How many trusts one should have is a question that comes up frequently because it used to be that two trusts were the norm. There’s some history behind this: estate tax laws (tax on the value of what is left) were different, and each spouse had an exemption up to a certain amount. Frequently, each spouse had a trust established under that amount. However, the laws have changed for the better– spouses can now consolidate the trusts without losing the tax benefits. While it is no longer the norm to have separate trusts for each spouse, there are several reasons why families establish more than one trust.
Married couples who want to keep assets, property, and rights separate will often establish separate trusts. This is a common option for blended families or other family dynamics; some children will get an inheritance, and others will not.
If there is a unique piece of property or interest that you would like to stay in the family (a family farm, a business, a vacation home, etc.), a trust is a great option for keeping these assets in line with your wishes.
Trusts can act as a protection or preservation tool. The most common concern in this arena is families wanting to preserve assets in the event they need nursing home care and do not want to blow through their money or have to sell their property or home to afford it.
Secondarily, a trust can act as liability protection from creditors—often, a judgment creditor. For those in “high-risk” professions with a higher probability of being sued (surgeons, doctors, attorneys, truck drivers, etc.), a trust can act as a “vault” or insurance policy of sorts.
There is no one-size-fits-all formula—an experienced estate planning attorney will help you establish an estate plan unique to your family dynamic, wishes, and needs. In California, there are numerous forms of trusts. Depending on your goals for your estate, you may wish to include one or more of these trusts in your estate plan.
A testamentary trust, sometimes known as a “will trust,” is established under an individual’s last will and testament. An individual’s estate may comprise more than one testamentary trust, depending on the terms of the will.
If a person with special needs receives assets through a traditional trust option, their assets may disqualify them from public services such as health care and long-term care funding. A special needs trust is the answer to this problem. The assets are held and managed by a trustee.
Property is handed to a minor under a minor’s trust. It isn’t easy to give assets to a minor. This is due to the fact that juveniles cannot be expected to manage huge sums of money and lack the legal competence to make decisions concerning assets. However, until the minor reaches a certain age, the property is controlled by a trustee. If all of the trust property is dispersed by the time the youngest minor reaches the age of 21, this sort of trust provides tax advantages.
Revocable living trusts allow you to keep control of your assets while you are alive and choose how your assets are dispersed after you die. Life trusts avoid the complications and costs of both living and death probate. You can change it at any time after you create it. This involves both adding and removing assets as well as beneficiaries.
Those looking to maximize tax benefits or preserve assets from the high costs of nursing homes may consider irrevocable trusts. You cannot change an irrevocable trust after it has been established. While it lacks the flexibility of a revocable trust, it does provide some asset protection from creditors.
If you are passionate about one or more causes, a charitable trust allows you to donate your assets to a charity. In addition, for estates subject to the Federal Estate Tax, charitable trusts provide tax advantages.
You may be able to lower estate taxes by using a life insurance trust. This ensures that more of your hard-earned assets reach your intended beneficiaries. In addition, your policies are owned by a life insurance trust, which keeps them distinct from your estate.
At the Law Offices of Alice A. Salvo, attorney Alice Salvo and our other attorneys have the experience and knowledge to answer any questions you have, and can recommend the steps that are necessary to protect your assets, pass them to your loved ones according to your wishes, or tackle any other estate planning matter.
We can discuss concerns, review your case and provide answers during a free consultation in our office, by phone or Zoom. Please call 818-676-9572 to schedule a convenient consultation.