Estate planning can feel like a monumental task, but it is a crucial one. Some people aren’t sure where to start or what is needed given their financial and familial situations. If you have a fair number of assets and have specific instructions on how you’d like those assets dispersed after your death, establishing a trust is an important step in your estate planning journey.
There are many different types of trusts, but each type has the same main purpose: allowing people to control how their property and assets are managed and dispersed after their death. Creating a trust allows a living person to put their assets and property into a “trust” where they can still manage and make decisions about what is in the trust while they are alive, without the assets technically being in their name. This allows beneficiaries to bypass the probate process after their loved one dies.
Establishing a trust involves three parties. First is the guarantor, or trustor, who creates the trust and puts their assets into the trust. Second is the trustee who is chosen to manage the property in the trust. Often with a living trust, the guarantor will list themselves as the trustee while they are living and then designate another trustee to take over once they pass away. The third party is the beneficiaries or the people who will eventually be given the assets from the trust.
Creating a living trust has several benefits both for the person creating the trust and the beneficiaries of the trust:
If you are considering making a trust, a great place to start the process is by contacting an experienced California estate planning attorney. They can guide you through the process to ensure it is completed correctly to avoid any headaches for you or the trust’s beneficiaries down the road. Details of creating the trust can vary depending on which type you choose and your specific assets, but the process will generally involve:
The creator of the trust can specify an ending date of the trust or note that the trust will end when the conditions of the trust are met. A trust may be set to end once all of the assets are dispersed, for example. If an end date is indicated and there are still assets in the trust, the trustee and beneficiaries can work together to determine how the trust should be handled.
Choosing a trustee is an important decision, as this person should be trustworthy and responsible. There are no requirements for a trustee to have a legal or financial background, but it could be wise to choose someone with these traits to ensure your trust is well managed. Many people choose a close friend or family member, lawyer, accountant, or corporate trustee to manage and carry out the terms of the trust.
Trust litigation can occur for a few different reasons. One way to potentially avoid disputes or litigation is to work with an attorney when creating your trust to ensure it is legally sound and filed appropriately. Disputes could occur if fraud or wrongdoing is suspected, such as if a person believes the trustor was coerced into creating or altering the trust. Trustee wrongdoing can lead to disputes as well, which is why it is important to choose a responsible trustee. Additionally, it is wise to consider choosing a trustee who is not also a beneficiary to avoid the temptation of them acting unfairly to benefit themselves.
In many cases, you may want to have both a will and a trust, as a trust cannot cover all of the decisions that may need to be made after your death. For example, guardianship is not outlined in a trust, so if you have minor children, it is important to have a will to outline whom you wish their guardian to be. Trusts also likely won’t cover every single asset in your name, as you could make a purchase late in life that doesn’t get transferred to the trust before death. Creating a will can allow you to make a blanket statement about whom you want to have your remaining assets.
Creating a living trust can be an overwhelming and complicated process. These decisions are important and impact your loved ones for years to come. At the Estate Preservation Group, our experienced estate planning attorneys regularly help Carlsbad residents with all of their estate planning matters, including creating trusts. Contact us today to learn how we can help.
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