California Trust Attorneys
Providing Trust Attorney Support to Clients Across California.
When creating an estate plan, it’s important to examine not only your current financial goals but your future ones as well. Estate planning is a complex process that involves specific tools and processes to preserve your wealth and your assets. One of the most important tools in an estate plan is a trust. Creating a trust can help reduce your tax liability and avoid the probate process, leaving more assets to your family on a faster timeline. If you are interested in creating a trust, the next step is to consult a California trust lawyer for more information.
At The Singh Law Firm, our team of California trust attorneys would be happy to review your estate plan and your financial goals. We have years of experience providing legal advice to clients and helping them preserve their assets. Our estate planning lawyers understand just how important it is to have a plan in place for when you pass, and we are confident that we can help you create that plan. If you would like to learn more about our services and get essential trust support, call our office today at 888-828-2864 for a free consultation.
What is a Trust? The Key to Effective California Estate Planning
A trust is a legal arrangement that gives a third party (a trustee) the power to manage assets within a trust. It is a vital part of estate planning and allows you to further help your family and loved ones after you pass away. The creator of the trust, or the grantor, names beneficiaries who will receive benefits from the trust, typically in the form of monthly payments. There are many different types of trusts, and in some trust cases, the grantor can assign themselves as trustee to continue managing the assets.
The grantor chooses which assets to move into the trust. The trustee will manage these assets to ensure they remain profitable. Once the grantor passes away, the assets will be distributed to the beneficiaries named within the trust.
This wealth transfer planning can help ensure your assets are being managed the way you decide and distributed to your family properly. It can also help avoid estate litigation after you pass away, as your final wishes are clear and concise. If you need help with your estate plans, speak with an estate planning attorney with The Singh Law Firm.
There are multiple kinds of trusts to choose from, and some may work better for your financial goals than others. Whether you want to reduce your tax liability, maximize your estate, or preserve your wealth, our team of California trust lawyers can recommend the right trust for your estate plan. Contact our estate planning law firm today to speak with our experienced attorneys about establishing a trust.
What Are the Main Benefits of a Trust?
There are many benefits to creating a trust. The main one is that it avoids the probate process after death. The probate process is a legal process that all wills must go through once the creator of the will has passed. The court will examine the will to determine its validity and also hear any disputes from family members. Unfortunately, the probate process can take months or even years to resolve, which means your assets will not be distributed until then. Trusts are not required to go through probate, meaning your family members will likely receive their assets much sooner than if you leave them in a will.
Other benefits of a trust include:
- Reducing tax liability for your estate
- Protecting your wealth from creditors and lawsuits
- Keeping your estate plan private and off the record
- Controlling your wealth and distribution methods
All trusts have the same players involved: the grantor, the trustee or trustees, and the beneficiaries.
Grantor: The trust grantor, also called the trustor or settlor, is the individual or entity
What’s the Difference Between a Revocable and Irrevocable Trust?
If you create a trust, you will likely be asked to create a revocable or irrevocable trust. These are the two main types of trusts, but they operate differently.
Below are the main differences between revocable and irrevocable trusts:
Revocable Trusts
A revocable trust allows you to manage and control the assets within the trust after it has been created. The grantor can add assets, remove assets, or even revoke the trust altogether at any time if they choose. In most cases, a revocable trust becomes irrevocable after the grantor passes away. Revocable trusts do not offer the same tax advantages as irrevocable trusts; however, they do offer a sense of ownership and control over the assets within them. If you want to maintain your assets while still creating a trust, a revocable trust may be right for you.
Irrevocable Trusts
Irrevocable trusts cannot be modified by the grantor after the trust has been established. Once the assets are in the trust, they cannot be modified, added to, or revoked in any way. Because the assets are out of the grantor’s control, they are no longer considered part of the estate and are not subject to estate tax.
Irrevocable trusts can be modified or even dissolved only when all beneficiaries sign off on the changes. This makes it significantly harder to change the groundwork that an irrevocable trust was built on because even one reluctant beneficiary can prevent any changes.
If you are looking to lower your tax liability, an irrevocable trust may be right for you. However, an irrevocable trust can be riskier since you are giving up control of those particular assets. If you need assistance deciding which trust is right for you, contact our attorneys today.
What Are the Most Common Types of Trusts?
There are many different types of trusts to choose from, and some may benefit your estate more than others. If you are interested in creating a trust, our team will advise you on the best one for your financial needs. It is important to factor in all of the unique aspects of your life, your wishes for your estate after you pass away, and the people or organizations you would like to benefit from a trust you create.
Here are a few of the most common trusts and some information that may help you get started on the right track. If any of these trusts seem right for you, call 888-828-2864 to schedule an obligation-free consultation. We will get you on the right track!
Irrevocable Life Insurance Trust
An irrevocable life insurance trust (ILIT) is a legal arrangement that holds one or more life insurance policies. Once established, it cannot be changed or revoked.
The unique thing about an ILIT is that it exists separately from your estate, which means it is not included in your estate’s value, reducing taxes on your estate.
When you create an ILIT, the trust becomes the owner and payor of the life insurance policy instead of you. Since the ILIT owns the life insurance policies, you will typically pay the trust, and the trustee will use those funds to pay the life insurance premiums.
Once you pass away, the trustee collects the payout and distributes the payouts to the beneficiaries.
ILITs allow you to control how your death benefits are used after your death. You can name any number of beneficiaries and instruct how and when the money from the trust will be used.
If you are interested in forming an ILIT or you have questions about this type of trust, The Singh Law Firm is here to help!
Charitable Remainder Trust
A charitable remainder trust (CRT) allows you to contribute assets to the trust and then receive income from those assets for a specified period of time. Once that period expires, the remainder of the assets in the trust are donated to the specified charity.
A charitable remainder trust is also irrevocable, meaning that once it is formed and assets are transferred to it, you lose the ability to alter or revoke the trust.
This is a valuable estate planning tool because it allows you to plan for your future while still benefiting from the assets you place into the trust. However, because of its irrevocable status, you must ensure it is truly a good fit for your circumstances.
When creating a CRT, you will pick one or more qualifying organizations that the IRS recognizes as a charity to be a beneficiary. You then select one or more non-charitable beneficiaries. This can be your family, friends, or even yourself.
Because of its irrevocable nature, you will benefit from certain tax planning benefits. Your non-charitable beneficiaries will receive income from the trust for a designated amount of time. After that specified time, the assets within the trust are transferred to the charity.
The specified period of time can be the lifetime of one or more non-charitable beneficiaries or 20 years.
There are two types of charitable remainder trusts.
Unitrust (CRUT): In this setup, the non-charitable beneficiaries receive an annual payment equal to the value of assets held in the trust. This means the assets must be valued each year. The grantor, you, is allowed to make additional contributions to a CRUT after the initial transfer of assets.
Annuity Trust (CRAT): This type of charitable remainder trust pays non-charitable beneficiaries a fixed dollar amount, called an annuity, annually. The payment will remain the same each year regardless of inflation or the value of the assets held in the trust. Making your yearly payment too high can lower the tax breaks you can expect from this type of trust. Further, the charity named in the trust may refuse to accept a CRT if it is likely that the payments are too high and no assets will remain in the trust for the charity in the end.
Investments held within your CRT can grow tax-free, which is a huge benefit as the value of the trust’s assets could significantly increase.
This type of irrevocable trust is incredibly complex and governed by many regulations. It requires constant management, and even a minor misstep can result in losing any benefits offered by creating a CRT. You WILL need an experienced estate planning attorney in order to successfully set up and manage a CRT.
Bypass Trust
A bypass trust, also known as an AB trust, is a trust used by affluent married couples to manage their estates and avoid estate taxes.
When the first spouse dies, the trust splits into two: the survivor’s trust and the bypass trust. The survivor’s trust is called the A trust, and the bypass trust is called the B trust.
Bypass Trust (B Trust): Property and assets in the B trust do not belong to the surviving spouse, but the surviving spouse is able to use the property and receive income from it for the rest of their life. As long as the value of the assets in the bypass trust is below the federal estate tax exemption, which is currently $13.99 million, no federal estate taxes will be owed.
Survivor’s Trust (A Trust): The remainder of the assets go into the survivor’s revocable trust. The surviving spouse has total control over these assets, and they can spend them, donate them, or pass them to the trust’s beneficiaries. Estate taxes are not paid on this property, either, because everything left to a surviving spouse is free from both federal and state estate taxes.
Special Needs Trust
A special needs trust (SNT) is a type of special needs planning that allows people with disabilities to receive financial support without risking their eligibility for government benefits like Medicaid, food assistance, or Supplemental Security Income (SSI).
If you have a loved one that you intend to name as an heir, you may end up doing them more damage than you intend when their new wealth makes them ineligible for many of the necessary government-sponsored programs that they need to survive.
If you are the parent or guardian of a child with special needs, you may want to establish a special needs trust instead. This can provide your loved one with financial support without the risk of losing those oh-so-valuable government assistance programs.
There are many benefits that can be gained from using an SNT. It allows you the ability to leave assets and financial assistance to your loved one who does not want to risk losing their benefits. You can assign a trustee to manage the trust. This can be a trusted family member or even an agency.
An SNT is an incredibly complicated trust because it is designed to enable you to leave something to a loved one with special needs without impacting their federally provided benefits. An SNT is a form of irrevocable trust, which means you are unable to modify or revoke the trust once you create it and transfer assets to it. Because of the complexity of this kind of trust and what’s at stake if it is mismanaged, it is highly recommended that you speak with an estate planning attorney when creating one.
Generation-Skipping Trust
A generation-skipping trust (GST) allows you, the grantor, to pass assets directly to your grandkids or other younger beneficiaries and bypasses your children.
Because a GST skips your children and ensures that wealth will be distributed to the generation after your children, it actually helps avoid estate taxes on the assets within the GST. When designating the beneficiaries of your GST, you don’t have to name your own grandchildren. As long as the beneficiaries are 37.5 years younger than you and not your spouse or former spouse, the beneficiaries can avoid estate taxes.
Testamentary Trust
This type of trust is typically created as part of your will and does not take effect until after your death. When creating your last will and testament, you can include a clause that establishes one or more trusts.
Once you pass away, the testamentary trust becomes irrevocable.
A testamentary trust is an excellent way to leave assets and property to your minor children. It allows someone you trust to manage their inheritance for them in a way you define when creating the trust.
You can place any assets or property into this trust when you create it, and you can add to those assets throughout your lifetime. You can designate a starting period, usually when you die, and determine how long it will last. For example, the trust goes into effect once you die, and your trustee can use assets within the trust to care for your minor children. The trust then expires when your children turn eighteen, and the remaining assets within the trust are distributed to them, allowing them to use the funds as they see fit.
Marital Trust
This irrevocable trust lets you transfer your assets to your surviving spouse after you pass away without incurring taxes. Another benefit of this trust is it offers a form of asset protection, protecting the assets from creditors.
When your surviving spouse dies, the assets are not included in their estate. This means the remaining estate will incur less taxes that the surviving beneficiaries will owe.
This type of trust essentially doubles your and your spouse’s estate tax exemption.
This trust provides your spouse with tax-free income after you pass away. You are able to set limits on how much can be withdrawn from the trust over time, meaning you can ensure there are assets left to be given to your children when your spouse passes. Because you create this trust, you are able to designate who the remaining assets will go to when your spouse passes away, meaning you can stop it from going to their new spouse, should your spouse choose to remarry after your death.
What is Trust Litigation?
Trusts are intricate entities created to manage assets, which may be valued very highly. When someone, such as a beneficiary, feels like the trust is being mismanaged or the intention of the grantor is being misconstrued, a dispute may arise.
Trust litigation refers to disputes concerning the management and distribution of trust assets. It is a vehicle for parties to resolve disagreements through the legal system. The process usually includes court involvement, mediation, or negotiation to ensure the trust is being managed as the trustor intended.
There are many reasons someone may wish to involve the court, but here are a few of the most common reasons for trust litigation.
Mismanagement of Trust Assets
When forming a trust, the trustor chooses a trustee to manage it. This person is usually picked because the trustor trusts them to administer the trust as intended.
This person is still human, and trust administration is difficult. They may be tempted by greed or some other nefarious reasoning to mismanage the trust’s assets. If the numbers just aren’t adding up, then the trustee may be mismanaging the trust, either intentionally or because of incompetence.
In either case, the trust’s beneficiaries may need to start an investigation to determine the extent of the mismanagement and the total losses the trust has suffered. If the damage is extensive, then you and the other beneficiaries may need to take legal action against the trustee.
Disagreements Among Beneficiaries
If a trust is poorly outlined or circumstances have significantly changed since the creation of the trust, the beneficiaries may disagree over the interpretation of the trust.
Beneficiaries may disagree over the terms of the trust or misunderstand the provisions set forth by the decedent. Not all disagreements need to go through the court system. The family can use a mediator to help them understand the provisions of the trust. But if they fail to come to an agreement, they may need to have a judge weigh in.
Changes in the Law or Tax Implications
Laws and tax codes change all the time, and they can have major impacts on a trust. These impacts can cause disputes by altering the financial interests of the beneficiaries and the administration of the trust. If the trustor intended the assets of a trust to be distributed a certain way, but new tax laws make that impossible, then the only route to settle these disagreements may be to have the court step in.
Initiating Trust Litigation
Regardless of how the dispute arises, if you are a beneficiary of a trust, you have the right to ensure it is administered fairly and as the trustor intended.
To initiate litigation, you should start by thoroughly reviewing the trust document and all related facts. Understanding the grounds for your concerns is key. If you believe there is reason for litigation, you should immediately speak with a California trust attorney who understands trust and estate administration and can help you with these legal matters.
Trust litigation can quickly become expensive, incurring legal fees, allowing debts that the trust assets could pay to balloon, and even seeing the value of the assets within the trust losing value.
Should I Consult a California Trust Lawyer?
Trusts can be a very valuable estate planning tool when it comes to reducing tax liability and preserving your wealth. If you are concerned about estate taxes or wish to avoid the probate process, a trust may be right for you. Our team at The Singh Law Firm has the legal specialization to review your current estate plan and make a recommendation based on your financial goals and your future wishes for your estate. We will also help you create a trust and establish it correctly so it is legally valid and holds up to any potential disputes. For more information about trusts and how they can help you, call our office today at 888-828-2864.