Trusts are appropriate estate planning tools for all generations

There are many different Trusts in an estate planning attorney’s tool box to meet your estate planning goals and give you peace of mind knowing your estate planning goals will not be frustrated by subsequent events

There are many different types of documents your Trusts attorney can prepare for you alone or in conjunction with other Trusts to meet your estate planning goals.

What is a Trust?

In general a Trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be drafted to address your particular estate planning goals and spell out exactly how and when you want your assets to pass to beneficiaries. Since a Trust can avoid probate, your beneficiaries can gain access to assets in the Trust more quickly than they would if assets were to pass directly to your beneficiaries by way of a Will.

There are many types of Trusts and almost endless drafting solutions that can be utilized by your trust attorney to meet your estate planning and charitable goals. However, the major distinction between different types of Trusts is whether they are revocable or irrevocable.

Revocable Living Trust

A Revocable Living Trust should with few exceptions be a part of every estate plan. A Revocable Living Trust works to pass assets outside of probate, yet allows you during your lifetime to retain control of the assets in the Trust. A Revocable Living Trust is flexible. Its terms can be modified and you can dissolve it at any time, should your circumstances or intentions change. However, although there are exceptions, a joint Revocable Living Trust should be drafted to become irrevocable upon the death of the first spouse to ensure the deceased spouses estate planning goals are not frustrated by a subsequent revocation or remarriage of the surviving spouse. This is a factor often overlooked by trust mills and inexperienced estate planning practitioners. With a Revocable Living Trust you can name yourself as the trustee or co-trustee and retain ownership and control over the assets in the Trust and its terms during your lifetime. The terms of the trust can also provide for a successor trustee to manage trust assets in the event of your incapacity or death.

Irrevocable Trust

In conjunction with the use of a Revocable Living Trust, an Irrevocable Trust is an important estate planning tool if one of your estate planning goals is to reduce the amount of assets in your estate that are subject to estate taxes upon your death. When properly utilized, an Irrevocable Trust will effectively remove the assets placed in the Irrevocable Trust from your estate thereby reducing the amount of assets in your estate that will be subject to estate taxes upon your death. As an added benefit, if the trust assets are no longer part of your estate, the assets should also be immune from liability to creditors of your estate.

Benefits a Trust can Provide

Other benefits a trust can provide as part of your estate plan include:

Control of the Distribution of Trust Assets after Death

You can precisely specify who Trust assets pass to and how they are managed after your death even in complex situations involving beneficiaries who are or become disabled and beneficiaries who may have substance abuse problems or are unable to manage their finances.

Protection of your Legacy

A properly constructed Trust can help protect your estate from your heirs’ creditors or from beneficiaries who may not be adept at money management.


Probate is a matter of public record; a Trust may allow assets to pass outside of probate and remain a private matter.

Provide for your Surviving Spouse

 A Marital Trust in its least restrictive form can be designed to provide income benefits to a surviving spouse, access to principal and permit the surviving spouse to specify the beneficiaries of any remaining assets upon death.

Control Distribution of Trust Assets upon the Death of your Surviving Spouse

In second marriage situations, a Qualified Terminable Interest Property Trust (QTIP Trust) can be utilized to ensure the estate planning goals of the first spouse to die are fulfilled. There are variations, but it can be the most restrictive type of Marital Trust in terms of the rights of the surviving spouse. In a QTIP Trust, the surviving spouse is entitled to all income from the Trust for life, but is not entitled to principal distributions unless permitted by the Trust terms. For example, a QTIP Trust can be drafted to provide for distributions of the greater of $5,000 or 5% of the Trust assets to the surviving spouse annually upon demand. Upon the death of the surviving spouse, the Trust terms can provide that the remaining Trust assets pass to the beneficiaries specified in the Trust documents including children from prior marriages.

Passing Assets to Heirs upon the Death of the Surviving Spouse

A Bypass or Credit Shelter Trust can be used to hold assets upon the death of the first spouse to die that are exempt from estate taxes ($5.43 million per individual in 2015) and pass them to children or other heirs upon the death of the surviving spouse. During life, income and (if desired) principal from the Trust can be made available to the surviving spouse and other beneficiaries under the terms specified in the trust. Upon the death of the surviving spouse, even though the assets in the Trust may have grown significantly, the assets in the Trust would not be subject to estate taxes.

Other types of Trusts

There are several other different types of Trusts that can be utilized as part of a well crafted estate plan, some of which include but are not limited to:

Priscilla Madrid, founder of Madrid Law Group is an estate and elder law attorney with a legal masters degree (LLM) in estate planning and elder law and over 23 years of experience serving clients throughout Orange County and the surrounding areas.  If you need help with estate planning or an estate related matter, we are here to help.  Contact us today to schedule your free consultation.