Residents in the golden state enjoy a high quality of life, with access to a variety of outdoor activities, world-class healthcare, and one of the world’s strongest economies. But even the healthiest person needs to think about estate planning, and a
living trust
can be a key part. A living trust is an estate planning tool that provides a sturdy framework to manage and distribute assets while avoiding the probate process. Let's look at what a living trust is, how to create a trust in california, and the pros and cons of using a living trust for your estate plan.
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What Is a Living Trust?
One of the most common misconceptions about trusts is that they’re only for individuals of high net worth with substantial estates. While it is true that anyone with significant wealth should consider a trust, those of more modest means can benefit from asset protection and other features offered with a trust. There are two basic types of trusts: living and testamentary.
The former is so-named because it is set up while the creator, also known as the grantor, is still alive. Testamentary trusts are tied to the grantor’s will and do not take effect until the person dies. A living trust holds the grantor’s assets for their own benefit during their lifetime, then distributes them to designated beneficiaries by his or her chosen representative, called a “successor trustee.
Many people are under the misconception that estate planning is only for the wealthy. Not true. Regardless of your age or your wealth, it’s a particularly good idea to plan in advance on how to distribute your assets if you become incapacitated or after your death. Basic estate planning involves drafting a will which can include your assets and property as well as important decisions such as who will care for your minor children if something happens to you and your spouse. So, why consider a living trust as part of your estate plan? first of all, you should familiarize yourself with basics about living trusts.
How To Create a Living Trust
The trust itself owns the assets and the grantor can't designate themself as the trustee of an irrevocable living trust. The grantor relinquishes certain rights of control over them and the trust. The trustee effectively becomes the legal owner. The named beneficiaries are set when the irrevocable trust is created and the grantor can do little to amend that agreement. Trust provisions can only be changed in certain specific situations. Some changes may even require the approval of the courts. You can never take back the assets assigned to an irrevocable living trust. There are benefits to establishing an irrevocable trust, however.
Living trusts are created by individuals who are typically called grantors, settlors, or trustors. The grantor who creates it will designate who the beneficiaries should be and who should act as the trustee, as well as decide what assets to transfer into the ownership of the trust. The assets held within the trust can be transferred outside of the probate process upon the death of the trustor. Revocable living trusts, or rlts, can be changed or modified during the course of the grantor’s life. Since the grantor largely retains control over the assets, an rlt provides very limited asset protection compared to irrevocable trusts.
It will take some time—but you can do it now, or you can pay the courts and attorneys to do it for you later. One of the benefits of a living trust is that all of your assets are brought together under one plan. Don't delay “funding” your trust; it can only protect assets that have been transferred into it.
When it comes to estate planning , more people are establishing a living trust in addition to creating their last will and testament. But what exactly is a living trust and what are the main benefits? the information below can help you better understand how a living trust works.