Providing Clients With Flexibility in Decision Making
Only about half of people have estate plans, and even fewer branch out beyond the basic last will and testament when it comes to making decisions about their assets. But probate can be a lengthy process that can mean it takes months and sometimes even years for your beneficiaries to actually receive their inheritances. Revocable trusts are another option and allow you to maintain control over your assets and make changes to your estate plan for as long as possible.
Living trusts can be a valuable way to ensure that your assets are protected until they can be released to the beneficiary, but it’s important that they be set up correctly and that you understand how to manage them. Work with a revocable living trust attorney to ensure you make the most of this possibility.
What Is a Revocable Living Trust?
A revocable living trust is a type of trust that allows you to transfer assets, such as bank accounts, to a beneficiary and avoid probate. Trusts are a common estate planning tool for those who want to ensure that their minor children are provided for or who want to protect young adults from making poor financial decisions if they are left a substantial amount of money.
The person who owns the trust assets is called the grantor or trustor. The person who will eventually receive the assets is called the beneficiary. Trusts have an additional party, called the trustee, who is tasked with managing the assets in the trust and ensuring that they are dispersed according to the terms of the trust when it’s time. In some cases, there is also a successor trustee who is appointed to take over if and when the original trustee is unable or unwilling to fulfill their duties.
The big difference between living trusts and an irrevocable trust is that a revocable living trust allows you to change the terms at any point. This includes how and when the assets are released, what assets are held in the trust, and who is named as the beneficiary or trustee. An irrevocable trust is very difficult to change once it is set up. Revocable living trusts can be set up with most types of assets, including life insurance trusts.
How Do Estate Taxes Work With Revocable Trusts?
While certain types of trusts can help reduce the amount of estate taxes, California law doesn’t allow for revocable living trusts to be included in this. Because the grantor has the ability to change the trust terms, or completely dissolve the trust, at any time, there are no tax advantages of having a revocable living trust in your estate plan. If this is one of your goals, talk with a trust attorney to find out what other options you may have, such as generation skipping trusts.
Do I Need an Estate Planning Attorney to Create a Trust?
It is technically possible to create a trust by yourself, but the process can be complicated. And if you don’t set it up correctly, it could be deemed invalid, which can leave your beneficiaries without what you planned. A trust is a legal document and should involve a revocable living trust attorney. Working with a living trust attorney also provides other benefits.
If you do end up needing to make changes to the trust, your attorney will already be familiar with the terms and your situation and be able to help you execute those amendments quickly and in accordance with California probate law. An attorney is also a valuable resource when it comes to making sure that your trust supports the larger goals of your estate plan. They can inform you of any alternative options that may suit your situation better or recommend a specific type of trust.
How Do I Make Changes to a Revocable Trust?
One of the primary advantages to living trusts is that you are able to maintain control and can amend the terms of the trust up until your death. For example, this allows you to add a family member, such as a surviving spouse, as a beneficiary later on if you marry after the trust has been created.
Making changes to the trust is as simple as creating and signing an amendment. You will need to put the changes in writing, but it’s important to do so in the same manner in which you created the trust. This can get complicated in some cases, so it’s important to work with a living trust attorney who has experience with changing revocable trusts to ensure that your changes will be valid.
What Happens to the Trust After I Die?
Revocable living trusts are changeable until the grantor dies. At that time, the trust can no longer be changed, and whatever terms were in place at that time will be executed. Any assets in the trust are able to avoid probate and will immediately pass on to the beneficiary according to the terms of the trust through the trustee. Not having to wait on probate can be beneficial if the assets in the trust are to be used for time-sensitive expenses, such as burial costs, paying off a mortgage, or paying for a beneficiary’s college education.
At MMZ Law, we understand that estate planning is important but can be complicated and overwhelming to put in place. We’re here to put our experience and knowledge to work for you to make this process as easy and stress-free as possible. Call our office at 909-347-7444 to schedule an appointment with a living trust attorney so you can start planning for the future.