Without knowledge of trust law, some people think that a last will and testament is the only estate planning tool that allows a deceased person to transfer or distribute estate assets. While drafting wills is indeed useful for naming heirs and transferring or distributing inheritance (to a surviving spouse, family member, or heirs), it is not the only way. Setting up a last will and testament has advantages and disadvantages. A competent estate planning lawyer can explain to you other estate planning documents.
Establishing a trust allows the grantor to determine how the property in trust shall be managed when you die. When you set up a trust, you appoint a specific trustee who will be managing and administering assets in a trust account. The trustee in a trust you set-up can be a loved one, a bank, or a trusted company. Grantors themselves can administer and be appointed as trustees.
After setting up a trust, estate assets are placed in the name of the trust. Under this estate plan, any bank account, personal property, real property, or investment held in trust is no longer owned by the grantor but owned by the trust.
In case you opt for a revocable trust, there are certain things you must consider. If you are acting as the initial trustee of a revocable living trust, you are tasked to manage, invest, and distribute assets only until the successor trustee you have named steps into the picture.
When you can no longer make decisions on your own
Before you pass away, a time might come when you can no longer manage, invest, or handle day-to-day tasks associated with the trust. Such ‘incapacity’ could be quite scary, especially because a lot of trust property is likely involved. Trust law takes this into account. If a reliable successor trustee has been assigned, the said person or entity can step in and continue to manage and invest the trust without court involvement. Note, however, that under relevant trust rules, even if you stop being a trustee, you continue to be a beneficiary of the trust.
When you die
A deceased person can no longer manage, invest, or distribute trust property. At this point, your successor trustee will be the one in charge of managing, investing, and using property held in trust for the beneficiaries of the trust. The successor trustee that grantors include in a trust will be able to carry out the wishes of the decedent without court involvement.
Whenever you want
Creating a trust is one thing, managing assets in the name of the trust is another. If you no longer want to be in charge of managing, investing, and transferring property in a trust, you may opt to resign. This means you are no longer the initial trustee and your successor steps in.
Another option is to have the successor trustee act as co-trustee. Allowing your successor to act and manage assets in a trust account while you are still alive and mentally aware enables you to see how much will be handled when you are deceased. If your trust documents will allow it and you still have the mental capacity to do so, you may fire your successor and appoint a new one. Remember that your successor must manage your assets for the benefit of trust beneficiaries.
A living trust is advantageous for your children, grandchildren, or any trust beneficiary. Under relevant state law, trust documents help avoid probate. If a decedent established a trust, assets of the deceased will no longer be brought to court and probated after death.
From the perspective of the one who creates a trust, it will be good to know that income from trust assets, though taxable, is yours throughout the remainder of your lifetime. Until you are deceased, none is transferred to any beneficiary of a trust who you decided to appoint, be it a surviving spouse or would-be heirs. Additionally, if you opted for revocable trusts, you have control over trust property and over the trust, which can be amended or revoked.
Before you create a trust, contact a Calabasas estate planning attorney from a law office that specializes in trusts and estates. Trust forms and the different types of trusts can be quite confusing. For questions on a revocable or irrevocable living trust, credit shelter trust, succession, or probate and estate taxes, contact our law firm. Call us at Moschetti Law Group for reliable estate planning services.