Part of setting up a revocable living trust is appointing a trustee, bank, or trust company to manage the estate assets (bank account, personal property, real property) of the grantor. Drafting this estate plan determines how property in trust of a decedent shall be managed after death. Since the assets of the deceased person are owned by the trust, beneficiaries need not go to court (probate court) and have their estate probated when they die. The probate process for transferring or distributing assets is complicated, and revocable trusts can help with avoiding probate.
While they are taxable, income from trust assets remains yours and is not transferred to any beneficiary of trust while you are still alive. You generally keep control of trust property with this legal document, which can be amended or revoked during your lifetime. Additionally, trustees appointed by creating a trust could manage financial affairs without the need for a durable power of attorney.
To an extent, establishing a trust can also help minimize estate taxes, particularly through a credit shelter trust that is established when you pass away. Such a credit shelter trust helps in reducing what is taxed for estates that exceed estate tax exclusions. Those who decide to have a trust also aim to protect assets that they have accumulated. A professional trustee you designate can manage your trust estate, limit withdrawals only to income and for emergency purposes, and make sure assets held in trust continue to grow even after you are deceased.
While the above illustrates why it is often a good idea to set up a trust, some people prefer to explore their options and see if there is an estate planning tool that better suits them. A reliable Calabasas estate planning attorney can help you look at how factors such as taxation and possible revocation can affect your decision.
As specified in relevant state law, a last will and testament is generally an estate planning document that allows you to spell out how your affairs are to be handled, and how your estate assets are distributed, when you die. Last wills and testaments, however, sometimes lead to disputes among the heirs you decided to appoint (or, in some instances, disinherit). A family member or business partner, for instance, could contest your will supposedly due to lack of testamentary capacity or undue influence.
In contrast, when you create a trust, you create a fiduciary relationship between a trustor and a trustee. The latter is granted the right to manage assets or property of another for the benefit of a third party. Creating a trust, however, is often costly.
Individuals who establish a trust get to control their assets, but this also implies that such should be actively managed throughout the remainder of your life. Under relevant trust law, in the absence of an estate-transfer plan, it is the state and federal government who will have one for you.
Trust documents essentially streamline the process of transferring estate property when you pass away. They provide better asset protection and can help your heirs avoid probate, which can be lengthy and costly. A revocable living trust can also give another person the authority to make decisions for you, in case you become incapacitated or disabled. Some would argue, however, that creating a will is a better option for deciding on the guardianship of minor children. In certain situations, such can better protect both the children and the inheritance involved.
Deciding on what estate planning documents you will opt for is, at the end of the day, a personal choice. Related expenses and ease of setting up are common factors that are considered, although benefits of each type are also looked upon closely.
Setting up a trust is not a simple task. Before proceeding, it helps to know how a living trust will be advantageous for your surviving spouse, children, grandchildren, or any trust beneficiary you designate.
For questions on a revocable or irrevocable living trust or the different types of trusts, consult with a professional from a reliable law firm. Call us at Moschetti Law Group for a consultation with an experienced estate planning attorney.