Finding the right trust solutions for an estate plan

As California residents work on estate plans, the decision about creating a trust may be a concern. A trust is perceived as protecting one’s assets from the probate process, allowing for smoother and more private distribution after death. However, trusts may not always be protected fully from probate, and state laws should be considered. Many individuals believe that there are tax benefits available when a trust is established, but experts indicate that many of these benefits are primarily advantageous to those who are very well off.

Changes in tax policies allow married couples an exemption of $10.6 million from federal estate taxes. For many, this is more than enough protection to eliminate the need for a trust. It is also helpful to know that revocable trusts offer no special tax advantages. While there may be some tax benefits with irrevocable trusts, the expense and effort involved in administration of such trusts may be significant.

If an individual or couple decides to use a trust, it is important to understand the difference between revocable and irrevocable options. Changing an irrevocable trust can be complicated, requiring the approval of all heirs and trustees involved. A revocable trust can be changed as often as desired. Because a trust allows one’s assets to be held and managed by a third party, a revocable trust is often used by those who want to prepare their estates for management at a future point when personal management may not be possible.

Because some options in estate planning can be more difficult to change, it may be important to work with an estate planning lawyer to limit the risk of errors. The lawyer can offer advice on different trust options based on a client’s assets and concerns.

Source: US News, “How to Choose Between a Revocable and Irrevocable Trust“, Joanne Cleaver, June 19, 2014

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