Deciding on the right trusts for your estate plan

by | Jul 14, 2023 | Estate Planning

Estate planning involves making critical decisions about how to manage and distribute your assets upon your death. Trusts are an important tool in this process, as they can help you accomplish a variety of objectives.

Determining which trusts to include in your California estate plan depends on your personal circumstances and goals.

Revocable living trusts

A revocable living trust is one you establish during your lifetime. You can change, add to or end it at any time. Assets in this trust bypass the probate process, enabling a smoother transfer to your beneficiaries. This trust provides flexibility and control, as you can serve as the trustee and manage your assets during your lifetime.

Special needs trusts

If you have a loved one with a disability, a special needs trust can ensure they continue to receive care and support after your death. This trust protects assets for the person with special needs without jeopardizing their eligibility for government benefits like Supplemental Security Income or Medicaid.

Charitable trusts

If philanthropy is important to you, consider a charitable trust. These trusts allow you to donate to your chosen charities during your lifetime or after death. They can also provide you with income and estate tax benefits.

Life insurance trusts

A life insurance trust holds your life insurance policy. It removes the proceeds of the policy from your taxable estate, potentially saving on estate taxes. It also provides more control over the distribution of the proceeds than a policy not held in trust.

Asset protection trusts

California does not allow self-settled asset protection trusts. However, you might establish an out-of-state or offshore asset protection trust. These trusts protect your assets from creditors, lawsuits and other financial risks.

The type of trusts you include in your California estate plan should align with your estate planning goals and personal circumstances. Remember, trust laws can be complex and change often, so always stay informed about the latest developments to make the most suitable decisions for your estate plan.