For some people in California, estate planning is very simple. The cornerstone of their estate plan is a simple will containing instructions as to how their assets should be distributed upon death. Combined with a durable power of attorney to provide some protection if they become incapacitated, and a living will to make sure their health care wishes are respected, they have all they need in an estate plan.
Many other people want more out of their estate plan. For them, an inter vivos trust – also known as a living trust – is an option to consider. Unlike a will, which only becomes effective upon the testator’s death, a living trust can be used for asset management and distribution during the trustor’s lifetime, as well as after death.
Trusts have a number of advantages. For many people, the primary attraction of a trust is the ability to avoid probate. The probate process in California can be extremely time-consuming and expensive. It is also public.
A will must generally be probated in California. Living trusts, however, do not have to go through probate because the assets in the trust are owned by the trust, not the trustor. The assets are therefore not part of the trustor’s estate when he or she dies. Living trusts therefore have the advantages of reduced expense and privacy.
Living trusts also allow management of assets by a trustee during the trustor’s lifetime, for the benefit of the trust beneficiaries – including the trustor, if desired. A living trust can also be very useful in minimizing federal estate taxes.
