Two women work from home sign trust document in san mateo

How Can a Trust Be Used to Distribute Assets to Beneficiaries?

If you want to make sure your property is managed well, consider setting up a trust. Under the law, a trust is a way for a person (known as a “grantor” or a “settlor”) who owns property or assets to legally turn them over to a person or group of people (known as “beneficiaries”) by using a Trustee as a middleman. The Trustee must handle the assets or property safely and carefully, acting only for the benefit of the beneficiaries. 

Creating trusts and administering them is a major part of estate planning law, and can be a great way to avoid some estate taxes. If you want to ensure that your trust is handled correctly you will want to engage the services of a California trust attorney

Understanding the Concept of a Trust

A trust is essential for managing assets. A trustee has a legal obligation to administer a trust properly. The formal trust documents must comply with state law and must be signed and notarized. The property is known as the “corpus” or “trust property.” Trusts can be revocable or irrevocable, and there are different rules for each. For a living person, the trust is called an “inter vivos trust” and is revocable. When it’s part of a deceased person’s estate, it’s a “testamentary trust,” and the terms are part of the Will.

Many tangible items are commonly put into trusts, such as a house, an automobile, monies, and investment portfolios. Taxes still have to be paid, as set out by the State of California.

In California, when the grantor dies or becomes incapacitated the trust becomes irrevocable, and the terms of the trust have to be carried out by the successor trust exactly as written. An irrevocable trust, once properly signed, cannot be changed.

Trusts provide a legal framework for the distribution of assets. In California, anyone can be a trustee if:

  • They are at least 18 years old
  • They are a US citizen
  • They have a “sound mind”

The role of the trustee is to carry out the wishes of the grantor as stipulated in the trust documents. Regular reports of how the trust is being handled are required by law.  

Mechanics of Trust Asset Distribution

There are several ways that a trust can be used to distribute assets to the beneficiaries. A check can be written. The trustee can just give the beneficiary cash. Real estate can be transferred by selling the house and giving the beneficiary the proceeds or transferring the deed. 

Types of Trusts and Their Modes of Asset Distribution

There can be many different kinds of assets in a trust. One kind of asset might be the interest earned from investments in an investment portfolio. The trustee will likely be responsible for distributing the interest earned by the investments but preserving the money in the actual portfolio (the “principal”). For real estate, the trustee will have to make sure the property is kept up, and the taxes are paid every year, for example.California law regarding trusts and estates can be complicated. The best way to ensure everything is managed properly is to consult an attorney. Our attorneys are very experienced. Give us a call today.