May 05, 2023 | Estate Planning
A living, or revocable, trust is one of the most common estate planning tools. A trust can be a useful part of an estate plan, but it is not necessary for everyone. Both wills and trusts determine the distribution of assets and who benefits from those assets. Trusts have some significant benefits and drawbacks, and it’s important to determine if a trust is needed to keep your assets out of probate court and help your loved ones.
Types of Trusts
Trusts allow you to keep certain assets out of probate, giving your beneficiaries the most benefit from your assets and estate. Trusts can be revocable or irrevocable.
- Revocable Trusts: The creator of a trust, or trustor, can retain ownership and control over assets in a revocable trust. The trustor can also alter the contents and beneficiaries of a revocable trust at any time, assuming they are legally competent.
- Irrevocable Trusts: In an irrevocable trust, the ownership of assets passes to the beneficiaries immediately. An irrevocable trust can only be changed with a court order or approval from all beneficiaries. Once an irrevocable trust is created and signed, it’s unlikely it will be changed. An irrevocable trust lessens the amount owed in estate taxes, but California does not have state-level estate or inheritance taxes.
Whichever type of trust is used, it can help your loved ones avoid a long probate process and allow for a more private trust administration. A Trust Administration Attorney in Encino, CA, can help during the administration process.
Advantages of Creating a Trust
A trust can help many people reach specific goals for planning their estate. The benefits of a trust include:
- Avoiding Probate
The biggest advantage for many people when planning their estate is that a trust can keep certain assets out of probate. If a person dies without an estate plan, their assets and estate pass to the state. The state then assigns an executor to manage the estate and distribute it.A will can be useful by naming your own executor and providing distribution instructions. However, your assets will still go through probate, which is expensive, lengthy, and public. When your assets are put in a trust, they do not have to go through probate. This is because the care and ownership of assets remain with the trust, not the individual. The named trustee has control over the assets after the trustor dies. - More Privacy
A living trust allows for more privacy. A will becomes a public document during probate. A living trust is a private document that keeps asset and distribution information out of public records. - Increased Flexibility
If you put your assets in a revocable trust, you can remove or alter the trust at any time. This includes after major life events like increased family sizes, a death in the family, or even financial changes. As long as the trustor has the legal and mental capacity to make changes, they can do so. - More Control
A revocable trust allows the trustor to keep control over assets while still planning ahead for how they will be distributed. Like a will, a trust allows a person to have significant control over how their assets are given to individual and organizational beneficiaries. - Planning for Incapacitation
Many people become incapacitated or disabled as they grow older. A trust can determine the distribution or management of a trustor’s assets if they become unable to manage them themselves. The trustor can state that the trustee will manage the trust, thus avoiding court intervention.
Disadvantages of Creating a Trust
There are also certain drawbacks to creating a trust. This includes:
- More Costly and Time-Consuming
A trust is more expensive and takes much longer to create than a will. You will need to work with an attorney, who can help you create new documents of ownership for each asset in the trust and retitle them in the trust’s name. A trust is also more complex to create than a will. - May Not Avoid Probate
If you fail to retitle and properly transfer your assets to the trust, they may still go through probate. This makes the process of creating a trust functionally useless. - Requires Specific Asset Protections
If there are not certain protections in place, creditors and those filing claims against you or your estate can still get assets that are in a trust.
FAQs AboutTrust in California
What Assets Should Not Be in a Trust?
Assets that can’t or shouldn’t be put into a trust include:
- Cash: You can put cash into a bank account and then include the account in a trust.
- Vehicles: Although ownership of cars and other vehicles can be transferred through a trust, it may not be necessary. Cars depreciate in value, and you may end up selling a vehicle before a trust even comes into effect.
- Retirement Assets: It’s not recommended to include accounts like a 401(k) or IRA, as it may trigger withdrawal penalties.
What Are the Disadvantages of a Trust in California?
Trusts are costly to create. Creating a trust without an attorney may be less expensive, but doing so leaves the trust much more vulnerable to trust contests and other legal litigation. It is also more time-consuming to properly set up a trust than to create a will. For many people, the time and cost are worth the benefit.
What Are the Disadvantages of Putting Your House in a Trust in California?
Putting a home, or any real estate, into a trust can be costly. The process can also take time, even with the help of an experienced attorney. If the home is in a trust, it can also make refinancing and changing your mortgage much harder. However, it can protect your home from the probate process.
What Is the Advantage of a Trust in California?
A trust provides you with more control over where your assets are distributed, just like a will, but it also keeps those assets out of probate. Probate is long and expensive for your family members and beneficiaries after your death, and some parts of your estate may be lost during the process.
Trust and Probate Administration in Encino
Whether your loved one set up a trust or you are dealing with probate, Barry Law Group can help. We have more than 30 years of experience helping families who are going through difficult emotional and legal processes. Contact us today.
Cash: You can put cash into a bank account and then include the account in a trust.Vehicles: Although ownership of cars and other vehicles can be transferred through a trust, it may not be necessary. Cars depreciate in value, and you may end up selling a vehicle before a trust even comes into effect.Retirement Assets: It’s not recommended to include accounts like a 401(k) or IRA, as it may trigger withdrawal penalties." } },{ "@type": "Question", "name": "What Are the Disadvantages of a Trust in California?", "acceptedAnswer": { "@type": "Answer", "text": "Trusts are costly to create. Creating a trust without an attorney may be less expensive, but doing so leaves the trust much more vulnerable to trust contests and other legal litigation. It is also more time-consuming to properly set up a trust than to create a will. For many people, the time and cost are worth the benefit." } },{ "@type": "Question", "name": "What Are the Disadvantages of Putting Your House in a Trust in California?", "acceptedAnswer": { "@type": "Answer", "text": "Putting a home, or any real estate, into a trust can be costly. The process can also take time, even with the help of an experienced attorney. If the home is in a trust, it can also make refinancing and changing your mortgage much harder. However, it can protect your home from the probate process." } },{ "@type": "Question", "name": "What Is the Advantage of a Trust in California?", "acceptedAnswer": { "@type": "Answer", "text": "A trust provides you with more control over where your assets are distributed, just like a will, but it also keeps those assets out of probate. Probate is long and expensive for your family members and beneficiaries after your death, and some parts of your estate may be lost during the process." } }]}
