If you are creating an estate plan in California, you might not realize that one or more trusts could be a part of it. While many people assume that a trust is only for wealthy individuals, this is not the case, and a trust can have a number of uses depending on your specific situation.
Trusts offer more privacy than a will because the assets in a trust do not have to go through the public probate process. They can be used to protect assets if the beneficiary is too young or unlikely to manage their inheritance responsibly for any other reason. Another use of trusts is for loved ones who have special needs and are receiving government benefits. Placing their assets in a trust will allow them to draw on it as needed without affecting their continued access to those benefits. Other uses include donating to charity, protecting assets from credits and using trusts as a strategy to reduce taxes.
The person who makes the trust is called the grantor. The trustee is the party that manages the trust. This could be a family member, a friend, or a professional, such as an attorney. It could also be a bank or a similar type of entity. The beneficiary is the person, group or entity that will benefit from the trust.
Revocable or irrevocable?
There are two major types of trusts, revocable and irrevocable. The former is more flexible while the latter can be more powerful. Under those umbrellas, there are many other different kinds.
The kind of trust that you need will vary according to your individual situation and your goals. Setting up a trust can be more costly than a will, but for some people, it can be a solution to a number of different problems that a will cannot solve.