ESTATE PLANNING 101:
What Is A Trust?
A trust is a legal instrument that transfers title to designated property from the owner, called the donor or grantor, to a trustee, who holds the property for the beneficiaries of the trust. The grantor can also serve as the trustee, thereby enhancing control over the trust during the life of the grantor. In such a case, a successor trustee is usually named in case the grantor dies or is incapacitated.
Depending on the size or complexity of the trust, the trustee, or cotrustee, might be an institution, so as to bring more expertise to the position.
Testamentary Trust
A testamentary trust, created in a will, takes effect when the grantor dies.
It names the beneficiaries and gives directions for payment of the income from the trust and for disposition of the assets. The testamentary trust has the advantage of increasing the odds that an inheritance is used prudently. The trustee can manage the assets of the trust until such time as the beneficiaries are prepared to do so, as opposed to an immediate transfer of assets to the beneficiaries.
Living Trust
The second category of trusts is the living, or inter vivos, trust, which is created during the grantor's lifetime. An important decision for a living trust is whether the trust will be revocable by the grantor or irrevocable. In either case, the assets are retitled in the name of the trust. As the name suggests, a revocable trust may be dissolved entirely by the grantor. But short of that, the grantor may also change beneficiaries, replace the trustee, or change the composition of the assets in the trust. Revocable trusts do not remove assets from the grantor's estate. The trust pays taxes on its income, and if any assets remain in the trust at the death of the grantor, they are part of his estate and at least potentially taxable as such. A revocable trust has few tax advantages. An irrevocable trust permanently takes assets out of the grantor's estate and puts them into the trust. While tax savings can be realized with an irrevocable trust, this type of trust is not to be entered into lightly, as it will take action by a court to alter it later. For tax purposes, the trust becomes a separate entity. Assets in the trust generally are not subject to estate taxes on the death of the grantor, but the transfer of assets into the trust may be subject to gift taxes.
When the grantor for a living trust dies, the trust assets pass directly to the beneficiaries. This is a distinct advantage over having to go through probate, the often costly and time-consuming process of administering a will. A living trust also maintains the privacy of the estate, because bypassing probate also means that no public record is created, as occurs with probated wills.
Effective use of trusts in estate planning requires not only awareness of these trust basics, but familiarity with specialized trusts that might be a good, ± for particular cases, such as those involving life insurance policies and charities. To decide on and implement the best option, use the services of qualified professionals.
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Jason R. Schingler was born and raised in Stockton, California.
He obtained a B.A. in Global Studies with an emphasis in Economics and Politics from the University of California at Santa Barbara in 2001. In 2005, Jason received his Juris Doctorate from California Western School of Law. Jason proceeded to obtain his LL.M. in Taxation from the University of San Diego in 2006.
Jason is licensed to practice law in California (2005) and by the United States Tax Court (2006). His notable accomplishments from law school include an American Jurisprudence Award in International Taxation, the Miller, Monson, Peshel, Polacek & Hoshaw scholarship for academic excellence in Tax courses, and the Graduate Law Merit scholarship from University of San Diego.
Jason worked with SDLF as a law clerk during the summer of 2005 and we are
very excited to have him on our team as the newest addition to our transactional department. Jason will primarily work on matters involving wills, trusts and probate, tax, real estate and business law.
In his free time, Jason enjoys surfing, biking, swimming, running, training and participating in triathlons, spending time at the beach, playing the guitar and traveling.
Jason is an integral part of San Diego Law Firm's unique and service-oriented legal team. His positive attitude and good common sense, coupled with his excellent legal research skills, have made him a valuable asset to the clients of the firm. The next time you are in the office, be sure to say hello to Jason Schingler.
SAN DIEGO LAW FIRM TAKES ON PROBATE
Probate is the process by which legal
title passes to the beneficiaries of an
estate, either by way of a person's will or
by way of legal determination. When a
person dies the legal title of property from
their estate has to pass to their intended
beneficiaries via a will. If there is no will,
then the law will determine who is the legal
heir entitled to the estate and the property.
The probate court oversees the entire
process and makes a legal declaration
of distribution that the property goes to a
specific person or persons.
Probate also serves other functions, such
as paying all outstanding creditors of the
estate, making a determination as to any
and all taxes that are due on the transfer
of property, giving persons a chance to
come forward and assert a claim against
the estate, and many other perfunctory
functions.
The process can be time consuming,
confusing and, in some cases, expensive.
An attorney should be consulted to assist
in the process and make it as expedient
and smooth as possible. In most cases
the attorney gets paid from the estate
at the conclusion of the representation
so the client does not have to pay a fee
in advance. If you or anyone you know
needs assistance in handling the estate of
someone who has recently passed away,
please contact San Diego Law Firm and
allow us to assist you.
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