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Horizon Elder Law & Estate Planning Blog

Monday, May 31, 2021

A Beginner's Guide to Living Trusts

Estate planning may include numerous documents to protect your assets and your loved ones. You may have a Last Will and Testament, but you may also have one or more trust agreements. Trusts are common estate planning documents.

There are many types of trusts you may choose from based on your needs. A California living trust attorney can help you identify your goals and needs and choose the trust agreement that is best for your situation.

Benefits of Using Trust Agreements During Estate Planning

Trust agreements may offer many advantages over other forms of estate planning. Some benefits of trust agreements include:

  • Allow for more flexibility during estate planning
  • Can avoid the probate process for most assets
  • Allows you to keep details of your finances and inheritance private (the probate process is public)
  • May decrease inheritance taxes and provide other tax benefits
  • Protect property during and after your death from creditors and others
  • Allows you to set specific parameters for the use of inheritance
  • Avoids the need for a conservator for the property included in the trust if you become incapacitated
  • Could reduce the risk of a court challenge for your estate

Before you sign and fund a trust, there are many things to consider. The type of trust is an important consideration. The type of trust you choose may limit what you can accomplish. You need to choose a trust agreement to use based on your goals and needs.

What Is a California Living Trust?

There are many different types of trust agreements. Some trusts may not take effect until after your death, such as a testamentary trust. Other trusts are used during your lifetime to manage and protect assets, such as a living trust.

A living trust is a written agreement that creates a legal entity. The trust may hold title to assets and manage those assets on behalf of the trust beneficiaries. The duties of the trustee and the trustee's authority are outlined in the trust. The trustee must follow the terms of the trustee when managing assets and distributing funds to beneficiaries.

The Grantor or Settlor (the person creating the trust) generally names themselves as the trustee. If the person becomes incapacitated, a successor trustee named in the trust agreement assumes responsibility for managing the trust. A living trust is one way to avoid a conservator if a person becomes incapacitated. However, all of the person's assets would need to be held by the trust. Assets outside of the trust would be managed by a power of attorney or a court-appointed conservator.

When the person dies, the trust assets are distributed to the beneficiaries according to the terms of the trust.

The Downside of Living Trusts

Living trusts may not provide complete protection of assets from creditors. If the living trust is revocable, meaning the person can dissolve the trust, the assets may not be protected fully from creditors' actions. On the other hand, if the person sets up an irrevocable trust, it could provide a higher level of asset protection, but the trust cannot be dissolved, and the trust terms may not be subject to change.

Living trusts may not provide the tax benefits that a person seeks. They may not be suitable for holding all types of assets. There could be other trust agreements that are better for those purposes.

Contact a California Estate Planning Attorney for More Information

When used correctly, living trusts can be a valuable tool for asset protection and estate planning. However, it is best to seek experienced legal counsel when setting up a trust agreement. Some actions you take may not be undone.

A California estate planning attorney can help you ensure that the type of trust and the terms of the trust meet your needs and goals. Get in touch with our office today.


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