Using trusts as part of an estate plan

People in California who are creating an estate plan may find a trust useful. Trusts are one way of protecting an estate from estate tax, but they have a number of other uses as well. For example, an irrevocable trust can protect assets from lawsuits and creditors. The disadvantage of an irrevocable trust is that a person loses control of the assets in it when they create the trust. A revocable trust can be altered or canceled in a person's lifetime.

A person might want to remove their home from the estate to lower the value of the estate, and this can be done with a qualified personal residence trust. The deed to the house is placed in a trust, and the former owner can remain in the house for the time specified in the trust. One drawback is if the former owner dies before the time period ends, the house returns to the estate.

A generation-skipping trust allows funds to go straight to grandchildren. This is one way of avoiding estate tax, but it can also be used if a person does not want their children to have access to certain assets. One formerly more popular trust for avoiding estate is a credit shelter trust, but this is less necessary now that couples can use one another's tax exemptions.

Whether a person has substantial assets or only a few assets, a trust may be helpful in certain situations. For example, a person might have a child who receives government assistance due to a disability. A trust may help support that child without affecting the child's eligibility for assistance. One important aspect of a trust is choosing the right trustee to oversee it. This can be a family member, a friend or a professional like an attorney.


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