What Are Trusts?
A trust is really a contract. It’s a contract that designates specific people, called trustees, to manage specific property trust assets. Those trustees become the legal owner of the property. Setting up a trust is a way to make sure that if you become incapacitated, we know who’s going to take care of your assets and what powers they have to deal with those. After you pass away, we know who’s going to inherit your property because the trust designates beneficiaries. A trust is just a way to take care of things when you’re unable to.
Who Needs A Trust?
People who have assets need a trust. Generally, we look at real estate: if you own your primary residence or investment properties, you definitely need a trust. Even if you don’t have assets but you have a life insurance policy that would take care of your minor children, it would be important to have a trust. If you were to pass away, the trust would be in place to hold and manage that money for minor children or for disabled children. It’s specifically designed for you to direct your money, your assets, and your resources for those who survive you after you’re gone.
What Components Constitute An Effective Trust?
An effective trust should be thorough. The effective components should be thorough incapacity language and thorough transition of power language, including how to change who the trustee is, how a trustee resigns, what happens if a trustee dies, what happens if a trustee spends the money inappropriately, and how to remove a trustee. Every trust should have a trust protector which has some oversight and can make sure that your trustee is doing his or her job. A trust also should have thorough distribution language to know who inherits your property and, if that person was incapacitated, how that would be dealt with.
The other components of a trust should be comprehensive trustee powers in saying what the trustee can and can’t do; directions on trust administration after you pass away. It should have some basic definitions of terms, so the trustee knows what the words mean. A trust is a complex contract. It’s not uncommon for a trust to be 100 or more pages long because it takes that much time to really account for and deal with all of the various aspects that may come up in your life.
Do I Lose Control Over My Assets Once They Are Put Into A Trust?
As long as you’re healthy, you are in control of all of your assets. The minute you become either incapacitated or pass away, then a successor trustee is in charge. While you are the trustee, you have no prohibition from renting property, selling property, exchanging property, or adding more property to the trust. You have no limits.
Can I Or Should I Have More Than One Type Of Trust?
There are different types of trusts and they do different things. Some people have multiple trusts. They have life insurance trusts, irrevocable asset protection trusts, charitable remainder trusts, spousal support trusts, special needs trusts, and trusts for their retirement accounts, their 401k, and their IRA. It really depends on what’s going on in your life. For most people, one trust is enough.
Is A Trust As Good As A Will And Vice Versa? Do I Need Both?
A trust and a will are not comparable. The only thing that they both do is say who inherits your property when you are dead. You absolutely need a will. Whether or not you need a trust is dependent on your personal situation but everyone should have a will.
What Happens To A Trust Upon The Death Of its Maker?
Upon the death of the maker, the trust immediately becomes irrevocable and we put into place the actions that are laid out in the trust, and follow the directions that the maker has put together. The trust goes through what’s called trust settlement or trust administration and that is the formal process of the trustee communicating with all interested parties regarding paying any bills required by the trustee to pay, paying any taxes that may be due, and distributing assets to whom the trust maker directed in the trust. It is a formal process that should be taken very seriously. Trustees carry personal liability for mistakes that he or she may make in the administration of the trust. They should consult with an attorney to walk them through that process.
For more information on Trusts In The State Of California, a free consultation is your next best step. Get the information and legal answers you are seeking by calling (916) 674-2066 today.
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