Setting up a trust that is properly funded helps in avoiding probate proceedings (and one should avoid probate as much as possible) and estate tax problems (since estate taxes can be costly). Drafting and creating trust can also help provide organization and maintain control for both your heirs and yourself.
Proceeding with trust and estate planning is not as difficult as some people think. Trust documents, in a way, can be compared to a book of instructions. Think of it as a legal document that enables the trustor to tell a trusted family member or loved one what to do and when to do such.
These estate planning documents enable grantors to appoint trustees (naming an initial and a successor trustee is the norm) who shall manage and administer trust assets, before and when you die. The opposite of this is a testamentary trust, which is created through the last will and testament of the deceased person.
Keep in mind that estate assets and would-be inheritance that are still owned by the decedent (and not the trust) will generally be probated after death. This means that your supposed heirs and beneficiaries will have to worry about probate costs.
Under relevant state law, there are several types of trusts that one can make use of as an estate planning tool. A Calabasas estate planning attorney can explain this in detail to you. What this article will focus on, however, is when a grantor (the one establishing trust/appointing a trustee) should opt for a revocable or irrevocable living trust.
As in above, transferring and distributing property to beneficiaries of the trust can spare them from the probate court when you pass away. When you set up a revocable trust, 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.
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, like when a divorce takes place or a new child is born. 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 (an estate planning document which one cannot revoke), any bank account, personal property, or real property held in trust is also transferred out of the name of the trustmaker. As in a revocable living trust, they are transferred into the name of the trust.
However, if you decide 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, for trust beneficiaries to ‘fully’ benefit, you will generally not be able to control what will happen to trust property.
- Under relevant trust rules, your tax liability will likely be reduced. This is because accounts and property in a trust account are not included in one’s estate anymore.
- If you created an irrevocable trust, there is increased asset protection (from creditors and creditor lawsuits) for the property in the trust.
- If you decide to create a revocable trust, a trust protector may be able to modify it if a specific circumstance changes and the original goals of the estate plan become frustrated.
For an estate or trust legal matters or questions on living wills and trusts, contact a competent law firm in California specializing in estate administration. Call us at Moschetti Law Group and consult with a reliable Calabasas real estate planning attorney.