Living Trusts

A living trust is a popular tool that is used in Estate Planning.  This article will provide you with additional information on living trusts and some common provisions found within them as seen from an experienced Folsom living trust lawyer.  

Trusts Overview

For a vast majority of our clients, a trust is a legal “alter ego” of themselves.  Their trust essentially holds their assets for them, so that when they pass away, this alter ego can pass assets onto the beneficiaries without the need for court involvement.  When an individual dies with a will, there is no alter ego, and therefore California law provides that the individual’s will must go through a lengthy probate process in the courts to pass assets onto beneficiaries.  

A trust is created by executing a trust agreement, which has a few components that we will discuss later.  However, some key terminology to know is that the person creating the trust is the “trustor” and the person who will be conducting business on behalf of the trust is the “trustee.”  As stated earlier, the trust is generally the “alter ego” of my clients, so generally the client is both the truster and trustee of their trusts.  As trustee, they can do anything for, and on behalf of, the trust.  

Living Trusts and Revocable vs. Irrevocable Trusts

For estate planning purposes, a trust is generally a “living trust,” which means that the trust itself is effective during the person’s lifetime.  Furthermore, trusts come in two varieties: revocable and irrevocable.  A revocable trust can be modified at any time, whereas an irrevocable one is set in stone upon creating the trust.   For our clients, we create revocable living trusts for the overwhelming majority.  This allows flexibility in the trust document for changes to our client’s wishes, family or financial situation.  Irrevocable trusts are used more infrequently and are generally used for tax planning purposes for some isolated situations.   

Components of a Living Trust

The living trusts that we compose are generally broken into multiple sections, each with their own importance.  Some key trust information includes:

• Establishing the Living Trust.  This section will generally include information such as the name of the living trust and that, in most of our cases, the truster (creator) of the trust is also the trustee.  For husband and wife, we generally list each spouse as trustee not only on their trust but their spouse’s trust. 
• Family Information.  This includes not only the individuals who are to receive assets and distributions, but also includes individuals who are disinherited.  It is important to include both, as applicable,  so that there are no challenges to the trust later on. 
• Property Distribution and the Creation of Trusts.  Depending upon an individual’s net worth and their marital status, we may want to create provisions within the trust that allow for tax benefits.  Also, if property is to be distributed to underage children, it spells out protections for the children. 
• Other Legal Protections.  Every family’s situation is truly unique and therefore the trust is drafted to fit their situation.  For example, if one family has a child who is unreliable with money, we may create “spendthrift” provisions which control the amount of trust property released to that child. 

Funding the Living Trust

One of the primary reasons that drive the creation of living trusts is that it avoids probate upon the death of an individual, allowing family members to avoid the courts in distributing the deceased’s assets.  However, in order for the trust to be effective, an individual’s assets need to be properly funded into the trust.  This means that an individual’s bank account, real estate and other important assets need to be placed into the living trust.  Generally, new accounts are not required and the trust can use the trustor’s social security number as its identification number.   

Summary

Trusts have become a very popular estate planning tool and a majority of my clients utilize this tool because it not only avoids probate but it also helps clients control their assets during their life and it provides tax planning.  If you have any other questions or are looking for an experienced Folsom living trust lawyer to help guide you, please call us or send us a message.