Creating a trust is an excellent way to manage your wealth and secure your family’s future. But it should never be a do-it-yourself project. California trust law is nuanced; even minor errors can have far-reaching consequences.
We at The Law Offices of Young Wooldridge, LLP understand that your goals are as unique as you are. Whether you’re aiming to minimize taxes, protect specific assets, or ensure your loved ones are provided for, our attorneys can help you craft a trust that aligns with your objectives.
Entrust your legacy to a California trusts lawyer at The Law Offices of Young Wooldridge, LLP. Our distinguished law firm in Bakersfield, California, is eager to guide you through this intricate legal landscape. You and your family deserve nothing less than peace of mind. Contact us today to learn more about how we can help you.
What Is a Trust?
A trust is a legal arrangement in which one party (the trustee) holds and manages assets on behalf of the trust’s creator for the benefit of other parties (beneficiaries). A person who creates a trust is called a trustor or settlor. The assets in a trust can include real estate, investments, cash, and other property.
There are different types of trusts in California, each with unique advantages and purposes. State law has specific provisions governing the creation and management of trusts, including the responsibilities of trustees, requirements for trust documents, and protections for beneficiaries, among other things.
One important aspect of setting up a trust is the avoidance of probate. Probate is a court-supervised process of validating a person’s will, paying their final debts, and transferring their assets to appropriate beneficiaries. But when you properly establish a trust, assets held in that trust can bypass the probate process, saving your beneficiaries time and money when it comes to receiving their inheritances.
What Are the Benefits of Creating a Trust?
There are several significant advantages to creating a trust beyond avoiding probate, such as:
- Increased Control – Trusts offer a higher degree of control over when and how assets go to your beneficiaries. You can stipulate specific conditions or milestones, like reaching a certain age or finishing college, before beneficiaries receive certain assets.
- More privacy – Trusts also provide a greater level of privacy. Wills become part of the public record in probate court, but the distribution of assets from a trust can remain confidential.
- Flexibility – If you set up a revocable living trust in California, you can maintain control over the assets during your lifetime and make changes as necessary, enjoying flexibility and peace of mind.
- Legal Protections – Certain types of trusts can also shield your assets against creditors and legal judgments that demand money or assets from the estate.
What’s the Difference Between a Trust vs. a Will in California?
Wills and trusts are different legal documents in California, but they are used primarily to transfer assets after death. Each has unique advantages and disadvantages, and both serve slightly different purposes.
A will is a document that specifies how the creator wants their property to be distributed after death. It also allows the creator to name an executor to manage their estate, choose guardians for minor children, and express their wishes for other matters, like the care of pets.
After death, wills must go through the court-supervised probate process. This process is usually public and sometimes also lengthy and costly, especially if the will is contested.
A trust is another type of estate planning tool. It creates a separate legal entity to hold and manage the trustor’s assets during their lifetime and distribute those assets after their death per their instructions.
A trust does not go through the probate process, making asset distribution faster, more private, and usually less expensive than it is with a will. However, establishing a trust is typically more complex and costly than creating a will. It is also necessary to transfer ownership of assets to the trust, which requires additional steps that aren’t needed when making a will.
What Are Common Types of Trusts in California?
Depending on your specific needs, you can establish numerous types of trusts in California. Here are some common examples:
- Revocable Living Trusts – These are trusts you can modify or revoke entirely during your lifetime. When a trustor dies, a revocable living trust becomes irrevocable, and the assets are managed or distributed according to terms set by the trustor.
- Irrevocable Trusts – Once established, these trusts generally cannot be modified or revoked without the beneficiaries’ consent. The trustor no longer owns the assets placed in an irrevocable trust – they belong to the trust.
- Testamentary Trusts – These trusts are established through wills and become effective only upon the trustor’s death. They’re common in situations involving beneficiaries who are minor children or individuals who might not manage inherited assets well.
- Charitable Trusts – Charitable trusts are established to benefit particular charities or the public in general. These trusts can provide tax benefits to trustors.
- Special Needs Trusts – These trusts aim to benefit individuals with disabilities. A special needs trust allows beneficiaries to enjoy the use of assets held in trust while continuing to receive needs-based government benefits.
- Life Insurance Trusts – A life insurance trust is an irrevocable trust that assumes ownership of life insurance proceeds from the estate for tax purposes.
- Generation-Skipping Trusts – These trusts allow trustors to transfer substantial amounts of money tax-free to beneficiaries at least two generations their junior, typically grandchildren.
- Grantor-Retained Annuity Trusts (GRATs) – These irrevocable trusts allow trustors to contribute assets into a trust while receiving a fixed amount from the trust for a specified period.
What’s the Difference Between a Revocable Trust and an Irrevocable Trust?
With a revocable trust, the trustor remains in control of the trust assets and can modify or terminate the trust during their lifetime. However, assets in a revocable trust are still considered part of the trustor’s estate for estate tax purposes and might be subject to creditors’ claims.
Conversely, an irrevocable trust cannot be changed or terminated without the beneficiaries’ consent once it has been established. The trustor essentially gives up control over the assets placed in the trust. Assets in irrevocable trusts are not considered part of trustors’ estates for estate tax purposes and are generally protected from creditors.
What Is a Special Needs Trust?
A special needs trust is a specific type of trust designed to benefit individuals with disabilities. The main goal of this kind of trust is to supplement income from government programs like Medicaid and Supplemental Security Income (SSI) without disqualifying the beneficiary from getting assistance. Money from special needs trusts can be used for various purposes, like education and recreation.
If a beneficiary receives their inheritance directly, they could lose eligibility for government benefits due to having too many assets. A properly structured special needs trust allows assets to be kept safe for beneficiaries, enhancing their quality of life without risking the loss of essential government aid.
What Is a Living Trust?
A living trust or revocable living trust is a document created by a trustor during their lifetime and recognized under California laws. When trustors transfer ownership of their assets to a living trust, they retain the power to manage those assets and alter the trust terms.
The primary advantages of a living trust include the ability to manage the trustor’s assets if they become incapacitated and to avoid probate upon their death. When the trustor dies, their assets are distributed to beneficiaries per the trust’s terms without court intervention.
How Can a California Trusts Lawyer Help Me?
Why turn to an estate planning lawyer at The Law Offices of Young Wooldridge, LLP? Because our 80-plus-year reputation is built on decades of serving Californians like you. Our firm has an unwavering commitment to personalized service and a deep understanding of state trust laws.
We can provide valuable assistance in many ways when you’re looking for how to create or update a trust in California, including:
- Selecting the Right Type of Trust – An estate planning lawyer can help you understand the types of trusts available and guide you in choosing the one that suits your specific goals and needs.
- Drafting the Trust Document – Trust planning lawyers have the skills and knowledge to prepare trust documents correctly, reducing the risk of future disputes or complications.
- Funding the Trust – For a trust to be effective, it must be “funded,” which means you must transfer ownership of your assets to the trust. An attorney can guide you through this process and ensure it is done correctly.
- Tax Planning – Trusts can have significant tax implications. A knowledgeable attorney can advise you on potential tax consequences and how to use trusts in strategies for minimizing estate, gift, and income taxes.
- Assisting with Trustee Selection – An attorney can explain the responsibilities of a trustee and help you select someone who will manage your assets and carry out your wishes.
- Addressing Special Situations – If you have complex family dynamics, own a business, or have significant assets, an estate planning lawyer can address these situations through your trust.
- Reviewing and Updating Estate Plans – As life circumstances and laws change, your estate plan should be updated to reflect these changes. An estate planning lawyer can review your plan regularly and make adjustments as necessary.
Contact Our California Trusts Attorney Today
California trust laws are complex, and setting up or managing a trust alone can be overwhelming. Your legacy and the future of your estate are too important to leave to chance. Trust The Law Offices of Young Wooldridge, LLP to handle the intricacies on your behalf. With our dedicated attorneys by your side, you can avoid common pitfalls and confidently secure your legacy.
Our knowledgeable and attentive California trusts attorney is ready to guide you with personalized attention, seasoned legal advice, and comprehensive estate planning services. Take the first step today and contact The Law Offices of Young Wooldridge, LLP.