A living trust takes effect while the trustor is still alive. By comparison, a testamentary trust only takes effect when the trustor dies, transferring ownership of the trust to the trustor’s designated trustee. If you decide to create a living trust, there are two options. This first is to create a revocable living trust that allows you to adjust the terms of the trust and add more to the trust as you see fit. The second would be to create an irrevocable living trust that is essentially set in stone and cannot be altered in any way. There are benefits and drawbacks to both types of living trusts. An experienced Orange County trusts attorney can help you determine which option better suits your needs and expectations.
With a revocable living trust, the trustor retains a significant degree of ownership and control over the trust while they are still alive, meaning the trust does not shield the contents from creditors. Additionally, revocable living trusts are subject to state and federal estate taxes upon the trustor’s death. Depending on the size of the trust, it may be in the trustor’s best interests to construct the trust as a revocable living trust to ensure they have the ability to easily make changes to the terms of the trust, add contents to the trust, or change beneficiary designations.
Irrevocable trusts may seem disadvantageous to some due to the fact that you cannot change the trust after its creation, but the reality is that an irrevocable trust can act as a tax shield against state and federal estate taxes. Additionally, an irrevocable living trust can help the trustor’s family completely avoid the probate process as all of the trustor’s assets transfer to the trustee immediately upon creation of the trust.
In the event you want to take advantage of the benefits of an irrevocable living trust but are concerned about adding more items to the trust in the future, your Orange County trusts lawyer can help you create a “pour-over will,” a document that essentially transfers ownership of any assets that have not been included in your trust to the ownership of your trustee upon your death. This is a great contingency plan for anyone who wants to take advantage of the tax benefits of an irrevocable living trust and still ensure assets gained after the creation of the trust are added to the trust.
Working with an experienced Orange County trusts lawyer to create a trust is one of the best decisions you can make when it comes to estate planning. Even if you have already started the estate planning process by developing a will or designating a Power of Attorney, creating a trust can provide an additional layer of security over your assets and provide your family with invaluable peace of mind.