Month: September 2021

Estate Planning 101: The Different Types Of Trusts

Posted on September 23, 2021 by - Estate Planning

Estate Planning 101: Trusts

Creating a trust or multiple trusts is an indispensable part of the estate planning process for many people. Trusts offer many advantages. They can reduce taxes, simplify the probate process, and give the grantor (the person who creates the trust) some amount of control over how their assets are used and managed even after they pass away. There are many different types of trusts in California. There is no one-size-fits-all approach because each has its advantages and disadvantages. Understanding some of the most common trusts will give you a sense of the tools available to you.

Testamentary Trust

The grantor’s will creates a testamentary trust after their death. A person might want this type of trust if they don’t wish to fully transfer their property to an heir (in the case of minor children, for example).

Because it doesn’t come into existence until the grantor’s death, the grantor may annul or make changes to the terms of a testamentary trust while they are still alive. However, the assets of the trust must go through the probate process.

Living Trust

As the name implies, a living trust is created while the grantor is still alive. The tax implications of a living trust and the degree of control the grantor may keep over the assets depend on whether it is a revocable or irrevocable trust.

With a revocable trust, the grantor may move assets in and out or annul the trust. However, any income is taxable to the grantor.

An irrevocable trust cannot be changed once created, so the trust itself must pay the taxes.

Special Needs Trust

A special needs trust provides for the needs of a person who is chronically disabled. The major advantage of a special needs trust is that the disabled person may still receive government benefits such as SSI or Medi-Cal. That’s even when the value of the assets in the trust would otherwise disqualify them.

A special needs trust can either be first-party (funded by the assets of the disabled person) or third party (funded by someone else).

Life Insurance Trust

With a life insurance trust, the trust owns and pays for an insurance policy on the grantor’s life. When the grantor dies, the proceeds of the policy are paid to the trust and distributed accordingly. Because the assets are not part of the estate, this arrangement can reduce or avoid estate taxes.

Charitable Trust

There are two main types of charitable trust: the charitable remainder trust and the charitable leads trust.

With a charitable remainder trust, the grantor may receive income from the trust assets for a certain period of time or the rest of their life. The assets are distributed to designated charities after the set period.

A charitable lead trust works oppositely. Income is paid to charity for the duration of the trust, and afterward, the assets may be distributed to family or others. The two types offer different income and estate tax benefits.

For Expert Advice on Different Types of Trusts

The list of California trust types could go on: bypass trusts, spendthrift trusts, blind trusts, etc. You have many options available to meet your unique needs, but it’s crucial to speak with an experienced estate planning attorney to find the best fit. Contact our office today to schedule a consultation.

Is DIY Estate Planning A Good Idea?

Posted on September 9, 2021 by - Estate Planning

The Risks of DIY Estate Planning

Many people don’t have an estate plan in place. They may be young or believe they don’t have enough assets. Others recognize the need for one but try to do it all on their own. While we understand the impulse to avoid hiring an attorney, the benefits generally far outweigh the drawbacks and risks of DIY estate planning.

Risk #1: Invalid Documents

Whether it’s a will or trust or both, you must follow many rules and requirements for them to be considered valid.

If the documents you drafted aren’t clear enough, can’t be authenticated, or try to distribute assets in a way the law does not allow, they may be declared invalid by the probate court. In that case, the court will likely distribute your property according to the laws of intestacy (the state’s default rules of inheritance).

It’ll create two significant problems. First, your estate may not go to those to whom you wanted it to go. Some people may be overlooked, while others may receive more than you wanted. Second, it can make life difficult for those you’ve left behind. When someone contests a will in probate court, the process can be long, expensive, and emotionally exhausting.

A clear and professionally prepared estate plan, on the other hand, is much more likely to be executed smoothly and according to your wishes.

Risk #2: Higher Taxes

One of the most important considerations for an estate plan is the impact it’ll have on taxes. And that’s whether it’s your taxes, the taxes on your estate, or the taxes your heirs must pay.

There are various ways to reduce the overall tax burden and control when you must pay the tax. It can be complicated, and we advise you to leave it to the professionals.

Risk #3: Missed Opportunities

With a DIY estate plan, one big drawback is that you don’t know what you don’t know. Many tools will help you accomplish specific goals and prepare for a wide variety of contingencies. But unless you’re familiar with the ins and outs of estate law, you’re likely to take a few missteps.

Rather than trying to figure everything out on your own, a consultation with an attorney is crucial to make sure nothing gets missed.

Southern California Estate-Planning Experts

You’ll spend your whole life building up your estate. Determining what happens to it after you’re gone is one of the most important decisions you will make.

Trying to go it alone is likely to be frustrating and time-consuming. But more importantly, it may have unintended consequences for those you leave behind.

A quick consultation with our expert attorneys can help you create an estate plan that works and is right for you. Contact our office today.