A Family/Living Trust is a contract that allows an individual to control his/her assets during their lifetime and after their incapacity or death through their chosen successor. The clients can decide how their assets are utilized if they lose capacity, to whom the assets can be distributed and at what point in time after their death; protection of their children’s inheritance; and probate avoidance.
A-B Trusts are for spouses as they have no application for single people. The A-B provisions come into active existence when a spouse dies. The Survivor’s Trust A is commonly remembered by the fact that the Surviving Spouse is Above ground, Trust A. The deceased spouse is Below ground hence, Trust B. The Trust estate is then split between the two Trusts by a formula. Practically speaking, each Trust receives one-half of the Community Property owned by the Living Trust and the Separate Property owned by each spouse. The formula limits funding Trust B up to the maximum of the FET exemption. As a result, the B Trust insures that the exemption amount for the decedent spouse is retained. Otherwise it would be lost on the death of the first spouse.
Protective Inheritance Trusts
It is a provision that makes giving inheritance to your children a condition. The condition being that the beneficiary is free of legal proceedings on your death, and if the beneficiary does not meet the condition, the inheritance will remain in your Living Trust protected from any lawsuits, divorces, or creditor claims. Another condition that is included is that the beneficiary establishes his/her own Sole and Separate Property Trust to receive the inheritance. This will allow the beneficiary to continue to keep his/her inheritance separate from his/her community property estate in a marriage.
Special Needs Trusts
Special Needs Trusts (SNT) are designed for disabled beneficiaries so as not to interrupt their Medi-Cal and/or S.S.I. benefits. These Trusts are ESSENTIAL for this purpose and some implementation for their arrangement should be provided for in the Family/Living Trust. There are two types of SNTs – a First Party Trust and a Third Party Trust. There is an important difference in the two which has to do with who gets the ultimate remainder of the Trust after the death of the disabled beneficiary.
Sole and Separate Property Trusts
The purpose of creating a Sole & Separate Property Trust is to gives sole ownership to the Trustor, which means the Trustor’s spouse would not be able to take ownership of the Trust. We recommend anyone who wants to have their assets, wills, and/or inheritance that was owned prior to a marriage to be separate from their spouse to create a Sole & Separate Property Trust.