Many people believe that only wealthy people use trusts. The term “trust fund baby” has been used for generations to refer to someone who gets their vast wealth from a trust. However, just because the concept of a trust is often associated with wealth doesn’t mean that trusts can only have value if you’re dealing with substantial assets.
Trusts can be useful for anyone who seeks to protect their loved ones and secure their family’s future. Here is what you need to know about how trusts work in California and what benefits you and your family can gain from incorporating a trust into your estate plan.
What is a trust?
A trust is a legal way to transfer assets outside of probate. There are two types of trusts.
A revocable trust can be revoked at any time. You retain complete control of your assets in this type of trust.
In an irrevocable trust, your assets are controlled by the trust, and another party acts as trustee. However, your assets can be better protected in this type of trust.
What are the advantages and functions of a trust?
Every trust has a different purpose, depending on your wishes and your family’s unique circumstances. But for most cases, a trust comes with certain benefits as it serves key functions for your estate.
Prevent Your Heirs From Owing Money After Your Passing
Even if you have very little money to pass on after you die, it’s important to ensure that you don’t pass on debts. When you create a trust, you can pre-pay many expenses — or at least ensure there is money available to pay those expenses — that will only occur after you die.
For example, if you know how you want your remains to be taken care of and where you want to be buried, you can create a trust that arranges these details in advance of your death and pays for them before you die.
Avoid Taxes on Your Estate
Another reason to create a trust is to prevent your heirs from having to pay taxes on their inheritance. This is another concern that is valid for everyone, not just the wealthy. A relatively simple trust will only cost a few hundred dollars to create. But taxes on your estate, even if it is relatively modest, could be quite a bit more expensive.
Pass Along Property Easily
If you have purchased a home, you will probably want to pass it along to your children. But this can be a tricky task, especially if you can’t afford property taxes during your later years.
You can create a trust that passes possession of your home to your children but allows you to continue to live in it until you die. This would make them responsible for taxes and upkeep while you are alive, ensuring that you don’t lose the property because you can’t afford it.
Skip the Probate Process
Skipping the probate process can be desirable if you are concerned that your potential heirs might dispute your will. The probate process can be extremely complicated and usually takes a lot of time. It also will often diminish the value of your estate.
By creating a trust, you can skip the probate process and ensure that your wishes are fulfilled without the courts getting involved. Keep in mind that the cost of creating a trust isn’t meaningfully different from the cost of hiring a lawyer to help you write a will.
Do I need a trust?
Regardless of your wealth, a trust offers significant advantages to you and your heirs, especially when compared to a standard will.
If you are interested in creating a trust to secure your family’s future in California, an experienced estate attorney from OC Wills & Trusts Attorneys can help. Our Orange County team can guide you on the best options for your situation. Contact us to schedule your consultation today.