Understanding the basics of trusts as estate planning tools can be crucial for California residents. Trusts are essentially agreements that dictate how assets will be managed and distributed to named beneficiaries. The creator, or grantor, of a trust can name a trustee to manage the trust. This trustee has a fiduciary duty, meaning that he or she must make decisions regarding the trust and trust assets that further the best interests of the trust’s beneficiary.
There are many reasons why creating a trust can be beneficial. To start, trusts, unlike wills, allow assets to bypass the probate process. This can reduce the amount of time needed to distribute estate assets and it can save beneficiaries money. Since the probate process can be bypassed, those who utilize trusts can protect the privacy of their estate. Also, trusts are a viable way to financially provide for those a grantor cares about while allowing restrictions to be placed on the distribution of those assets.
A wide variety of types of trusts exist to fit an individual’s unique estate planning needs. A living trust allows a grantor to place assets in a trust throughout his or her life, while a testamentary trust can be created through a will when an individual passes away. Trusts can be created to provide for pets and contribute to charities. Trusts can also be funded or unfunded, and revocable or irrevocable.
The decisions to make with regards to trusts can quickly become overwhelming, especially when an individual doesn’t have a clear sense of how to use them to his or her advantage. Understanding estate planning tools can help individuals understand their options and help them identify the estate planning vehicles that are best for them and their estate.