One of the estate planning tools California residents can utilize to protect their assets and distribute to the heirs and beneficiaries of one’s wishes is a trust. A trust creates a fiduciary relationship between the trustor and the trustee, giving the trustee the right to hold the title to assets or property for a beneficiary’s benefit. The beneficiary is the third party.
Trusts have many advantages, such as ensuring assets and property are distributed according to the trustor’s wishes, saving time and reducing paperwork, avoiding or reducing taxes and probate and providing legal protection for the assets in the trust. Assets and property in a trust is protected from creditors.
The terms on which the trust operates are based on the terms on which it was built. A living trust is where assets are provided as a trust for the person’s use and enjoyment during his or her lifetime. When the person dies, the trustee transfers the assets to the beneficiaries. Assets could also be revocable or irrevocable-revocable trusts can be changed by the trustor during his or her lifetime and can even be terminated while the irrevocable trust cannot be changed or terminated once it is established. Trusts could also be funded, in which assets are put during the trustor’s lifetime and an unfunded trust is one that only consists of the trust agreement and no funding.
There are different types of trusts, each one with its own pros and cons depending on the trustor’s situation. Trusts are complex tools that can go a long way in protecting one’s assets and property, but only if set up properly to avoid trust litigation. Discussing one’s options for setting up a trust with an experienced attorney can be helpful.