The belief that trusts are only for wealthy individuals is fading as Californians discover the estate planning benefits of trusts. Sometimes wills are enough for the distribution of assets to heirs. Often trusts are beneficial supplements because they serve multiple purposes — not the least of which is potential estate tax savings.
Revocable and irrevocable living trusts give asset protection at different times for different people. Irrevocable trusts protect personal assets before your death, while revocable living trusts safeguard assets meant for beneficiaries.
Assets placed in revocable living trusts are often excluded from estate taxes. Revocable trusts are kept private and out of probate court, unlike wills which are publicly accessible and can be contested in probate. When estate planning documents are properly prepared, assets that beneficiaries receive from RLTs cannot be touched by creditors, ex-spouses, bankruptcy courts or lawsuits.
Trusts are managed according to the creator’s desires. Details in a trust instruct trustees which and how many assets to assign and when to give them to beneficiaries. Trusts can also be highly conditional and canhelp beneficiaries who may not be capable of handling assets. Trustees may be told to portion asset distributions to certain beneficiaries who are immature or irresponsible. For example, a college student who receives a full trust inheritance all at once could be tempted to spend it frivolously. A trust can ensure that the heir receives staggered payments at certain ages or stages of his or her life.
Other trusts address concerns of heirs with special health needs. A child with a disability who inherits assets may be financially disqualified from receiving valuable government benefits. Trusts can be designed to help special needs beneficiaries to retain the benefits they get.
Probate issues may take years to resolve. Because trusts are private and settled outside probate, beneficiaries save time and preserve more of what they inherit. Estate planners universally recommend wills, but trusts are also highly-effective documents that keep assets safe before and after death.
Source: postcrescent.com, “Carissa Giebel column: Revocable living trust helpful tool to manage assets,” Carissa Giebel, Sept. 22, 2012