While a will is an important part of an estate plan in California, a trust can be included too. A trust gives the grantor, or creator, control of their assets. One popular type of trust is a revocable trust, which has many benefits.
Revocable trust overview
A revocable trust is an estate planning tool that allows the grantor to change assets placed in it. They may assign a trustee, which can be the beneficiary, to act in the event of death or incapacitation. The trustee ensures that the trust is directed according to the wishes of the grantor and manages the income from it.
These two parts of a trust are the income and the principal, or the assets that produce income. However, a revocable trust does not offer asset exemption protection from creditors or tax exemptions since they still own assets. The grantor must also re-title the assets to keep them inside the trust and from going to probate.
Pros of trusts
The main benefit of a revocable trust is that it helps heirs avoid the lengthy probate process, saving them time and expenses. Probate court is the legal process of the court supervising the authentication and distributing the assets of the will.
Another benefit is that asset transfers do not become public records, unlike a will which is an accessible public record. In addition, if a grantor feels that their heirs won’t spend their inheritance wisely, they can create a spendthrift trust. A revocable trust gets protection from the FDIC for up to $250,000 per beneficiary up to five, or $1.25 million.
Trusts aren’t limited to high-income people or high-value assets, and a will is still needed for every estate plan. Each situation is different when it comes to trusts, so researching all the options may be helpful.