Estate Planning Services in San Diego: All About Trusts
What is a Trust?
To put it as simply as possible, a trust is a legal agreement. It’s where one party, the trustor, transfers their property or assets to another party, the trustee(s).
The trustee holds the assets in trust for the benefit of the trustor and any of his/her beneficiaries (the person or persons who are designated to receive the trustor’s assets after the trustor dies).
Trusts are a way to avoid having the assets of the estate owner bound up in probate after they die. Instead, trusts allow assets to be distributed according to the terms set by the trustor immediately.
There are various types of trusts with different stipulations and procedures regarding to transfer of property and distribution to beneficiaries. Examples of various trust types are listed below.
Types of Trusts
Testamentary trusts are subject to probate because they transfer property from the trustor to the trustee only after the trustor has died.
Living trusts are established while the trustor is still living. When the trustor dies, a few different things can happen:
- The trustee can continue to manage the designated property for the benefit of the beneficiaries until a set time (for instance, when children are at an age where they can maturely manage assets).
- The trustee may be instructed to transfer the contents of the trust directly to the beneficiaries.
Another name for living trusts, these are trust agreements that can be changed, altered, or revoked according to the trustor.
Irrevocable trusts cannot be changed or revoked at any point after their creation. Once property is transferred to this type, it cannot be taken back out by any person, including the trustor.
Asset Protection Trusts
Asset protection trusts are meant to shield a person’s assets from creditors. Not all states allow asset protection trusts – in fact, only a handful do as of 2012, according to Investopedia.
Special Needs Trusts
A person who is considered legally disabled receives certain government benefits. In cases such as these, a special needs trust might be set up for that person so they are not disqualified from continuing to receive those benefits as a trust beneficiary.
These trusts specify charitable institutions or a public group as the beneficiaries as opposed to a specific person.
When a Trust Might Be Needed
A trust makes more sense for someone with a lot of wealth, as opposed to the average middle-class citizen. A living trust can help avoid estate taxes, probate, and allow the owner to dictate where and how their property is distributed long after their death.
Estate planning services in San Diego can help estate owners figure out what kind of trust they might need, if any at all, and how to go about establishing that trust. Planning for the end of life can be a daunting and complicated task, but knowing the options and being familiar with some legal terminology can make it easier in the long run.
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