One of the critical decisions to consider in a California revocable trust is whether to leave property to beneficiaries through a continuing trust or outright distribution. Each of these options have drawbacks and benefits depending on the circumstances of your family.
Outright distribution means that once the person who created the trust passes away, the beneficiary gets the assets directly without any continued trustee oversight. This option is relatively straightforward and can be attractive to those clients who want simplicity. It also provides for no need for future trustee management since the beneficiary doesn’t have to navigate any restrictions or trustee decisions in the future. However, there are cons with outright distribution, such as no long-term control, a lack of tax planning advantages, and a lack of creditor protection.
With a continuing trust, however, this allows the assets to stay inside the trust for the benefit of the beneficiary over the course of their lifetime. The trustee then manages the trust, who distributes the funds according to the trust’s terms, potentially offering more creditor protection. The pros of this trust include financial oversight, creditor protection, generational wealth transfer, and flexibility with trustees. However, it does come with potential downsides: potential conflict if a trustee is too restrictive with distributions, additional costs associated with maintaining the trust, and complexity.
Make sure you discuss any of your estate planning intentions with a qualified Pasadena estate planning attorney. Our office can help you navigate the process of estate planning now and in the future. Our lawyers are experienced with helping you understand how to create an estate plan that you can add to or adjust over time, allowing your plan to evolve with your life.
