If you have done any research on estate planning, you may have noticed that there are a lot of options for distributing property after death, each with their own pros and cons. Trusts are one of the best tools available to San Diego residents who are beginning the estate planning process.
As the person creating the estate plan, you are referred to as the grantor. A trust essentially is a fiduciary arrangement that allows a trustee to hold assets on behalf of the grantor’s beneficiaries. The trustee is generally a third-party person not benefiting from the contents of the trust who can be trusted to manage your affairs after you have passed away.
There are many types of trusts available, but the most common types include:
- Revocable or living trust – Allows grantor to remove property from the trust during his or her lifetime.
- Irrevocable trust – Does not allow for any alterations or changes once it is created.
- Special needs trust – Intended for those receiving governmental benefits.
- Constructive trust – Implied trust, as determined by the court.
- Charitable – Set up to benefit a specific charity without estate and gift taxes.
What are the benefits of a trust?
One of the main benefits of a trust is that it allows your estate to avoid probate, as the assets in the trust will be distributed as specified by the terms of the trust. Avoiding the probate process can save your family a significant amount of time and money. If you have a revocable trust, you as the grantor will continuously be able to modify your trust throughout the course of your lifetime.
What are the disadvantages of a trust?
Trusts can be costly to create, as they must be funded at the time of creation. Also, any property put into the trust will need to be re-registered in the name of the trust. Any property that is not registered in the name of the trust will likely have to go through probate.
No matter what tools you use in your estate plan, you should know that you are doing your family a great service by planning for the future. An estate planning attorney can assist you throughout the process and help ensure that your wishes will be fulfilled when you are no longer living.
