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5 Benefits of Living Trusts in California
When it comes to estate planning, you have many options. Most people know they probably need a will, but you might also consider trusts and other legal tools that help you leave a legacy while protecting your assets. One option to consider is a living trust.
What Is a Living Trust?
A living trust is a trust you create that goes into effect in your lifetime. You transfer the title of select assets to the trust. Typically, you will act as the Trustee of the Trust and will also be the Trust beneficiary. (You can still benefit from the assets if you are a trust beneficiary.) Upon your death, the assets in the trust are transferred to your heirs—how that happens depends in part on the provisions of the trust.
Is a Living Trust Revocable?
A living trust can be revocable. This means that you can revoke or change the trust during your lifetime. This type of trust doesn’t offer the same level of protection against creditors and other risks that an irrevocable trust might. This is because there is an understanding that you can make changes to the trust to ensure you have access to the assets in the future if you need them.
A trust can also be irrevocable, though. You choose the type of trust you want to create.
Potential Benefits of a Living Trust
Trusts can provide a variety of benefits depending on how you set them up. Some common reasons people choose to set up living trusts as part of their California estate planning are summarized below.
1. Probate Avoidance
Assets that are owned by a trust are not subject to estate administration. That means they do not have to go through probate when you pass away. This can make it easier for assets to pass to heirs or benefit your loved ones quickly. It can also cut down on the delay and costs associated with probate, which can be an expensive, drawn-out legal process.
2. Privacy
Because assets in trusts aren’t subjected to probate, they can be kept more confidential than assets that do go through the probate process. Probate is a public court proceeding. That means anyone can look up court documents about your estate’s probate to learn details such as how much your assets were worth and who received what type of assets. In addition to protecting your estate’s confidentiality, keeping matters more private could help protect your heirs at a time when they may be vulnerable due to grief.
3. Potential Tax Savings
By taking assets out of the ownership of your estate, you may be able to reduce burdens associated with estate taxes and other types of tax. This is an extremely complex intersection of tax law and financial management, however, so it’s important to talk to experienced professionals about your options. The California Attorney General’s office warns residents to be wary of so-called living trust mills and to work with reputable attorneys when setting up trusts for this reason and many others.
4. More Control of Assets
A living trust provides you with the ability to manage your assets (within the trust) during your lifetime and maintain some control of assets even afterward. You can set up a trust with specific provisions to help increase the chance that assets are used in a manner that is in keeping with your wishes.
For example, you might create provisions in a trust that allow assets to be used to cover beneficiaries’ educational expenses or require that someone reach a certain age before assets are distributed fully to them. As you begin to work on creating estate plans, consider what your future goals are for assets, your legacy, and providing for heirs. Talk to your lawyer about these goals and how best to support them with trusts and other tools.
5. Flexibility
A living trust can help you draw a good balance between meeting the desires and needs of today and creating some peace of mind for tomorrow. If you create a revocable trust, you can make changes as you go to best meet current and future needs.
Even if you create an irrevocable trust because you want the higher level of protection it offers, you can build in some flexibility. For example, you may name yourself beneficiary and ensure that the trust is set up to distribute the amount of money you need each year. Or you might set up a special real estate trust so that you are the beneficiary and can live in or use the home held in the trust during your life as you otherwise would.
In all these cases, when you pass away, the assets can pass on or benefit your heirs according to the trust mechanism.
Talk to an Estate Lawyer About Your Trust Options
Living trusts can be a good addition to a holistic approach to estate planning in California. A living trust can be the only trust you set up or one of several trusts, depending on your assets and goals. The first step to this type of proactive estate planning is speaking with an estate planning attorney about your options. Call Patricia Scott Law to get started. You can reach us at 510-694-1098.
