Setting Up a Trust

Trusts aren't just for the wealthy; they are valuable tools to protect your assets and make sure your wishes are honored. The Law Office of Geoffrey Fong will guide you through the process of setting up a trust and help you make informed decisions.  

What Is a Trust?

A trust is a legal arrangement in which one party holds property for the benefit of another. There are many types of trusts, but they all serve the purpose of managing and protecting assets. Trusts can dictate how and when assets are distributed, offering control over wealth beyond one's lifetime. 

Trusts have several advantages over simple wills. They help avoid the lengthy and often costly probate process, allowing beneficiaries quicker access to assets. They also provide privacy since trusts are not public records. They also offer significant tax benefits, potentially saving your estate money. 

Types of Trusts

Here are some common types of trusts and their benefits: 

Revocable Trusts 

A revocable trust allows the creator to retain control over the assets during their lifetime. These trusts can be altered or revoked at any time. After the creator’s death, the assets are distributed according to the trust’s terms without going through probate. 

Irrevocable Trusts 

Once established, irrevocable trusts cannot be easily altered or revoked. Since the assets are removed from the creator's estate, these trusts offer greater tax benefits and asset protection. 

Special Needs Trusts 

These trusts provide for beneficiaries with special needs without jeopardizing their eligibility for government assistance programs. They ensure the beneficiary has resources for care and quality of life enhancements. 

Charitable Trusts 

Charitable trusts are established to benefit a specific charity or the general public. These trusts can offer income and estate tax benefits while supporting causes you care about.

There are two main types: charitable remainder trusts, which provide income to the beneficiaries for a specified period before donating remaining assets to a charity, and charitable lead trusts, which donate income to a charity for a specified period with remaining assets going to other beneficiaries. 

Spendthrift Trusts 

Spendthrift trusts are designed to protect the beneficiary's inheritance from creditors and poor financial decisions. A trustee manages the trust and distributes funds according to the terms specified by the creator.

This type of trust ensures that the assets are used wisely and can provide a steady income stream to the beneficiaries who may not be financially savvy. 

How to Set Up a Trust 

Setting up a trust involves the following steps: 

1. Determine your goals: Before setting up a trust, identify your primary goals. Consider who you want to benefit, how you want your assets managed, and any specific instructions for asset distribution. 

2. Choose the right type of trust: Based on your goals, select the type of trust that best suits your needs. Consulting with a legal professional can help clarify which option is most beneficial for your situation. 

3. Draft the trust document: This document specifies the terms of the trust, including who the trustee will be, who the beneficiaries are, and how the assets should be managed and distributed. 

4. Funding the trust: After creating the trust, you need to transfer ownership of your assets into it. This process, known as funding the trust, can include transferring titles of real estate, bank accounts, investments, and personal property. 

5. Choosing a trustee: The trustee is responsible for managing the trust according to its terms. You can choose a trusted individual or a professional trustee. It's important to select someone reliable and capable of handling the responsibilities. 

6. Updating your trust: Regularly review and update your trust to reflect changes in your family situation, financial circumstances, or wishes.  

Common Mistakes to Avoid

It is easy to make mistakes when setting up a trust. Common errors include not funding the trust properly, failing to update the trust after major life events, and not clearly defining the terms. An experienced estate planning attorney can help guide you through the process, ensuring your trust is set up correctly and effectively. 

Setting up a Trust in California 

In California, several laws impact how trusts are created and managed. The California Probate Code governs the establishment and administration of trusts. It includes provisions on the duties and powers of trustees, the rights of beneficiaries, and the procedures for resolving disputes. 

California law mandates that the trust document be in writing and clearly state the intent to create the trust. The trustor, the person creating the trust, must have the legal capacity to understand the implications of the trust at the time of its creation. 

California law insists that certain formalities be adhered to, such as signing the trust document in the presence of a notary public or witnesses. California also offers the option of creating a pour-over will, which ensures that any assets not transferred into the trust during the trustor's lifetime will be placed into the trust upon their death.  

Enlist Help From an Estate Planning Attorney in Rocklin, California

Attorney Geoffrey Fong has always valued family above all else. This deep appreciation for family and a desire to positively impact his community led him to a career in law. After graduating from the University of the Pacific's McGeorge School of Law, he began practicing estate law in Rocklin, California. He is dedicated to helping Californians plan their futures and protect their families.

If you live in Rocklin, Roseville, Folsom, or Citrus Heights, contact the Law Office of Geoffrey Fong for estate planning guidance.