Many individuals are confused about the differences between testamentary trusts and living trusts when it comes to their estate planning needs. Radiant Probate & Estate Law, Inc., understands that choosing the right trust requires careful consideration of timing, control, and family circumstances. The company's guide below outlines similarities and differences between testamentary and living trusts.
Understanding Trust Basics in Palo Alto Estate Planning
A trust allows individuals to manage their assets and designate beneficiaries who will receive them upon death. Individuals also appoint a trustee to oversee the trust and distribute assets to the proper beneficiaries. One significant advantage of establishing a trust is asset protection and the avoidance of certain legal complications.
The testamentary trust versus living trust question depends mainly on when individuals want their trust to take effect. A testamentary trust, also known as a will-based trust, is created by a will and only activates upon death. This trust becomes irrevocable at the time of death, meaning no one can change the terms afterward.
In contrast, a revocable trust established during one's lifetime allows individuals to add and remove assets at any point. Individuals who want control over their assets during their lifetime often choose this option. If they become incapacitated, a trustee of their choosing steps in to manage the trust.
The Difference Between Testamentary and Living Trusts in Palo Alto
When evaluating testamentary trust versus living trust options, the probate process is a critical distinction between the two. Assets in a will-based trust and other assets in probate typically must go through probate before distribution to beneficiaries, which can be time-consuming and becomes part of public records. A probate lawyer in Palo Alto can help individuals understand which assets are subject to this requirement.
Living trusts offer several advantages over this:
Probate avoidance allows loved ones to settle estates faster.
Greater privacy keeps estate matters off public records.
Control of assets enables the easy addition of new property.
Still, testamentary trusts provide specific benefits for families with young children. Parents can set parameters for when younger heirs receive their inheritance. For example, rather than allowing a child to inherit assets at 18, parents can stipulate that children receive monthly benefits beginning at 18 and inherit the remainder at 21.
Neither option prevents creditors from seeking payment of outstanding debts after death. Loved ones may need to use funds within the estate to compensate creditors before settlement.
When deciding between these options, individuals should consider whether they may want to add or remove notable assets in the future. They should also think about if they want their estate to go through probate.
About Radiant Probate & Estate Law, Inc.
Radiant Probate & Estate Law, Inc. helps Palo Alto residents navigate complex estate planning decisions, drawing on years of experience in trust administration. Their legal team guides clients through sensitive matters, including testamentary trust versus living trust decisions, trustee selection, and beneficiary designation. To schedule a consultation or to learn more about establishing a living trust, contact their firm at (650) 749-1226.
