Trusts are a complex aspect of the estate planning process for many people in California. The person considering a trust must look at the purpose of that trust and where they want their money to eventually go in order to choose the perfect trust.
Purpose of trust
The first decision to make when considering the formation of a trust is the purpose of that trust. A trust is a legal entity that is designed to hold assets for a person outside of their own legal name and possession. Trusts have several different functions and some trusts are made to fit one function better than another. The most common reason to have a trust is for estate planning purposes. A trust can hold assets and move those assets into different investments that help reduce a tax burden. Trusts can also hold assets and make decisions on behalf of a person who may not be able to make those decisions themselves for one reason or another. Deciding on the purpose of a trust can help an individual make better estate planning decisions and eventually pick the best trust for their situation.
Once a person has decided the purpose of their trust, they can then look at specific types. There are special needs trusts that can help make financial decisions for adults with special needs. The same applies to trusts that are tailor-made for children such as pot and educational trusts. If a person making a trust is interested more in tax planning, they may look towards irrevocable or revocable trusts. These trusts include testamentary and living trusts.
They can begin the decision-making process about assets while also avoiding some of the pitfalls of probate and estate taxes. Choosing the right type of trust must also be combined with choosing the right trustees and administrators. These three decisions are essential for the best possible trust strategy for accomplishing goals with an estate.