Trusts are often recommended for estate planning because of their flexibility. They can be useful for avoiding probate as well as for asset protection, wealth management, charitable giving, special needs planning, and Medicaid planning. If you have a net worth of more than $100,000, including real estate, creating a trust can offer benefits both now and in the future.

At San Diego Legacy Law, we work closely with clients to evaluate their personal goals and available assets before incorporating trusts into their estate plan. Our founder, attorney Nicole D’Ambrogi, holds an LLM in International Taxation with concentrations in Financial Services and Wealth Management, which allows her to strategically analyze the many variables that can affect your ability to meet your estate planning goals instead of focusing on simple document preparation.

Understanding the Main Types of Trusts

There are two main types of trusts: living trusts and testamentary trusts. Living trusts, sometimes called inter-vivos trusts, are established by a living person. Testamentary trusts are established in a will.

Living trusts, which are the most common type of trust, can be either revocable or irrevocable. A revocable living trust transfers property ownership into the trust, but the person who created the trust still has the authority to alter, amend, or terminate the trust. An irrevocable living trust transfers ownership to the trust, and the person who creates the trust has no further authority to alter, amend, or terminate the trust.

Testamentary trusts can only be irrevocable.

Deciding Which Type of Trust Is Best

Each trust type has unique advantages and disadvantages, so it’s important to work with an experienced estate planning attorney to create a trust that best suits your unique needs. For example, if you want to create a source of income in retirement while preserving assets for your heirs, a typical revocable trust arrangement can provide you with distributions while you are living and then continue to support your children, grandchildren, or other heirs after your death.

Some of the factors we’ll discuss as we create your trust include:

  • What assets you want to include in your trust, such as cash, investments, real estate, life insurance policies, collectibles, or antiques
  • What goals are most important to you, such as having an income now, providing for heirs, donating to charity, preserving Medicaid eligibility, or caring for a loved one with special needs
  • Your desire to minimize estate or inheritance taxes
  • If you want to protect assets from creditors
  • How much control you want to have over the management of the trust
  • If you want the trust proceeds to be distributed as a lump sum or paid in smaller percentage disbursements

Please note that regardless of what type of trust you choose, you’ll still need a Last Will & Testament. Functions such as choosing a guardian for your children, naming an executor of your estate, and dealing with property not held by the trust can only be accomplished with a will.

The Role of a Trustee

A trustee is the person or entity that manages your trust according to the terms outlined in the trust document. Depending upon the type of trust you’ve created and your own personal preferences, a trustee can be:

  • The person who set up the trust (you)
  • A trusted friend or family member
  • A corporate entity, such as a bank or trust company
  • Two or more parties acting a co-trustees

Trustees have a high degree of fiduciary care. They must:

  • Receive and manage assets
  • Defend the trust against legitimacy challenges
  • Collect income
  • Handle accounting and recordkeeping
  • Make tax payments
  • Distribute income to beneficiaries
  • Make decisions that are in the best interest of the trust, regardless of personal financial gain

Trustees can be held personally responsible for trust losses if they make risky investments outside the terms of the trust.

Schedule a Consultation Today

San Diego Legacy Law serves clients throughout San Diego, as well as those in La Jolla, Del Mar, Rancho Santa Fe, El Cajon, Poway, Spring Valley, Chula Vista, Santa Rosa, Petaluma, Novato, and Healdsburg. Contact us today to schedule a consultation to discuss your estate planning and asset protection needs.