Many people believe that having a last will and testament is the only document you need for California estate planning. While it is generally considered the centerpiece, other tools exist that can help distribute, manage and protect your assets.

According to SmartAsset, a trust is a legal arrangement between yourself and your heirs. Similar to a will, you can name charitable organizations, friends and family members as beneficiaries. The charities or individuals can receive assets that you designate, such as bank accounts, real estate, business interests and investments.

There are a variety of trusts available, depending on your needs:

  • Revocable trusts are also called living trusts. You can change or dissolve them at any time. They provide flexibility, enabling the transfer of assets as you wish. The placement of the assets becomes permanent only when you pass away. Revocable trusts do not go through probate, giving you more privacy than a will.
  • Irrevocable trusts can create a haven for assets. Once established, you cannot change it in any way. It protects assets from claims by beneficiaries and creditors. This type of trust also shelters them from gift and estate taxes.
  • Marital trusts set aside assets and any income generated by them, especially for your spouse. It allows him or her to avoid paying taxes on them while they are alive. When your spouse dies, the remaining heirs pay taxes on whatever assets remain.
  • Bypass trusts, also known as credit shelter trusts, reduce the tax impact on your heirs. Assets transfer to your spouse, and a trustee manages them. When your spouse dies, remaining assets go to your heirs, estate-tax free.

Trusts can help you plan where your assets go and their management before and after your death. Depending on your needs, you may set up several, including those for charities, skipping a generation, special needs and more. Visit our webpage for more information on this topic.