Many residents of California have begun exploring the use of trusts as a way to leave family members instructions and inheritance guidelines upon their death. Trusts are an extremely effective way of protecting assets or inheritances from misuse.
However, learning about the types of trusts and how they work is a critical element of developing the right plan for your loved ones. This can help you establish an estate plan that accomplishes your goals and functions in the way you expect.
If you have already engaged in trust research, then you probably know that the topic can be confusing. There are many different kinds of trusts, but essentially just two categories of trust creation: the testamentary trust and the living trust. Below are the main differences between the two.
A living or inter vivos trust is started during the grantor’s lifetime and continues after death. If the grantor transfers his or her assets into the trust it can help keep the estate out of probate which is beneficial to the grantor’s heirs. Living trusts can be revocable or irrevocable. A revocable trust can be changed during the grantor’s lifetime while an irrevocable trust cannot be changed.
By contrast, a testamentary trust begins after the grantor’s death. At that time, assets or property will be transferred to the trust. To create a testamentary trust, a will is usually needed specifying the trust’s details. Because this kind of trust is a provision of a will, the property must pass through probate.
Being well-informed is an important part of all estate planning activities. This prepares you to create documents that protect your assets as well as your heirs. Most California residents find that working with an estate planning lawyer is a safe and effective way to create wills, trusts and other legal documents.
Source: FindLaw, “Trusts: An Overview,” accessed May 13, 2016