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What Is A Trust And Why Should You Have One?

Sep 1, 2022 | Estate Planning

Many people think that a last will and testament is all they need to have in order to leave an inheritance behind for their family, but if you have property or family, you really also need to have a trust! Trusts aren’t just for the wealthy elite – they are for everyone. A trust is a legal estate planning tool that allows one party (the trustor/grantor) to give another party (the trustee) the right to manage assets according to the terms sent by the trustor/grantor for the benefit of a third party (the beneficiary). It sounds complex, and in some ways it is, but having a trust has numerous benefits! The experienced Sacramento trust attorneys at Equal Justice Law Group can explain your options, simplify the process, and design a customized trust that will give you peace of mind for the future. 

Advantages Of Having A Trust

The main purpose of a legal trust is to secure your assets and ensure that your hard-earned money is protected so you and your family can stay in control of it, no matter what the future holds! There are many specific benefits that a trust can provide, such as…

Avoiding Probate

If you pass away unexpectedly, and you don’t have a trust in place, your assets will likely need to go through a California court process known as probate before they can be transferred to your family. Probate is time-consuming and expensive. It can be stressful for grieving family members, and it can leave them in a difficult financial situation, as they may not be able to access any of your savings or sell your house, etc., until the process is complete. A trust will bypass probate so your family doesn’t have to deal with that additional hassle!

Passing On Your Legacy

Trusts can allow you to specify how you want your life’s work and legacy to continue to benefit those you care about and love, even when you are gone. The trust can pass assets on to family members and to charitable organizations in the manner you choose!

Protecting Assets Against Mental Illness Or Addiction

If you have family members or children affected by mental illness or substance abuse, you might worry about leaving them with unlimited access to money. A trust allows you to limit the inheritance they can receive without disinheriting loved ones. The trust can distribute assets in a way that supports mental health and recovery without enabling their illness.

Leaving An Inheritance For Minor Children

Setting up a trust allows you to keep your young children’s inheritance safe until they reach a certain age. You can allow for a guardian you choose to manage some of the money while your children are little, or you can keep it just for them until they graduate college or turn 21, etc. You can have confidence that no matter what may happen to you, your children will be well taken care of!

Leaving An Inheritance For Loved Ones With Disabilities

Leaving money directly to someone with special needs can prevent them from receiving needs-based government benefits, but you need to ensure that they will be taken care of when you are no longer around to provide for them. Leaving money in a trust can help them maintain their quality of life without compromising their eligibility for benefits. 

And More – Even During Your Lifetime!

Trusts can also be used to protect your assets from creditors, minimize taxes, protect business assets and operations in the event of your passing, distribute collectible items, and more. Unlike wills, trusts take effect during your lifetime, so they can begin benefiting you right away! They can help you protect your assets from nursing home costs, for example, by owning them outside your name so you can qualify for Medicaid. 

Do You Need A Lawyer To Create Your Trust?

Yes. A local lawyer who specializes in trusts and estate matters is the best choice to create your trust, as they will understand California specific laws and have years of experience drafting trusts for a variety of clients. Designing an effective trust can be complicated. A trust attorney can create the trust in such a way that it meets your exact specifications and will work as intended. 

Different Types Of Trusts 

Another reason why working with a trust attorney is recommended is because there are so many different types of trusts available to choose from. You have options! Which trust you choose will depend on your goals, financial circumstances, family dynamics, and other unique things about your life. A lawyer can advise you as to which one may be the best fit! Some of the most common types of trusts include…

Living Trusts

A living trust is the most common type of trust – it is created during your lifetime, goes into effect during your lifetime, and allows you to transfer assets and property without going to probate court. This trust can help your beneficiaries save thousands of dollars in fees. In addition to real estate, the trust can accept bank accounts, jewelry, and stocks. 

Revocable Trusts

A revocable trust offers the key benefit of allowing you to amend, cancel, or revoke the trust. The trust’s assets will pass on to other beneficiaries after you pass away. Revocable trusts offer flexibility by allowing you to add or remove beneficiaries or sell trust property. (Note that a trust can be both living and revocable, or living and irrevocable – the “living” simply denotes when the trust was made.)

Irrevocable Trusts

An irrevocable trust’s terms cannot change or alter after creation. Compared to revocable trusts, irrevocable trusts offer unique tax advantages. People often use this trust primarily to shield assets from creditors or limit estate taxes. 

Testamentary Trusts

A testamentary trust holds information from the last will and testament. The will specifies the terms and conditions of the trust. A testamentary trust does not go into effect until you die and allows you to stipulate how the assets get distributed in your will. 

Life Insurance Trusts

A life insurance trust holds the proceeds from a life insurance policy. When you pass away, the beneficiary can immediately access the proceeds without paying taxes. After creating a life insurance trust, the insurance policy ownership transfers to the trust. 

Charitable Trusts

A charitable trust enables you to set up your assets to benefit charities. Philanthropic individuals who own non-essential assets, such as stocks and real estate, may benefit financially from a charitable trust. You can also use charitable trusts to reduce gift or estate taxes. 

Credit Shelter Trusts

A credit shelter trust benefits married couples looking to avoid estate taxes after death. When they die, the assets placed in the trust pass tax-free to the remaining beneficiaries. The surviving spouse can retain rights to the trust assets during their lifetime.

Why Choose Equal Justice Law Group To Help You?

Equal Justice Law Group has been helping clients in California establish trusts and estate plans for over 20 years. To us, every client is a partner, which means that we won’t just draft trust and send you on your way; our Sacramento trust attorneys, led by David Foyil, will take the time to invite you into the process. Our team will listen carefully to your goals and work with you to develop a legal trust that will safeguard your assets and legacy! 

We’ll get to know you and answer your questions; we point out things you should consider and help you understand what your trust will do for you. During your consultation, you can meet our friendly team members, learn about your next steps (without confusing legal jargon). We have offices in Sacramento, Jackson, and El Dorado Hills for your convenience! No one is promised tomorrow. Call our law firm today to schedule your free, no-obligation initial consultation and get started!

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