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Establishing a trust as part of a comprehensive estate plan

On Behalf of | Apr 20, 2020 | Estate Planning |

Estate planning can be complicated even if you already have a will. Those provide instructions for distributing property and assets after you die. But financial conditions and relationships can change over time. What if you want to manage them while you are still alive or reduce your tax liability after you are gone?

Trusts can help your heirs avoid probate and costly court proceedings. You can have more control over how to share your assets instead of leaving them to a judge’s discretion, which might not adhere to your wishes. They are valuable tools for overseeing properties spread out across multiple states and probate jurisdictions. And certain trusts are private enterprises, unlike wills, which are public documents courts review.

Defining trusts

The most common trusts in California are:

  • Revocable. Also called living or family trusts, a trust-maker can establish it while still alive and alter, transfer or revoke funds. Taxable until the trust maker’s death, when it becomes irrevocable and heirs inherit the property.
  • Irrevocable. The trust-maker typically cannot alter or revoke the terms after creating it. Defines assets and beneficiaries to guard against potential conflicts. Tax liability starts upon distribution.
  • Special needs. Invests assets to support physically and mentally disabled children long term. Protects personal injury settlements or inheritance from creditors or disqualifying them from receiving government benefits.
  • Charitable. Allows the donor to fund a specific charity or public entity during their lifetime and avoid costly estate or gift taxes upon death. Trust-makers can set a timeline for charities to draw interest from the gift and pass it down to heirs when it expires.

Trusts allow you to transfer several types of assets from bank, credit card accounts and stock portfolios to real estate, land and investment properties, life insurance, businesses, antiques and art. Each trust is unique and requires a trustee to manage the funds.

Prepare for when you are gone

Trusts are powerful tools to manage and protect assets, but they should be part of a comprehensive estate plan. A power of attorney to manage finances. Guardianship for minor children. An advance health-care directive to ensure quality of life. All of which allows you to better prepare for what will happen to your property when you are gone.

Take the time to investigate your options and simplify the legal complexities to design the best possible plan for you and your loved ones and provide yourself peace of mind.