Why Are Trusts Important in Estate Planning?
By Gullotta Law Group on April 29th, 2020 in
Trust & Wills Lawyer in Sonoma County
As you begin your estate planning journey and start to explore which tools are right for your family, you may want to spend some time looking at trusts. Trusts play a crucial role in many people’s estate plans, due to their ability to preserve wealth and allow individuals to control how their assets are distributed.
What is a trust?
A trust is a legal entity that has specific instructions regarding how and when the assets owned by the trust are passed on to trust beneficiaries. This is one of the key distinctions between a will and a trust: trust is its own separate legal being that owns assets transferred into it. A trustee is named to take over after the individual who created the trust (the trustor) is incapacitated or deceased.
Which types of trusts are available in California?
There are many types of trusts in California, so it’s important to speak to an estate planning attorney to figure out which options rightly meet your needs:
- Revocable trust. After a trustor puts assets into a trust, they can add or remove assets, change trustees, and otherwise amend the trust until their death.
- Irrevocable trust. The trustor is unable to amend the trust after establishing it and transferring assets to it.
- Special needs trust. This type of trust provides for the needs of a trustor’s loved one with special needs. It places assets under the care of a trustee, allowing the beneficiary to maintain their public services.
- Charitable trust. Some people use this type of trust to give assets to a charity of their choice after their passing.
- Irrevocable life insurance trust. An irrevocable life insurance trust removes the decedent’s life insurance from the trust, limiting taxes on the policy.
- Generation-skipping trust. This estate planning tool distributes assets to grandchildren instead of children.
Other types of trusts are available, but these are some of the most popular options.
How do trusts help my loved ones?
Trusts can be very helpful to your loved ones and family members after you pass. Trust assets do not go through probate, which allows beneficiaries to take ownership of assets most quickly. A well-structured trust can reduce estate and gift taxes. A trust can also protect your family’s privacy, as assets distributed through trusts do not go through probate court and become public record. The distribution of trust assets remains a private matter.
Are trusts the same as wills?
While wills and trusts are both effective estate planning tools, they have several key differences that separate them. For this reason, it is important to discuss your estate planning needs with an attorney. They can get a better understanding of your goals and recommend ways to achieve those goals.
- Trusts go into effect as soon as they are created, while wills do not go into effect until you pass away.
- The property included in a will must go through probate and be verified by the court.
- A will allows you to name a guardian for your children, but a trust does not.
- A trust lets you plan for disability or incapacitation, but a will does not.
As you can see, there are situations where both tools are helpful. Depending on your assets and estate planning goals, your attorney may recommend a trust, a will, or both.
Discuss Your Estate Planning Options with Our Team
At Gullotta Law Group, we strive to meet our clients’ needs and develop estate planning strategies that match their goals. We offer free consultations to help you understand your options and find out how we can help. Schedule your consultation now by calling us at 707-938-7234.