- posted: Apr. 15, 2022
- Estate Planning
A living trust is a widely used estate planning tool that can offer flexibility and allow you to maintain control over the assets during your lifetime. There are many different types of living trusts that can be set up depending on your specific estate planning needs. Not to be confused with a testamentary trust — which goes into effect upon death — a living trust is effective during the lifetime of its creator.
There are various advantages to setting up a living trust. Since living trusts are revocable, the designated beneficiaries and other terms can be changed at any time. Other benefits of establishing a living trust include:
- Avoiding probate — A living trust can help your family avoid the lengthy and costly probate process by distributing the assets in the trust directly to the beneficiaries you name.
- Preserving privacy — As a living trust does not go through the public probate process, information about your assets and finances can be kept private after your passing.
- Separating assets — If you and your spouse had substantial property that you acquired prior to your marriage, a trust can help separate your individual assets from community property assets.
- Discouraging estate disputes — By having a trust in place, you can eliminate surprises and reduce the likelihood of family disputes and challenges to your estate.
While living trusts can be beneficial in many situations, there are also some potential disadvantages that should be carefully weighed. Some of the cons of a living trust include:
- Planning and maintenance — A living trust creator transfers ownership of their assets to the trust. Though you can access these assets at any time, setting up the trust and recovering assets does require some planning. You might also have some administrative expenses associated with the trust, as well.
- Creditors can reach your assets — Unlike certain types of irrevocable trusts, creditors are able to collect trust assets in order to satisfy a debt.
- No tax benefits — Although you can include a credit shelter trust provision in the trust instrument, a living trust on its own provides no tax benefits.
A living trust is only one type of trust that can be used as part of a comprehensive estate plan. Whatever your goals might be, it’s best to have the guidance of a trusts and estates attorney who can identify the best solutions for your particular needs. The California attorneys at Favaro, Lavezzo, Gill, Caretti & Heppell, PC provide diligent counsel and strategic advice for estate planning matters in Napa and Solano counties. Call 707-674-6057 or contact us online to schedule a consultation at our Vallejo or Fairfield office.