When you die, all property titled in your name or that you have an interest in becomes part of your probate estate. The probate court in the county of your residence oversees your estate. Probate is the legal process of distributing your property after your death. In this blog, our Palm Springs estate planning attorneys discuss how trusts can help avoid probate in California.
What Is a Trust?
A trust creates a fiduciary arrangement between a third party (i.e., trustee) and one or more beneficiaries. The trustee manages the property for the benefit of the beneficiaries according to the terms of the trust.
Different types of trusts accomplish different goals. Each trust has specific characteristics and rules. Therefore, talk with a lawyer before choosing a trust to avoid probate in California.
Examples of trusts include, but are not limited to:
Revocable Living Trust
Revocable living trusts are extremely popular. It allows the settlor (the person creating the trust) to title property in the trust name and serve as trustee. The settlor can modify or terminate the trust during their lifetime. After their death, the trust becomes an irrevocable trust.
Irrevocable Trust
Irrevocable trusts are used to protect assets and for tax planning. The trust cannot be changed or revoked after it is signed. The settlor gives up control over the property managed by the trust.
Testamentary Trust
A trust set up in your will that does not take effect until your death. Testamentary trusts are very simple and are generally used to manage a minor's inheritance. You can name a trustee and determine your child's age before they receive their inheritance. Testamentary trusts do not avoid probate.
Special Needs Trust
A trust designed for someone who receives disability benefits. A special needs trust can provide support for a disabled individual without jeopardizing their eligibility for disability and government benefits.
Charitable Trust
The trust holds assets for the benefit of a charitable organization or purpose. The assets do not go through probate.
How Does a Trust Avoid Probate in California?
Because you transfer ownership of assets to the trust, you are no longer the legal owner. The assets are held by the trust and managed by the trustee.
Provided the trust is drafted correctly and meets California laws for valid trust agreements, the property held by the trust does not go through probate. There is no need to probate those assets because you do not have an ownership interest in the property.
A trust that is not correctly set up could result in property needing to pass through probate. Property you forgot to add to the trust would go through probate.
Benefits of Using a Trust to Avoid Probate
Placing assets in a trust is beneficial in several ways, including:
Reducing your taxable estate to minimize estate taxes
Avoid the cost and time to probate an estate
Beneficiaries can gain access to the funds and property they need without waiting for probate
You can protect assets during your lifetime by using trusts
Trusts provide more control and flexibility for distributing your assets after death
Trusts remain private, while probate is public record
If you are unsure whether you need a trust or what type of trust to use, talk with an estate planning lawyer.
Learn More During a Free Consultation With Our Palm Springs Estate Planning Attorneys
You can choose from numerous types of trusts for your estate plan based on your goals and needs. Call Heritage Legal, P.C. to schedule a consultation with our Palm Springs estate planning attorneys. We can help you develop a trust and estate plan that protects your legacy for future generations.