People who are estate planning may want to place some of their assets in trust. Starting a trust as part of your estate plan has several potential benefits, including simpler estate administration after your passing, protection of assets, and providing for loved ones in the long term. A trust may be a great way to meet your estate planning goals.
What Is a Trust?
A trust is an estate planning tool by which you appoint a trustee to manage various assets that you place in trust for the benefit of people you choose. These people are called the trust beneficiaries. A legal document that you sign describes who the trustee will be, how you want the trust assets to be managed and distributed, and who you want to be trust beneficiaries.
Probate and Estate Administration
After someone passes away, often his or her will needs to be reviewed by the probate court before the appointed executor can distribute the deceased person’s assets to the heirs. Trusts come in handy for estate administration purposes because assets placed in trust do not go through probate. Instead, these assets are already part of the trust, and the trustee continues to manage the assets and distribute them to beneficiaries as stated in the trust document. If the deceased person was the trustee, then a successor trustee will take over management duties. Staying out of probate court by using a trust eases the financial and time burden on surviving relatives.
Placing Assets in Trust
When you place assets in trust, you no longer own the assets. Instead, the trustee manages the assets for the beneficiaries’ future benefit. Because you do not own the trust assets and because trusts are taxed differently than individuals, you and your estate may realize some tax benefits.
If you wish to retain control over assets during your lifetime, you can start a revocable trust with yourself as trustee. This type of trust permits the settlor (you) to make changes to trust property and the trust document during your lifetime. After you pass away, a successor trustee takes over. If you choose an irrevocable trust instead, you cannot make changes to the trust. Once you place property in trust, you lose all control over it. For some people, an irrevocable trust may have advantages over a revocable one.
Providing for Loved Ones
Trusts allow you to provide for loved ones in the long term. You can specify in a trust document how the trustee should make distributions to beneficiaries. These distributions come from either the interest and profits on trust assets or from the assets themselves. For example, you could tell the trustee to make monthly payments of the interest earned on money in the trust to your children until they turn 21 years old. Even if you pass away, the trustee should continue making these payments until the trust document says to stop or until the trust runs out of money. In this way, you can ensure that you take care of your loved ones for years to come.
Curious about starting a trust as part of your estate plan? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience and her certification as a California estate planning and probate specialist by the California State Bar Board of Legal Specialization will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.