Estate planning plays a vital role in financial planning, particularly when you want to control how others handle your assets after your passing. Trusts often come into play in estate planning, helping manage and distribute assets.
In California, you have access to various types of trusts, each with unique features, benefits and purposes.
Revocable living trust
A revocable living trust appeals to many people. You can create this trust and name yourself as the trustee, giving you control over the trust’s assets. Since you can change or dissolve this trust at any time, it offers flexibility. When you die, the assets within the trust go to the beneficiaries without going through probate.
An irrevocable trust differs from a revocable living trust in that you cannot change or dissolve it once created without the beneficiaries’ consent. This trust type can offer potential tax benefits and can provide more protection from creditors. People often use it to achieve specific goals like preserving assets for future generations.
Special needs trust
If you have a family member with disabilities, a special needs trust might be suitable. This trust aims to provide financial support to a person with special needs without impacting their eligibility for government benefits like Medicaid or Supplemental Security Income.
If you want to leave part of your estate to a charitable organization, a charitable trust could be an option. Various forms of charitable trusts exist, but they generally allow you to support a cause you care about and may offer potential tax benefits.
A testamentary trust, created through a will, takes effect only after your death. You can use it to specify how others will manage and distribute your assets to your beneficiaries. This trust type often serves to provide for minor children or other dependents.
Selecting the right trust for your California estate plan means understanding your available options and how they match your goals and needs. Doing this will allow you to create an estate plan that mirrors your values, safeguards your assets and ensures others carry out your wishes as you intend.