When people in San Marino, California, plan their estate, they might think that wills are the only available tools for dividing assets. However, trusts are another tool they can use to control where their assets go, even before death. While there are several types of trusts, a living trust is a commonly used type.
Basics of a living trust
A trust is a fiduciary arrangement between the creator, also known as the grantor, and the trustee who manages it. After the grantor dies, the trustee ensures the assets in the trust go to the named beneficiaries. The grantor creates the living trust, sometimes called a revocable trust, while they are still alive.
The trust may hold almost any type of assets, such as checking accounts, stocks, bonds, and real estate. The assets are transferred to the beneficiary upon the death of the grantor, and the grantor can amend add, or remove assets while they are still living.
How wills and trusts differ
One difference between a will and a trust is that a will only goes into effect when the grantor dies. In addition, a will allows the creator to control their final wishes regarding minor children and final burial arrangements. The will must go through a lengthy probate process, and it is subjected to contesting by family members and become a public record.
A trust gives the grantor more control over assets, and it doesn’t go through probate. While the process of creating a trust is often more complex, the grantor can choose from several types according to their needs. For example, an irrevocable trust cannot be amended, but it allows them protection from creditors and has some tax benefits.
Trusts also have the benefits of planning for incapacity and protecting the privacy of the contents. Wills are usually subjected to taxes, especially for grantors with a high net worth.
Both wills and trusts are great tools regardless of income. Without these tools, the transfer of assets is dictated by state laws.