Creating a last will and testament is the first method that many people think of for passing on an estate to selected beneficiaries. While this is a popular way of transferring one’s wealth to the next generation, it is not the only option. Another route to take is creating a revocable trust, which comes with its own unique set of advantages and pitfalls. If you’re a California resident still in the decision-making process, learning what revocable trusts have to offer may help you do what’s best for your family.
Revocable trusts involve a grantor agreeing to either a person, corporation or both to act as the trustee, meaning they’re responsible for administering the trust. It’s often seen as preferable to name a corporation – such as a bank or trust company – as trustee instead of an individual. With a corporation managing your trust, it’s never in question whether or not someone competent will be available at any given time to do what’s best for the grantor.
Depending on the jurisdiction, it may be possible for the same individual to be both grantor and trustee. When that is the case, it’s necessary to name a co-trustee so the trust will continue to be managed if the individual dies or becomes disabled.
Understanding your rights as grantor
The general rule with this type of estate planning is that the property is managed for the benefit of the grantor. Usually, the grantor keeps a certain set of rights over their trust during their lifetime. It is generally within the grantor’s rights, for example, to give instructions to the trustee to distribute all or any amount of the property in the trust.
To ensure that your wealth is passed on to the people you care about, it’s highly advisable to learn all your options. In many situations, revocable trusts are a viable way of managing property.