In California, you can set up a revocable trust to take care of your affairs as they relate to your property, assets, and money. Trust can be as simple or as complex as you want it to be. It is called a revocable trust because it can be revoked at any time. But a revocable trust cannot automatically terminate after your death.
Certain procedures will need to be followed for winding up a revocable trust. Alternatively, you can terminate the trust after a certain period or on the occurrence of a specified event. But first, you need to follow certain procedures to close a revocable trust in California.
In this article, you will know what a revocable trust in California is.
What is a revocable trust in California?
A revocable trust is a trust that can be revoked. This means that the trust can be set up and dissolved at any time by the grantor(s) and grantees. The grantor can also revoke the trust at any time, which means the grantee(s) automatically lose their interest in the trust assets.
An irrevocable trust is one where the trust assets can’t be changed or altered without the express written consent of all the beneficiaries. A revocable trust is one in which the trustee(s) have the legal authority to change or revoke the trust as they see fit.
In California, a revocable trust is a legal vehicle that allows a grantor to transfer ownership of assets into a trust. The trust is managed by the trustee for the benefit of beneficiaries, who typically, are also the grantor. That means that when you make an asset transfer to a revocable trust in California- even if it’s for your benefit- you’re doing so underwritten by the law and with full knowledge of how things might change at any time.
What exactly does trust do?
Trusts are commonly used for different reasons, but the most common/important ones are:
- to protect wealth
- Avoid Probate
- Anonymity so people don’t know what assets you own/control
- Reduce estate tax when you die (applies only to ultra-wealthy)
How to Set Up a Revocable Trust in California
A trust is a legal document that is created between two people. It describes how assets will be managed and controlled to ensure they are used fairly and for the benefit of the person put into them. Trusts can be written by lawyers or created without one. trusts generally aren’t considered legal entities like corporations because they are not taxed, can sue or make political contributions through their means, and there isn’t anything unique about them other than what’s described in the agreement between the trustee (the person putting something into a trust) and beneficiary (someone who will get access to that money).
You’ll need to consider the following when setting up a will for a revocable trust:
Who will manage the trust?
- This is important because the trustee(s) will be making all the major decisions regarding the trust. For example, they may choose to distribute the income from the trust or invest it in a tax-friendly manner.
What will happen to the trustee’s salary and other benefits if the trust fails?
- If the trustee is unable to manage the trust properly, or if they are found guilty of malfeasance, the administration can mandate that the trustee pay back some or all of the trust funds.
How will the beneficiaries be selected?
- It is a common mistake to use a random method when selecting the beneficiaries of a will. Instead, consider using a method that will ensure the usual suspects (i.e., close relatives) are not among the beneficiaries.
What will happen if you don’t make a will?
- If you die without a will, your assets will be distributed according to intestacy law.
Pros of Setting up a Revocable Trust in California
A revocable trust gives you a lot of flexibility. You can set it up as a simple revocable trust or a complex revocable trust with a wide variety of modification and termination options.
Cons of Setting up a Revocable Trust in California
If someone were to use the trust funds for their benefit, it could lead to a situation in which the beneficiaries have no say in what happens to the trust funds after their death. This could result in a trust fund drain that could negatively impact the rest of the community.
How to Terminate a Revocable Trust in California
You will send notice in writing to the California trust beneficiaries and other interested parties. The effective date of the dissolution of the trust will be provided to you and you will collect the signed acknowledgments acknowledging receipt of trust distributions.
A revocable is a trust you create that can be revoked at any time. You can set up a revocable that will automatically terminate if you die, or you can have the trust terminate upon a set event such as your death or the occurrence of a specified condition.