The living trust has become a popular estate planning vehicle for many California residents. A trust is a legal arrangement in which property is transferred to a trustee, who manages the property for the benefit of the persons named as beneficiaries in the trust document.
The person who transfers the property and creates the trust is known as the settlor or grantor. The trustee can be a relative or a trusted friend of the settlor; it can also be a financial institution. There can be more than one trustee, and a trust may indicate that trustees are to be compensated for performing their duties.
One of the most common forms of trust in California estate plans is the inter vivos trust, also known as a living trust. The grantor creates the living trust during his or her lifetime and transfers assets into the trust. By transferring all of their major assets into the trust before death, the grantor keeps those assets out of their estate and can thus avoid probate.
Unlike a will, a living trust can allow for management of assets during the grantor's life. For those with substantial estates, a living trust can also have some important estate tax advantages. And because it does not have to go through the public process of probate, a living trust has the advantage of privacy.
Trusts must be carefully drafted to comply with California law in order to be effective. It would be wise for anyone considering a living trust to consult an experienced estate planning lawyer.
Source: Findlaw, "Trusts: An Overview," accessed July 17, 2015