For Californians, estate planning might be perceived as a dual-edged sword. On one hand, it is a strategy to make sure that loved ones are cared for and assets are allocated as the owner wants. On the other hand, it is acknowledging one’s mortality and preparing for the inevitable. However, there are certain methods that are beneficial and should be considered even if it is difficult to contemplate. One is a trust. Specifically, a living trust (inter vivos trust) is a tactic that is useful. Knowing its benefits and potential drawbacks is key before deciding.
A living trust can make certain that the assets will be managed according to the person’s desires. When the living trust is formulated, the person who is taking it out can be the trustee at the start or someone else can be chosen to do it. The trustee can be named to take over if the person is no longer able or willing to do so. When the person dies, the trustee will accrue the assets and pay whatever outstanding debts remain. The assets left over will be distributed as the person wanted. The difference between a will and a trust is that the trust assets can be distributed based on the trustee’s decisions and there is no supervision or approval from the court.
There are also disadvantages of a living trust. As mentioned above, there is no court supervision to what the trustee does. With that, it is possible that the trustee might not act in the person’s best interests. The cost might also be prohibitive as it could be higher than what it costs to create a will. This is contingent on the estate plan. In addition, it is important to remember that there will be extra paperwork. A lender might not want to provide funds to a trust and will want property to be removed prior to granting a loan.
These issues could be confusing to people as they decide on how to proceed. For that reason, estate planning should be conducted with help from an experienced attorney. When considering trusts, a lawyer can help to determine whether it is the best choice or if alternatives should be explored.
Source: calbar.ca.gov, “Do I Need A Living Trust? 2) What can a living trust do for me? 8) What are the disadvantages of a living trust?,” accessed on April 18, 2017
