Answers to Four Common Questions on Revocable and Irrevocable Living Trusts
By: Tilden Moschetti
A piece of advice commonly given to individuals is to avoid probate as much as possible. Setting up a trust that is properly funded can help with avoiding probate proceedings. They can also help lessen the chances of estate tax problems, and this is important since estate taxes are often quite significant. Generally, drafting and creating trust can also help make things simpler for both you, your family members, and other heirs. Given all these, it is very important to consult with a reliable Calabasas estate planning attorney who knows about trust administration to make sure things go as planned.
To a certain extent, trust documents can be seen as a book of instructions. It is a legal document that enables the trustor to instruct a trusted family member, loved one, or other entity on what you want to happen with your estate assets. The problem, however, is that not a lot of people are familiar with the twists and turns of proceeding with trust and estate planning.
This article will provide answers to four of the most commonly asked questions related to the topic. These are:
Why should I include trust documents in my estate planning options?
Living trusts and estates
Living trusts are estate planning documents that enable grantors to appoint trustees who shall manage and administer trust assets, before and when you die. In most cases, naming an initial and a successor trustee is ideal. These documents are the direct opposite of a testamentary trust, which is created through the last will and testament of the deceased person.
Trusts, in general, are used to make sure that the estate assets and the would-be inheritance of the surviving spouse, children, and grandchildren of the decedent will not be probated after death. This means that trust beneficiaries will have to worry about probate costs. An experienced Calabasas estate planning attorney can detail this to you.
Under relevant state law, there are several types of trusts that one can make use of as an estate planning tool. A grantor, or the individual establishing trust and appointing a trustee, may choose a revocable living trust for transferring and distributing property. As in above, beneficiaries of the trust can be spared from going through probate court when you pass away.
Under relevant trust law, a revocable living trust you create may be amended or revoked throughout the remainder of the time you are still alive. Future assets may be registered. Trust records and books may be adjusted when necessary. Such is applicable in case of a divorce, remarriage, or when a new child is born.
When you set up a trust that is revocable, an income of estate assets, although taxable, will not be transferred to any beneficiary of a trust during your lifetime. They remain yours until you die and your trust estate can keep on growing. Additionally, in case of incapacity, a trustee could make decisions for you even without a durable power of attorney.
When a person creates a trust that is irrevocable, any bank account, personal property, or real property held in trust is likewise transferred out of the name of the trustmaker. As in a revocable living trust, they are transferred into the name of the trust. One, however, generally cannot revoke such an estate planning document.
If you opt to establish an irrevocable trust, you will not be able to change, alter, or cancel it once it is set up. In addition to this, you will generally not be able to control what will happen to trust property.
When a living trust will be ideal
If you decide to create a revocable trust, a trust protector may be able to modify it if the original goals of the estate plan are no longer applicable to your circumstance. Meanwhile, if you created an irrevocable trust, there is increased asset protection for the property in trust accounts. This is especially true for those who wish to avoid dealing with creditors and creditor lawsuits. Under relevant trust rules, because accounts and property in a trust account are no longer included in one’s estate, your tax liability will likely be reduced.
At Moschetti Law Group, our practice serves the needs of Founders by providing real estate law and real estate syndication attorney services to Founders. Whether you are the Founder of a real estate empire or building a business and need assistance with purchase and sales, real estate transactions, or real estate litigation, we serve Los Angeles County, eastern Ventura County, and North Orange County from our office in Calabasas. We also have a primary focus on helping Real Estate Syndication Founders throughout the United States with forming their syndication, understanding crowdfunding, private placement memorandums, and operating agreements.