Trusts are estate planning documents that allow for the distribution of assets after the death of the trust maker. In most cases, trusts have provisions calling for assets to be distributed to specific people, but the trust cannot do the distributing itself. Rather, that is the realm of the trust's executor. People who make trusts in California will appoint an executor as part of the process. The executor of a trust has a number of responsibilities, including managing the trust, filing probate and tax documents, making distributions and accounting for changes in circumstance.
For many California residents, trusts can be an optimal method to achieve their estate planning goals while preserving privacy, as trusts transfer property outside the probate system. Settlors can develop a range of innovative methods to pass wealth to their beneficiaries. However, when creating a trust, it can be important to select the right fiduciary. The trustee, who manages the assets on behalf of the beneficiary, should be someone responsible, trustworthy and communicative.
Many people in California consider how they can best protect their assets now and provide for their families in the future. Trusts provide important mechanisms not only to pass on wealth between generations without relying on the probate system but also to realize significant tax savings during a person's life. Therefore, many people wish to create trusts to provide for their children or other loved ones in the future. However, some people are concerned that if their children grow up knowing that a substantial trust fund is waiting for them, they may feel less incentive to succeed academically and in their careers.
Wealthy people in California may want to ensure that they can pass on significant assets to their children or other loved ones. However, many people may not want to disclose their plans early on, especially if they have many years left to live and want to benefit from tax as well as estate planning. In addition, their children may be quite young, and parents may want to encourage them to work hard and succeed without planning to rely on family money. However, when people create trusts, the trustees managing the assets have a responsibility to report on their administration to trust beneficiaries.
Parents in California may have an interest in establishing a legacy for themselves long after they depart this world. One way to do that is to ensure that their children have the money needed for a quality education. This goal may be accomplished by using a trust or by investing in a 529 plan. Before creating a trust, it is important for a parent to know what his or her money is intended to accomplish.
For many California families, trusts are an important tool to transfer wealth from one generation to another. They can be used to minimize the impact of probate, keep wealth transfers out of public view and even provide tax savings. However, it can be important for people with trusts to review them regularly to make sure that their documents and plans meet their current needs. In some cases, families are unhappy with the provisions of their trusts. However, by reviewing them in advance, individuals can make adjustments to improve their utility for their specific circumstances.
Even though philanthropy is frequently used as part of a tax-saving strategy, people in California can also benefit from the charitable giving in ways that are related to starting and maintaining a legacy, enjoying personal fulfillment and forming a connection with future generations. There are certain steps individuals should take to make sure that the philanthropic goals they have set for their lifetime and after they have died are fulfilled.
For California couples who have been farsighted enough to establish an estate plan, there comes a well-deserved peace of mind that their assets will be handled well after their deaths. While no one escapes their own mortality, having properly executed legal documents in place necessary to handle the transition when the time comes is reassuring. However, estate planning is not a one-and-done proposition; major life changes necessitate reviewing and sometimes altering one's plan.
The administrators of trusts in California have new tax codes to consider. The Tax Cuts and Jobs Act becomes largely effective in 2018 and brings changes to tax deductions for trusts.
People in California with significant estates may want to think about the future of estate taxation even after the major increase in the transfer tax exemption that was included in the 2017 Tax Cuts and Jobs Act. The law, which went into effect in 2018, doubled the exemption on transfer tax to $11.18 million per individual or $22.36 million per married couple. However, while this exemption allows even very wealthy individuals to avoid federal estate taxes, it has a built-in sunset clause. Without a specific renewal, the increased exemption will expire in 2025 and return to its 2017 level.