A trust is defined as a relationship whereby property is held by one party (the trustee) for the benefit of another (the beneficiary). The person who creates the trust is either called the settlor, grantor or trustor. The settlor, grantor or trustor often serves as the initial trustee of the trust.
Advantages of Trusts
Assets transferred to a revocable living trust before the settlor’s death can avoid the imposition of a conservatorship proceeding in court. After the settlor’s death, the assets held in trust are not subject to probate proceedings. As a result, a trust may save significant administrative costs for both a conservatorship and probate. A trust also allows the trustee to act more quickly than an executor or administrator in probate court. And unlike a public probate proceeding, a trust administration is handled privately and out of the purview of the courts.
Under California law, a settlor can be the trustee of his or her own trust. In fact, this arrangement is very typical. The settlor can also choose a trusted family member, friend or financial advisor to serve as trustee of the trust. A settlor can also appoint a “special trustee” or “trust protector” to serve specific and limited roles during the trust administration.
Disadvantages of Trusts
The biggest disadvantage of a trust is the initial costs of planning, drafting, and funding a revocable living trust, which is generally higher than the cost of planning and drafting a will. Another disadvantage of a trust is the actual process of funding the trust with assets. The funding of the trust can be time-consuming because assets have to be retitled in the name of the trust. If the trust will continue long after the settlor’s death, significant trustee fees could be incurred. Unlike a will, trust beneficiaries do not have the oversight and protection of the superior court.
Note: Attorney advertising. Nothing posted on this blog by the Law Offices of Matthew W. Harris, is intended, nor should be construed, as legal advice. Blog postings and hosted comments are available for general educational purposes only and should not be used to assess a specific legal situation. Nor does any comment on a blog post create an attorney-client relationship. The presence of hyperlinks to other third-party websites does not imply that the Law Offices of Matthew W. Harris, endorses those websites, their contents, or the activities or views of their owners.