One of the questions that we commonly field as trust attorneys in San Diego is, “What is a living trust?”. A living trust is a legal document that allows you to control and manage assets that are in your name, which you will likely end up distributing to your heirs after you pass away. This is a critical document in the estate planning process as it can remove the necessity of having to go through the formal Probate process in California, saving your heirs time, money, and endless headaches. Therefore, it’s imperative that you include certain provisions in the document which will help to both ensure that your wishes are seen to and make it legally sound. Here are three examples of living trust provisions you should always have:
Provision #1 — Naming Your Trustees and Beneficiaries
Trustees are people who manage the trust both during your lifetime as well as after you pass away. During your life, you will most likely appoint yourself as the trustee of your trust, however, it’s critical that you include a provision that appoints another trustee in case you are no longer able to serve in this role or if you pass away. Often having one or two backup trustees, if possible, will help avoid any gap in the role in the future. You can also include a provision to allow your beneficiaries to vote to fill a vacancy on their own instead of having to ask a Judge to appoint someone in Probate court.
Beneficiaries are they people who you want to inherit or receive assets contained within the trust. You can name as many beneficiaries of your living trust as you would like. They can be family or friends and the distributions can be in different percentages or in specific dollar amounts. One of the great things about developing a living trust is that you can completely customize it according to the goals that you have for your overall estate plan. Depending on how the trust is worded, failure to designate beneficiaries in the trust can actually cause the trust to fail at inception. You also have to be strategic in how the beneficiaries inherit to optimize the benefit of a living trust.
Related post: 4 Documents You Must Have in Your Estate Plan
Provision #2 — No-Contest Clauses
A no-contest clause ensures that the beneficiaries of the trust cannot dispute or challenge its terms. Additionally, this particular clause will also prevent beneficiaries from inheriting any assets if they do decide to challenge the legality of the trust on unfounded or unreasonable grounds. The purpose of a no-contest clause is to ensure that everyone abides by the terms while also discouraging heirs from going to court.
Provision #3 – Continuing Lifetime Trusts for Beneficiaries & Staged Distributions
You don’t have to bestow your beneficiaries with total ownership of your estate all at once upon your passing, and the property does not have to pass “outright and free of trust” to your beneficiaries. Instead, you can retain everything within a sub-trust, called a Continuing Lifetime Trust, for each child and access to the principal can be granted at ages or milestones. You can even establish this Continuing Lifetime Trust but set it up in a way where the kids have complete access to funds anytime.
Depending on the size of your estate, it’s not only wise to protect your family financially, but you should also protect them from your own assets and property. For example, if your heirs assume total ownership of your estate by the inheritance passing outright and free of trust, then the inheritance is at risk of the beneficiary’s creditors, potentially including a spouse in a divorce proceeding. Any money you place in the trust with a continuing lifetime provision will remain there — out of the hands of creditors and other unscrupulous parties, and always protected for your family.
You can also include restricted payments to discourage extravagant spending as well as incentive plans intended to motivate heirs to complete their education and pursue careers. With these provisions in place, your beneficiaries will have to restrain themselves and will have guidance from a trustee, which will encourage them to be fiscally responsible.
Related post: Shocking Myths and Bona Fide Facts About Living Trusts
Why Provisions Are Important
Ultimately, your goal is likely to ensure that none of your heirs will abuse or mismanage their share of the trust. When determining and designating trustees, make sure that they are someone who will make use of any given discretion to distribute funds in a way you approve of. Also make sure that your trust is customized in a way that aligns with your beliefs on how your estate should pass to your beneficiaries.
Hire a Trust Attorney in San Diego You Can Trust
Here at Jenkins & Jenkins, Estate Planning Attorneys, we have a team of trust and estate attorneys in San Diego who can help you secure your assets and distribute them fairly among your heirs, and in a way that’s best for them. We provide legal assistance for many Californians who are planning their estates, so feel free to schedule an appointment with us today. We will ensure that you can prepare for the future and protect your loved ones.
Testimonial from Tarek, Satisfied Trust Client in San Diego
We searched for good trust attorneys for quite some time before someone recommended Jenkins and Jenkins. Michael helped us establish our living trust, health directives, wills, and power of attorney. He made the process very smooth, explaining the general process, and taking the time to understand our wishes. He clearly explained our options along with benefits and drawbacks for each option. Our trust documents reflect exactly our wishes and Michael helped us make all educated decisions. The process was much faster than what other trust attorneys would take. Michael was very responsive and patient, taking all the time needed to clarify every point. Without hesitation, we recommend their office to anyone looking for estate planning attorney.
