How does a Trust work?
Below is a cursory explanation of the purpose and function of a Revocable Living Trust. Further questions, including whether you should incorporate a Trust into your estate planning, should be directed to a qualified attorney.
REVOCABLE LIVING TRUST
A Trust (also known as a “Living Trust” or “Revocable Living Trust“) is a planning vehicle whereby an individual transfers his or her assets during life to the Trust, while still retaining control over the Trust. The creator of the Trust acts as the Trustee and Trust assets are fully available to the individual during his or her lifetime.
A Trust is revocable or amendable at any time as new situations arise and the income, deductions, gains, etc. are reportable directly on your income tax returns. (In other words, you should not notice any major changes in your everyday control over your assets).
Trusts are popular in California because they allow for the avoidance of probate (the California court process for transferring a decedent’s estate). Since the property is deemed to have been transferred into a Trust, no probate follows because the decedent does not technically hold the property at death.
Instead, a Trust avoids this probate court process and leaves it up to a Trustee (chosen by you during life) to distribute your assets. In addition to the probate avoidance benefit, Trusts also deal more effectively with incapacity issues that might arise during life, because you can name a Successor Trustee who can take care of you, whereas Wills do not provide for problems during life.
Finally, a Trust allows you to specifically provide for how you want children or elderly parents to be cared for with the proceeds of your estate and it also allows a person more control on how to limit any distributions to beneficiaries who might otherwise waste their inheritance.
If this sounds like something you might want to consider, don’t hesitate to give us a call for a free consultation.