Torrance Trusts Lawyer
Trusts come in many different shapes and sizes, and they can provide enormous benefits to you and your family when planning your estate. Depending on the size of your estate, there is the potential to save tens to hundreds of thousands of dollars through the use of a trust. A revocable living trust will also save the time, stress and considerable expense of a probate administration. Learn more about how the use of a trust in your California estate plan could benefit you, and contact the Torrance trusts lawyer at Samuel Ford Law with any questions you may have.
What is a trust?
Trusts are legal arrangements where the legal ownership of an asset is separated from the beneficial, or equitable, ownership by transferring that asset into a trust. One person (the trustee) holds legal title to the property on behalf of another person (the beneficiary). Whereas a will enters into effect only upon the death of the testator (the person who created the will), certain trusts can be effective immediately upon creation and can provide a means of financial management in the event of physical or mental incapacitation.
Trusts allow the settlor (the person who created the trust) to place conditions on the gifts distributed by the trust. These conditions can be especially helpful when beneficiaries are young and potentially unable to manage a large lump sum of money responsibly. Assets held in trust are exempt from probate, meaning that your heirs will get to enjoy the gifts you left for them sooner and without incurring probate-related fees.
Types of California trust instruments
There are many different types of trusts, each designed for different needs. Many trusts are created for the explicit purpose of reducing the value of your estate in the eyes of the IRS, thereby reducing your potential estate tax burden. These types of trusts are usually only appropriate for clients that have a large enough estate on which estate tax would be owed. However, trusts still offer tremendous benefits to any person who owns property, has children or has substantial financial assets. The two most common categories of trusts used by California residents when creating their estate plan are revocable living trusts and irrevocable trusts.
Revocable Living Trusts: This is the most common form of trust utilized during the estate planning process. The revocable living trust goes into effect during the lifetime of the settlor and acts primarily as a way to ensure that assets pass directly to the intended beneficiaries without going through probate. Settlors act as the trustee of a revocable living trust during their lifetime, thus maintaining control of these assets. These trusts are relatively easy to alter, as explained below.
Irrevocable Trusts: These trusts provide a way for settlors to permanently give away certain assets during their lifetime so that they no longer have control over the property placed in trust and will not have that property be considered as part of their estate. While an irrevocable living trust removes control from the settlor, this move has potential benefits, such as protecting those assets from creditors and a reduction in estate taxes.
Can I change a trust once it’s created?
The ease with which a settlor can modify or revoke a trust after it is created depends on the type of trust created. Revocable living trusts are designed, as the name implies, to be revocable during the lifetime of the trust’s settlor. If the settlor wishes to make a minor change to the trust, such as the addition of a beneficiary or the substitution of a different trustee, the settlor need not revoke the trust, but can instead add an amendment or make a restatement. This saves the settlor the trouble of moving the assets to a new trust once the old one is revoked. Living trusts become irrevocable upon the death of the settlor. Additionally, if the settlor becomes incapacitated, the trust cannot be changed or revoked unless the incapacitated person has granted power of attorney to someone who can sign on their behalf. In some cases, an irrevocable trust can be modified when all beneficiaries agree on the changes to be made.
Irrevocable trusts require much more effort to modify. Irrevocable trusts can only be modified under very limited circumstances, usually requiring court approval, such as where it would be impossible to perform the terms of the trust without modification. For example, if the assets used to fund the trust lost a substantial portion of their value, the terms of the trust might need to be altered. Depending on the terms of the irrevocable trust, the trustee may be able to use the California decanting statutes to change some of the trust terms as well.
Create your trust with the help of a seasoned Torrance estate planning attorney
Samuel Ford Law has been in the business of creating unique and effective estate plans for more than a decade. We pride ourselves on providing estate plans that cater to the needs and goals of each family and individual we serve in the South Bay of Los Angeles. Contact trust attorney Samuel Ford at Samuel Ford Law for a consultation to discuss how the creation of a trust might benefit you.