Trusts you set up don’t just affect you: they serve as your legacy to the people you love. Any estate plan involving a trust should address the most important parts of your life, including your finances, healthcare directives, real property, and the well-being of your children and other loved ones. While it is difficult to contemplate our own mortality, a failure to do so while we can still plan ahead can lead to the burden being shifted onto loved ones who must then make impossible choices in a crisis situations. Questions like the following are likely to come up:
What will happen to your relatives if you ever have a medical emergency? Who will handle your financial affairs and provide for your family into the future? What will happen to the family business? Trusts can help to answer these and other questions, granting your family security while giving you the comfort of knowing your loved ones are in good hands.
With such matters hanging in the balance, it is crucial to seek professional assistance and representation from an experienced Los Angeles trusts attorney such as Robert Hoffman. Trusts must be formulated properly in order to be effective, and working with a trust lawyer helps protect your interests, allows you to modify or create new documents should your financial needs change, and provides you with priceless peace of mind in knowing that a licensed professional is looking after your family’s affairs.
To set up a confidential legal consultation, call The Law Offices of Robert Hoffman at (800) 897-3915 today. It’s never too early to start planning.
What is an Estate Plan? What is a Trust? What Are the Benefits?
One aspect of an estate plan is that it is like a financial blueprint for the future. Estate plans are designed to encompass your intentions for how your estate should be administered in the even of your passing or incapacitation. Estate plans can include instructions for how your loved ones should be provided for, how your possessions should be distributed, how your life insurance policy benefits should be handled, and other important decisions.
The centerpiece of a professional estate plan is, often, the trust. While there are many different kinds of trusts, in general terms, a trust is a financial arrangement which allows a third party called the “trustee” to manage your assets until the time comes for those assets to pass forth to the beneficiaries of the trust. Trusts can help you shield your assets from certain debt collectors, keep family financial proceedings private, avoid probate & its associated costs and disclosures, and manage wealth distribution with great precision regarding how and when assets should be passed on.
A robust estate plan should provide the management tools needed to address both medical and financial concerns. A well-crafted plan will also help to avoid the necessity of a conservatorship or other court-supervised action in the event of a health emergency. The last thing you want to do is to force your family into a complex legal battle while dealing with the emotional impact of your injury or illness.
Inter Vivos Revocable Trusts
While there are many types of trusts, the most basic distinction is drawn between inter vivos trusts, and testamentary trusts. How are these trusts different, and what are the basic purposes and salient features of each?
Let’s begin with the most common type of trust, the inter vivos trust. You are likely already familiar with this sort of trust through its more common nickname of “living trust” or “revocable living trust.” Unlike a testamentary trust, which we will discuss next, this instrument is created and put into effect before the testator’s (i.e. will-creator’s) death. In addition to serving as a means to transfer property at death, a living trust also functions as a management tool during life. Advantages of a living trust include:
- Delineating a plan for property management during periods of incapacity.
- Possible tax planning opportunities.
- The possibility of avoiding probate after death of the settlor (i.e. the party which creates the trust).
Additionally, living trusts may be useful when potential beneficiaries are minor children or adults with special needs, or if property is held outside of the settlor’s primary state of residence.
The main disadvantage of a trust is the lack of court oversight, which can create opportunities for abuse of discretion by a trustee. Another major disadvantage is the potential for a poorly-drafted trust, which may require court intervention to interpret the settlor’s intentions. In order to avoid these drawbacks, it is always prudent to work with an experienced trusts attorney who can draft comprehensive, clear, and valid documents.
Testamentary Trusts
A testamentary trust is created by a pre-existing will. A will may create multiple trusts, with each providing for distributions of principal and income. However, in contrast to a living trust which comes into effect before the testator’s death, the provisions of testamentary trusts only become operative at the time of the testator’s death.
While it is more common to create an inter vivos trust, there are still valid reasons to use a testamentary trust in your estate plan. Testamentary trusts are often used for tax-motivated reasons, but the decision to use such a trust may also be made for non-tax reasons, such as passing money down to children.
It is important to note that testamentary trusts do not avoid probate. When an individual passes away without leaving a will behind, a judge-appointed person inventories and appraises property and possessions. Probate matters are public information, so if you have any privacy concerns, you will want to avoid probate.
If you are interested in creating a testamentary or inter vivos trust for your family, Los Angeles trusts lawyer Robert Hoffman can help. To start discussing your needs and goals in a private case evaluation, call our law offices at (800) 897-3915 today or contact us online.