, has passed away. It generally works with a last will and testament instructing your trustee to distribute the person’s assets to the beneficiaries as outlined in your will.
It should be noted here that testamentary trusts function in the state of California like irrevocable trusts; once activated, the terms and conditions of the trust cannot be altered or changed.
There are also Joint trusts where two people create the trust and in essence, share the control of the assets and terms of the trust.
Charitable Trusts are a way to leave funds or assets to aid an organization you admire. There are charitable lead trusts and charitable remainder trusts.
You can also establish a special needs trust to provide for your beneficiary who has medical or physical disabilities.
To learn about other types of trusts, consult with our office.
As you can see, a trust is an important part of a person’s estate plan, more common and useful than just a will. It has valuable benefits. If you are ready to create your trust and your estate plan, contact the Law Office of Andrew Fesler today