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Wills & Trusts

A Will is a legal document in which you nominate an Executor, who after you die submits the Will to Probate, and is appointed as Executor by the Probate Court, before he can act as Executor. Once appointed, the Executor administers your estate, including settling debts, and distributing your assets per your wishes expressed in the Will. As such, a Will almost always goes through formal Probate. The only benefit of a Will is that you designate who will be appointed Executor, and how your assets will be divided when you die.

If you die with no Will or Trust, the California Probate Code prescribes who can be appointed to administer your estate, and who is the heir of your assets. That occurs via formal Probate. Probate Fees are set by the State, and they are a percentage of the Gross value of the Estate.

Because the Probate Fees are so high, a Living Trust is the essential Probate avoidance tool. A Revocable Living Trust does essentially precisely what a Will does, except it does it outside of Probate court. A Trust provides for administration of your assets during your life, and the distribution of your assets at death. Instead of Executor, you name a Trustee to take charge of your assets and make distributions after you die. Trusts can be structured in different ways to play different roles, and are utilized to benefit not only the Trust creator (known as the Settlor) but also the Trust Beneficiaries. There are different types of trusts, and trusts should be customized to fit your specific family’s needs.

Types of Trusts

A trust is a legal relationship in which property is titled in a legal entity and held by a Trustee for the benefit of the Trust Beneficiaries. The creator of the Trust, known as the Settlor, or the Grantor, creates the trust document, and names a successor Trustee. Generally, during the Settlor’s life, he acts as the Trustee, and manages the Trust assets for his own benefit. At the Settlor’s death, the named Successor Trustee steps in the shoes of the deceased Settlor, and collects, values and marshals the trust assets as provided in the Trust document. The Successor Trustee fulfills a number of fiduciary duties to the trust beneficiaries, generally without the need of any court involvement.

A Trust can be structured in a number of ways, and some of the more popular trust structures are:

  • Single Person Probate Avoidance Trust – which replaces what is generally known as your Will, because it completely avoids Probate.

  • Married Couple Probate Avoidance Trust    (“A” Trust), which can also be utilized by Domestic Partners, and which leaves the surviving spouse or domestic partner in full control of the entire trust at the first death.

  • Irrevocable Life Insurance Trust , which creates an irrevocable trust to own policies of life insurance thus removing them from the taxable estate of the Insured.

  • Qualified Domestic Trust, which should generally be utilized where one of the spouses is NOT a US Citizen.

  • Qualified Personal Residence Trust, which is a lifetime transfer of a personal residence in trust for a term of years, which can accomplish beneficial tax treatment.

  • Second Marriage (A-B) Trust, which ensures that the wishes and goals of each spouse are protected at the first death, and leaves (with proper drafting) no opportunity to the surviving spouse to disinherit the children of the deceased spouse, or take adverse position to their inheritance interests, while providing the surviving spouse with adequate support during his or her life.

The type of trust which best fits each set of circumstances will depend on the specific family dynamic, the extent of your assets, and the inheritance goals sought to be accomplished.

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