Trusts as important estate planning tools

While many California residents think that a will is the only document they will need to pass on their assets to beneficiaries when they die, there are other estate planning documents that can also be useful in a variety of circumstances. As one example, the importance of establishing an advance health care directive to ensure that the maker’s wishes concerning the types of medical treatment that will be allowed in the event of incapacity is well established. Another type of document that can be applied to a variety of situations is a trust.

In its most simple form, a person will place property that will be managed by a trustee for the benefit of a named beneficiary into a trust. The trustee can be an individual or an institution, such as a bank, and that entity is the legal owner of the trust property. The beneficiary is considered the property’s equitable owner. The trust itself can be created either during the grantor’s lifetime or by a provision contained in the maker’s will.

This estate planning document can accomplish many different purposes. A relatively common reason for establishing a trust is to provide limits and restrictions on the receipt or use of property by the named beneficiary. In many cases, a grantor who believes that a beneficiary would not act prudently after receiving a large inheritance under the terms of a will may choose to place the inheritance into a trust that contains express guidelines that the trustee must follow when making distributions instead. These can include, for example, a requirement that the beneficiary be of a certain age or achieve certain milestones in order to receive all or a portion of the property.

While it may be important for an individual to draft a will, it is also sometimes useful to consider other forms of asset management and distribution. An estate planning attorney can discuss the utility of trusts and their applicability to a client’s particular goals and objectives.

Source: American Bar Association, “Introduction to Wills”, accessed on March 7, 2015