Trusts
A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries. Since trusts usually avoid probate, your beneficiaries may gain access to these assets quicker than they might to assets that are transferred using a will. Additionally, if it is an irrevocable trust, it may not be considered part of the taxable estate, so fewer taxes may be due upon your death. Assets in a trust may also be able to pass outside of probate, saving time, court fees, and potentially reducing estate taxes as well.
Why is a Trust Important?
Most people I work with set up estate plans that include a revocable living trust. The primary purpose of creating a trust is to avoid probate upon death. It also puts a plan in place in the event of disability, and provides for minor or incapacitated adult children.
Benefit of Having a Trust
During your lifetime, a trust exists to benefit you. You are the Trustor, the party that has the assets; you are the Trustee, the party who manages and administers the trust, and you are the Beneficiary, the party that benefits from the trust. You can amend the trust at any time during your lifetime, as long as you have mental capacity. You name the persons who will benefit / inherit from the trust at your death. As well as naming you name Successor Trustees to follow you and settle the estate at your death, or step in and manage your assets upon your incapacity.
Risks of Not Having a Trust
A trust helps prevent your loved ones from having to deal with the probate court system, which can include added costs and delays. Plus, you can avoid multistate probate if you own property in another state. Probate court records are public records, which means that anyone can access your will. A living trust helps keep your personal matters private. Bank accounts can also be frozen until their new ownership is settled. A living trust helps ensure your accounts are available to those you designate with less interruption.
Options for Executing a Trust
There are several common options for setting up a trust in California. Here are a few:
Revocable Living Trust: This type of trust allows the person who creates it (the "grantor") to maintain control over the assets in the trust during their lifetime and make changes or revoke the trust if they wish.
Irrevocable Trust: An irrevocable trust cannot be changed or revoked by the grantor once it is established. This type of trust is often used for estate planning purposes, such as to minimize estate taxes or protect assets from creditors.
Testamentary Trust: This type of trust is created through a will and only takes effect after the grantor's death. The assets are transferred to the trust at that time and are distributed according to the terms of the trust.
It is important to consult with a qualified estate planning attorney to determine which type of trust is best for your individual needs and circumstances.
Cost of Setting Up a Trust
The cost of setting up a trust in California can vary depending on several factors, including the type of trust, the complexity of the estate plan, and the attorney or professional you work with.
Generally, the cost of setting up a trust in California can range from a few hundred to several thousand dollars. For example, a simple revocable living trust may cost around $1,500-$3,000, while a more complex trust that includes tax planning or specialized provisions may cost several thousand dollars or more.
Additionally, there may be ongoing costs associated with maintaining and administering the trust, such as trustee fees, accounting fees, and tax preparation fees.
It's important to work with a qualified estate planning attorney or professional who can provide an estimate of the costs involved in setting up and administering a trust based on your specific needs and circumstances.