When Should You Get a Trust?

A trust is a document created to manage your assets—property, financial holdings, personal belongings) not only during your lifetime, but after you’re gone. There are generally three kinds of trusts to consider in your estate planning:

  • Living trust—A document concerning the management of your assets which can be amended or revoked at any time during your life
  • Testamentary trust—A document based on language in a will, covering the management and distribution of your assets
  • Irrevocable trust—A document with specific distribution provisions that cannot be revoked later on

The primary reason for a living trust is so you can manage and administer your assets both in life and death, without the intervention or supervision of a court of law. While a living trust in and of itself won’t eliminate estate taxes, it’s the best way to avoid the expensive, time-consuming (and often emotionally traumatic) process of probate.

As noted by the State Bar of California, a living trust:

  • Gives the trustee (an individual, spouse or domestic partner named by you) the legal right to manage and control assets in the trust
  • Names beneficiaries who receive the trust’s assets per your instructions
  • Provides guidance to the trustee in charge of managing and distributing your assets. This individual is held to strict responsibilities and high legal standards, and “cannot use your trust’s assets for his or her own personal benefit without your explicit permission.”

What’s the difference between a will and a trust? A will is the document that’s prepared for use in case of any probate action. It also serves to nominate a guardian for any minor children. When you have a will without a trust, your instructions on how to settle your estate have to be approved by a court. The executor of your estate must submit the will to the court and have it officially recognized, before your last wishes can be carried out.

I assist clients in a range of issues related to estate planning, including living trusts and wills. These documents can complement each other, such as when a living trust is drafted together with what’s commonly called a “pour-over will.” Such a will is designed to protect any assets which were either forgotten when creating a living trust or left out for some reason. The pour-over will ensures that these assets become part of the living trust upon the individual’s death. It “pours over” all assets that failed to be originally placed in the trust and which now can be distributed as originally intended in the trust.

In California, people who want to pass real estate on to their beneficiaries should look into getting a living trust. If the value of all the property of your estate is less than $150,000, simplified probate procedures and/or affidavits to collect your assets without any court proceedings may be available to your beneficiaries. However, if you believe your estate will be more than that threshold at your death, or if you want to try to ensure your estate passes to your beneficiaries as smoothly as possible, you should contact an estate planning attorney about obtaining a trust.

As your assets grow, so does the need to create an estate planning team. This group of professionals—a financial planner, tax advisor and estate planning attorney—help make sure your instructions for distribution of your assets are followed both during your lifetime and in the event of your death. Contact the Law Offices of Ian S. Topf to learn more.