If you’re considering setting up a trust as part of your California estate plan, you might wonder which type is best. There are several types of trusts available, but the most popular one is the revocable trust – it’s easy, you keep control over it, and you can change it.
What is a revocable trust?
This trust manages your assets during your life and distributes them after you die. Revocable means you can change it or end it whenever you want.
Grantors create trusts. The grantor may also manage and invest assets when they are named as the trustee. When you die, property is distributed to your beneficiaries
You can change the terms any time or dissolve it. You can withdraw assets from it, so it remains in your estate. The grantor can also manage trust property while they’re alive unless they’re disabled. Most agreements let the grantor withdraw assets at any time.
Revocable trusts can avoid probate, which can be a time-consuming and expensive process. They are still subject to estate taxes since the assets fare owned by you. The federal estate tax exemption is scheduled to increase in 2023, and it will be $12.92 million for singles and twice that amount for married couples. Unlike a few other states, California does not impose its own separate estate tax.
Since you are still the owner of the trust, you are generally not protected from creditors. They can sue the trust for unpaid debt and attach its assets if successful.