A revocable living trust can be a powerful estate planning tool and an effective means to keep valuable assets out of probate. Before setting up your trust, it’s important to know your rights as the trust creator or settlor. Here is what you need to know about settlor’s rights and your revocable living trust:
What is a Revocable Living Trust?
In California, a person can set up a revocable living trust and transfer his or her ownership of property, assets, or funds to the trust. Once the resources are placed into the trust, they no longer legally belong to the former owner and are owned by the trust. When a trust is revocable, the trust settlor can take assets out of the trust and make other changes during his or her lifetime.
What are the Settlor’s Rights?
One of the most appealing aspects of a revocable trust is its flexibility. As indicated above, a settlor can make changes to an irrevocable trust throughout his or her life. That can mean taking actions such as removing or adding assets, amending trust terms, or changing beneficiaries.
Limitations on Settlor’s Rights
Although settlors generally enjoy the freedom to move assets in and out of an irrevocable trust, there are times when this right may be limited. For instance, when a settlor is going through a divorce, the trust may have a provision regarding what will happen to its contents in this circumstance. Without this type of provision, California law prohibits spouses from making changes to the trust while the divorce is pending. The divorce court has the final word on whether a revocable trust can be altered during the case.
Another limitation on the settlor is his or her ability to protect trust assets from creditors. Unlike an irrevocable trust, where a settlor’s creditors cannot reach trust assets, a revocable trust does not enjoy the same protections. A settlor’s creditors can come after trust assets to satisfy unpaid debts.
Having an irrevocable trust can be an excellent way to plan for your estate. However, it’s important to work with an experienced estate planning attorney to examine the benefits of this tool, as well as other available estate planning devices. At the Law Offices of Alice A. Salvo, we are experienced California estate planning attorneys who can help you get the right measures in place for your future. Contact us today to schedule your consultation.