Irrevocable Living Trust Attorneys in El Cajon
When most people hear the word “trust” in relation to an estate plan or leaving money to loved ones, they may automatically assume that trusts are reserved only for wealthy families, allowing wealth to be passed down from generation to generation. While it’s true that many high-asset families and individuals do indeed use trusts to protect wealth over generations, trusts can be important estate planning tools for those of a wide range of economic means.
At Garmo & Garmo, Attorneys at Law, LLP, our experienced estate planning lawyers can help you to understand the various types of trusts, how trusts work, and which type of trust may be best for your financial situation and goals. Consider the following information about irrevocable living trusts and call our law firm directly for more information.
Trusts: The Basics
A trust is a type of estate planning vehicle that allows the creator (of the trust) to more effectively manage their assets, especially as that management pertains to leaving assets to children or other beneficiaries. A trust is actually a very simple concept to understand: a third-party fiduciary, known as a trustee, holds assets placed in the trust on behalf of a single beneficiary or multiple beneficiaries. These assets are distributed to the beneficiaries per the terms of the trust.
There are multiple different types of trusts. For those who are hoping to obtain certain benefits (i.e. tax advantages, discussed in more detail below), an irrevocable trust may be preferable.
What Is an Irrevocable Living Trust?
As its name implies, an irrevocable trust is a type of trust that is not revocable – it cannot be revoked. This means that once the trust is created by the grantor, the terms of the trust, including the assets that are held within the trust and who the trust is intended to benefit, cannot be amended or rescinded.
After the trust is created, the grantor transfers 100 percent of their rights of ownership over the assets and the trust. (In a revocable trust, on the other hand, the grantor retains some control over the trust and reserves the right to amend or revoke the trust). There are two types of irrevocable trusts:
- Living trusts. When a trust is “living,” the trust is created and funded while the grantor is alive. Examples of types of living trusts include lifetime giving trusts, charitable trusts, and spousal lifetime access trusts.
- Testamentary trusts. Testamentary trusts, on the other hand, are created and funded after the grantor’s death via the grantor’s will and estate, respectively. By nature of the death of the grantor, then, these types of trusts are inherently irrevocable.
Advantages of Irrevocable Trusts
The advantages of creating an irrevocable trust instead of a revocable trust may not be immediately clear – why wouldn’t a grantor want to be able to amend or cancel a trust during their lifetime?
The primary reason that grantors choose to create irrevocable trusts as opposed to revocable ones is that when the grantor releases their rights of ownership over the trust, they will immediately benefit from a lower estate tax liability as assets that are gifted in an irrevocable trust are exempt from estate taxes. The other benefit of creating an irrevocable living trust and releasing ownership of certain assets is the protection from lawsuits and judgments that follows.
In the event that a grantor was to be sued (which is more likely amongst certain professionals, such as doctors), assets that are held in an irrevocable trust cannot be removed for the purpose of settling a case or via a court judgment. As such, placing assets in an irrevocable trust can protect those assets and ensure that they remain within the family or/and are distributed per the will of the grantor.
California Laws and Irrevocable Living Trusts
Despite the name and the general standards surrounding irrevocable trusts, in California, these trusts can indeed be amended or revoked under certain circumstances. Under California Probate Code Section 15403, “if all beneficiaries of an irrevocable trust consent, they may petition the court for modification or termination of the trust.”
The court will grant the cancelation or modification of the trust if all beneficiaries agree, unless there is a “material purpose of the trust” that makes the continuance of the trust necessary and such material purpose outweighs the interests of the beneficiaries in canceling/amending the trust.
The other situation in which a trust can be amended or revoked is in the event that there is a significant change in circumstances that defeats or impairs the primary purposes for which the trust was originally established. An amendment to an irrevocable trust can be made following a significant change in circumstances if the grantor can prove that the amendment will advance the grantor’s original intent in creating the trust.
Creating an Irrevocable Living Trust
The first step in creating an irrevocable living trust is to hire an attorney who can assist you in the process. Once you have determined which assets you want to be held in the trust, which type of irrevocable living trust is most appropriate for your situation, and who you want the beneficiaries of the trust to be, you will also need to choose a trustee – the person who is responsible for managing the assets held in the trust. Your attorney can assist you in drawing up the trust documents and funding the trust.
Reach Out to Our California Irrevocable Trust Attorneys Today
Creating an estate plan is one of the most valuable things that you can do in order to provide for your loved ones and plan for your future, and the formation of an irrevocable living trust may be an essential component of that plan. To assist you in understanding the various types of trusts, our California irrevocable trust and estate planning attorneys can help. To learn more about our legal services, please reach out to us online, visit our law office at your convenience, or call us at 619-441-2500 today.