Can a Trust Be Used to Provide for a Disabled Child or Grandchild?

A trust is an important financial tool that allows money to be given to someone indirectly through a third party. Specifically, a trust allows a grantor to appoint a trustee to manage an asset (money or property, for example) for a beneficiary. For example, a wealthy man who owns a lot of stock sets up a trust so that the stock dividends will be paid to his daughter, the beneficiary. 

A California trust attorney can help set up the trust, see that the right trustee is appointed and that the money is given to the beneficiary properly. The trust is a legal document that must be properly drafted and signed to be effective.

Understanding Special Needs Trust 

A Special Needs Trust (SNT) serves as a financial safety net for those with disabilities. It’s a legal and effective way to care for a physically disabled child or grandchild who will never be able to support themselves because they cannot work. The trust can be set up so that it stays in effect even after the parent or grandparent dies.

According to the California Department of Healthcare Services, a Special Needs Trust lets a person who is disabled maintain eligibility for public assistance money, even though they may be otherwise ineligible because of their assets. In California, there are two kinds of Special Needs Trusts: 

  • First-party SNTs are funded by parents or grandparents and include state and federal provisions to ensure that the state will be reimbursed when the beneficiary dies. They can be either an A(d)(4)(a), which applies to a disabled person under the age of sixty-five, or a Pooled SNT. The Pooled SNT can cover a disabled person of any age and is managed by an association. The funding for this usually comes from an inheritance or the settlement of a personal injury case.
  • Third-party-funded SNTs do not have to reimburse the state. The funds come from a third party entirely separate from the beneficiary and can apply to anyone of any age.

This distinction between first-party and third-party Special Needs Trusts highlights the importance of strategic planning to ensure the long-term financial security and well-being of individuals with disabilities. Engaging with a knowledgeable attorney can provide invaluable guidance in choosing the right type of trust and crafting a plan that best meets the beneficiary’s unique needs. This ensures that the beneficiary continues to receive the care and support they need while maintaining eligibility for public assistance programs.

How a Trust Can Provide for a Disabled Child or Grandchild 

When a child has a physical or mental condition that prevents them from working, parents are always faced with how to ensure the child is cared for when they are gone. A sibling could lose the money. A trustee is obligated to use it according to the provisions of the trust. The trustee can use the funds to pay for housing, food, caretakers, transportation, etc.

It’s important that an SNT be drafted so that Social Security or Medi-Cal benefits are not disturbed. The law in this regard is very state-specific, which makes it important for a California attorney with experience in Wills, Estates, and Trusts to draft the trust very carefully. Tax considerations will be critical. Obviously, you want to make sure your child or grandchild has the best possible quality of life. Don’t wait until the last minute. Call our office today to schedule a consultation so you can understand your options.

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.

Understanding Charitable Remainder Trusts

Many people have a goal of leaving some of their money to charitable or philanthropic organizations through their will or trust. Charitable remainder trusts make it possible for a person to give to the charitable organizations they choose during their lifetime while still having access to needed assets.  

If set up properly, a charitable remainder trust can give you the best of both worlds. You should work with a California trusts attorney to create a charitable remainder trust that complies with all the state and federal regulations and creates the desired benefits, like tax savings. A lawyer can help you understand how to use a charitable remainder trust in your estate planning.

An Overview of Charitable Remainder Trusts

With a charitable remainder trust, you or your chosen lifetime beneficiary may have access to your assets and can use them as you see fit during your lifetime, or the beneficiary’s lifetime, even though the assets are transferred into the trust. Your designated charitable beneficiary will receive some or all of the trust assets after you die. Your trust will specify the terms. 

It is possible to set up a charitable remainder trust to benefit a non-charitable beneficiary for the rest of their lifetime, with the remainder of the trust assets going to your designated charitable recipient after the death of the non-charitable beneficiary. In other words, you could set up the trust so that your surviving spouse, child, friend or family member, or some other person receives benefits from the trust for the rest of their lifetime, with the charity receiving the assets that remain upon the death of that person.

Your selection of trustees for a charitable remainder trust is a crucial decision. These trusts are more sophisticated and complicated to administer than a simple living trust. Many people appoint a professional fiduciary, trust company, or financial institution to serve as the trustee for their charitable remainder trust. The risk of appointing a non-professional to serve as the trustee for a charitable remainder trust is that if the trustee does not comply with state or federal regulations, the trust could become invalid and lose its tax savings and other benefits. 

How Charitable Remainder Trusts Are Different from Charitable Lead Trusts

There are two primary types of charitable trusts in California, the charitable remainder trust and the charitable lead trust. We have already discussed how charitable remainder trusts work. Charitable lead trusts are different in that the charity receives benefits first, for a period of years, and then the people you choose receive the remainder of the trust assets when the period expires.

Let’s say that you want to set up a charitable lead trust to pay a specified portion of the trust assets to a specific charity, like 10 percent of the assets annually to the charity for three years. At the end of the three years, called the lead period, the assets that remain in the trust would get distributed to the beneficiaries you chose, like your children or your surviving spouse, in the trust document. If you are considering setting up a charitable remainder trust or some other type of living trust, you should work with a California estate planning attorney to help create an estate planning document that meets your goals and needs. Contact our office today for help with your case.

Two Types of Trusts: Which Provides Better Protection Against Creditors?

If you are considering putting your assets in a trust, you may wonder which type of trust can best safeguard your assets against creditors. While there are many types of trusts, the two most common trust forms are “revocable” and “irrevocable” trusts. Our California trust attorney can help you determine which type of trust best suits your needs and goals.    

What Is a Revocable Trust?

A revocable trust is a legal entity where you can place your assets while you are alive and maintain some control over them. The beneficiaries of a revocable trust do not have access to the assets of a trust until your passing. This is a common type of estate planning tool because it takes assets out of the probate process and lets you pre-determine what happens to them when you die.

The creator of a trust can also be its trustee and manage the assets. A person can change the beneficiaries, remove or add property to the trust or even sell or gift trust property. You will name yourself the trustee when you create a typical revocable living trust to avoid probate.

Because of a person’s retained control over the assets of a revocable trust, this is not a way for you to shield assets from your creditors. In addition, income or wealth generated by the revocable trust counts as personal income, and you will be responsible for any taxes. This can be good in some scenarios, as individual income tax rates are usually lower than trust income tax rates for comparable income brackets. But, for others, the tax consequences may be more significant.

What Is an Irrevocable Trust? 

An irrevocable trust is a legal entity that can also be created during a person’s lifetime and be used for estate planning purposes to avoid probate. However, once a person transfers property or assets to an irrevocable trust, they cannot reverse this decision, and the property is no longer within that person’s control. In many scenarios, the person who funds or creates the trust will also be unable to make decisions related to the trust. 

However, the creator will have the right to choose the trustee of the trust when it is created. While this person cannot be the trust creator, it can be someone you trust. This is a serious decision requiring much thought, as getting the trustee changed or removed is not always so simple.

Some significant benefits of an irrevocable trust are that it can be a great way to limit estate taxes or protect assets from creditors. These creditors include ordinary creditors and others, such as the state of California’s Medicaid program, also known as Medi-Cal. An irrevocable trust may be a good choice for persons who are aging and facing the possibility of needing Medi-Cal to pay for their long-term care, persons who are subject to increased professional liability, or beneficiaries who have special needs or disabilities and want to avoid becoming ineligible for government benefits.

Types of Trusts

Many types of trusts may be available to you. Some irrevocable options that may fulfill a person’s goals of shielding assets from creditors include the following:

  • Special Needs Trusts (sometimes identified as Supplemental Needs Trusts)
  • Irrevocable Life insurance trust
  • Qualified Personal Residence Trust
  • Grantor Retained Trust

This is only a partial list of all the options for trusts that may be available to you. Forming a trust is a serious undertaking and should only be done after consulting with an experienced attorney.

Consult With an Attorney

If you are considering creating a trust to protect your assets from creditors, our attorney is here to help. The California Trust Law is complex and can be confusing. We offer a free initial consultation and a personalized estate and trust planning approach. Contact us today.

What’s the Problem With DIY Wills?

Many people wonder why they shouldn’t prepare their own will. After all, websites abound with “free” legal advice, and it’s easy to get forms and templates off the internet. While it may seem simple and less expensive to DIY your will, drafting mistakes or document execution issues can have serious consequences. 

Consequences may include a court not treating your will as valid. If a court does not accept your DIY will, you and your heirs may be treated as if you passed away “intestate.” Working with a California wills lawyer can help you avoid these issues and give you peace of mind.

Things to Consider Before You Prepare Your Own Will

California, like all states, has unique requirements for a will to be legal and valid:

  • A person must be a legal adult, at least 18 years old, when they sign the will
  • A handwritten will must be signed and dated by its author 
  • A printed or typed will must be signed by the author and witnessed by two people not receiving anything in the will

Many DIY wills fail to meet these requirements and may be deemed invalid despite the drafter’s best intentions. For example, California has stringent requirements regarding witnesses. If a typed will doesn’t have the signature of two witnesses who viewed a person sign it, it may be found invalid.

The wrong wording in a DIY will can also drastically change the meaning of the will and lead to unwanted results. Incorrect language can result in the wrong relative receiving portions of your estate or cutting people out you did not intend to omit.

You may also make choices in your DIY will that can negatively impact someone else’s life, despite your best intentions. If you have an heir with special needs who receives government assistance, receipt of an inheritance can cause them to lose their benefits. They may be forced to spend what you leave them to regain their benefits or hire a lawyer to help them deal with their potential loss of benefits.

Working with an attorney to evaluate any particular circumstances you need to consider can be worth the investment.

What Happens if Your DIY Will Is Considered Invalid? 

If your will is deemed invalid, a court will decide what should happen to your assets and belongings. This means California law will determine who inherits your estate according to specific default rules. These rules can result in unintended consequences. For example, if you have no children but are not on good terms with parents or siblings, they may inherit items you would have wanted to give to friends or other loved ones.

Consult With an Attorney

Get in touch with our office today for a free consultation if you have questions about preparing a will or how estate planning works.

Who Inherits When There Is No Will in California?

When a person dies without leaving a valid will or trust, that person has died “intestate.” Failing to ever make a will or create a trust document could cause intestacy, but many other events could also invalidate a will or make a will impossible to probate.

A California estate planning attorney can help you protect your own estate from intestacy. A lawyer can also help your family if a close relative dies intestate, by determining who will inherit the decedent’s assets and guiding the estate through the probate process. 

The California Rules for Intestate Succession

The California Probate Code sets out the rules for intestate succession. These rules can apply when the entire estate is intestate, or to the part of an estate that a will or other testamentary document does not cover.

Some of the rules for intestate succession in California include the following:

  • The surviving spouse inherits the half of the community property that the decedent owned in California at the time of death.
  • The surviving spouse receives the entire estate, including the decedent’s separate and community property, if the decedent does not have any surviving children, grandchildren, or other descendants, or any surviving parents, brothers, sisters, or any issue of the decedent’s deceased brothers or sisters.
  • The surviving spouse will get half of the decedent’s separate property in the intestate estate if the decedent has only one surviving child, or has surviving issue from only one deceased child.
  • If the decedent has more than one surviving child, or a surviving child and the issue of at least one deceased child, or the issue of more than one deceased child, the surviving spouse will get one-third of the decedent’s separate property in the intestate estate.

The California Probate Code provides detailed rules for how the legal beneficiaries other than the surviving spouse are to divide and distribute their shares of the decedent’s intestate estate. The rules also cover the situation in which an intestate person dies without leaving a surviving spouse.

How a Will Could Become Invalid or Impossible to Probate

Your lawyer could write a beautiful will that contains all the necessary terms and information to distribute your assets to your loved ones one day when you die. Many people take such a document and stick it in a drawer, never to look at it again. They check the “write a will” task off of their To-Do list and move on to other things. 

Unfortunately, using that strategy could make all of that work pointless for your heirs. Here are some of the things that could happen that make the will impossible to probate:

  • A potential heir successfully contests the will.
  • The court refuses to accept the will because of technical defects in the document.
  • The will has been lost, stolen, or destroyed.

These events could automatically invalidate your will if you do not write an updated will:

  • If you revoke a prior will but do not write a new will before you die.
  • If your marriage or domestic partnership ends in divorce or annulment, or is otherwise terminated, and your will does not expressly cover that situation.  In that case, California law will change or delete some of the terms as they relate to your former spouse or partner, unless you marry each other again or unless you execute a new will after you are divorced.

We understand that these rules are complex, but you do not have to learn all the laws of intestacy on your own. A California estate planning attorney can walk you through the rules and regulations relevant to your situation. Contact us today.

How Do Trust Disputes Arise?

Whenever there is money involved, there can be conflict. Trust disputes happen when people are not happy with the terms of the trust or how the trustee carries out the duties of the position. Sometimes the person objecting to the trust has a legitimate complaint. Some people challenge trusts hoping to get “free money” or make things difficult for the trust beneficiaries. A California trust attorney can advise you on whether you have a valid case against a trust and explain how trust disputes arise.

Complaints Against the Trustee

One of the most frequent sources of trust disputes is that the trustee does not perform the duties properly. The trustee has a fiduciary duty to act in the best interests of the trust beneficiaries. If the trustee puts his own interests ahead of the beneficiaries, he violates the fiduciary duty.

When you set up your trust, you should exercise extreme caution when selecting the trustee. People often choose a trustee because of personal feelings rather than an unbiased assessment of that person’s appropriateness for the position.

You might want to reconsider naming someone to serve as the trustee of your trust if any of these factors are true about the person:

  • Has ever filed bankruptcy
  • Causes you any doubts about his honesty, integrity, or character
  • Has a conviction for any crime involving fraud, theft, or a related offense
  • Has addiction or mental health issues
  • Dislikes any of the beneficiaries
  • Does not have financial stability
  • Has a history of making unwise investments or has little experience handling large sums of money and assets

It is always better to avoid a problem than to try to repair the damage afterward. You do not have to name a friend or family member to serve as the trustee. You could have a professional person or company serve as the trustee, like an accountant, attorney, or trust department of a bank. It is better to pay fees to a professional who will do the job right than to have your loved ones lose everything you left to them because the trustee breached the fiduciary.

Allegations that the Settlor Did Not Have Legal Capacity

When a person of advance years or cognitive impairment from Alzheimer’s disease or some other cause creates a trust or makes significant changes to a trust agreement, there will likely be allegations that the settlor (the person whose assets went into the trust) did not have the legal capacity to write or modify the legal document. Often, accusations that someone unduly influenced the settlor will accompany the “lack of capacity” challenge to the trust.

One way to avoid this issue or defend against such claims is to get a cognitive assessment from your doctor at the time that you make or change the terms of your trust. Make sure that your lawyer has the letter from the doctor that says you were competent at that time. 

Rolling the Dice

A person with nothing to lose might dispute a trust on the chance that the judge will award him something or the trustee will offer him money to dismiss the challenge. Even if you are upset with someone who might expect to inherit from you, like one of your adult children, you might want to consider leaving enough assets to this person to make him think twice about challenging the trust.

Contact our office today. A California trust attorney can talk with you about your family dynamics and help you develop a strategy to protect your loved ones and your estate.

Four Things You Should Know About Will and Trust Contests

Your loved one dies, and you discover that you’ve been cut out of the will or trust. You might still be reeling emotionally from the death in the family when you are shocked by this further bad news. The inheritance you have expected throughout your life is not going to happen. 

A California estate planning attorney can help you decide whether to contest the will or trust. There are many reasons to fight a will or trust. The most recent instrument might be a forgery, for example. Or the person who benefits under the document might have exerted undue influence to get your loved one to change the terms of a previous estate plan. If your loved one had Alzheimer’s disease or some other condition that affected their cognitive ability, they might not have had the legal capacity to make a new will or trust.

If you are thinking about contesting a will or trust, here are four things you need to know:

1. The Point of No Return

Things will never be the same in your family after you file a contest. Of course, relationships were already damaged if your loved one made a will or trust that cut out one or more natural heirs.

Expect that future holidays and family events will feel strained and uncomfortable for many years to come, whether you file a contest or not. Also, there can be collateral damage from this situation. For example, your relationships with your nieces and nephews, in-laws, and other people connected to those involved in the dispute could change forever.

2. Get Out Your Wallet

It may cost you plenty to fight a will or trust, and you may have to pay the legal fees and costs out of your pocket, upfront. Many attorneys will only represent you if you pay their fees by the hour, regardless of the outcome of the case. In appropriate cases, however, a few trust and estate litigation firms, including Loew Law Group, take on a will or trust contest on a contingency basis, meaning that they agree to receive a percentage of whatever you win.  

Still, the out-of-pocket costs of filing fees, obtaining documents, paying court reporters, and retaining experts for trial may make a contest an expensive proposition for all involved. Loew Law Group is always happy to discuss potential payment options with clients.

Filing a lawsuit does not guarantee that you will win. When the dust settles, you might end up paying tens of thousands or even hundreds of thousands of dollars in legal fees and costs and still lose the contest.  

3. Choose Your Lawyer Wisely

Your results will depend in part on the lawyer you hire. Do your homework before you hire a lawyer to handle the contest. Ask for recommendations of lawyers from people you know and trust. When you get the names of several highly recommended trust and estate litigators, ask other professionals, like your accountant or other lawyers you’ve worked with in the past, about the candidates.  Make sure that the lawyer you select is a specialist in trust and estate litigation.

Just make sure that you do not take too long to make a decision. You have very little time to file a will or trust contest. If you miss the deadline, you can lose the right ever to dispute the terms of the will or trust.

4. Prepare to Adjust Your Expectations

Unlike on television or in the movies, you are unlikely to have a “knock-down drag-out” battle in court. 

The vast majority of lawsuits settle. The parties may prepare vigorously and thoroughly for trial, but the risks and costs, as well as the delay, create the incentive for all parties to seek resolution before trial.  Given the limited resources of courts, the judge will heavily encourage the parties to pursue mediation, asking a professional, usually a retired judge, to help them resolve the case.  

Whether you are still on the fence or have made a decision to contest the will or trust, a California estate planning attorney can guide you through this process. Contact us today for a consultation

Three Trust Contest Problems Your Survivors May Face

If you have a living trust, or are considering getting a living trust in California, you might wonder what may happen to your trust after you pass on. You’ll probably want to know if someone can come along and challenge the trust — possibly getting a judge to set it aside, or causing your survivors to settle for less than you intended them to have. A California estate planning attorney can talk to you about specific trust contest problems that the beneficiaries of your assets might face. 

A trust contest happens when an heir,  beneficiary or other interested person asks a court to change the terms of a trust, or to throw out a trust, to ensure that the contestant will receive more assets from a friend, relative, or loved one’s trust agreement. Often the challenger was previously a legal heir to a larger share of the assets, or a beneficiary who had a larger share of the assets under a prior trust,  but will receive a smaller portion under the most recent version of the document.

Here are some of the more common reasons that people challenge a trust:

Capacity

You must be at least 18 years old to sign a trust agreement, but there is no age that is automatically too old to create a trust. The law generally presumes that adults are of sound mind, but certain facts can cast a shadow of doubt on a person’s legal capacity to understand who their natural heirs are and the legal ramifications of signing a trust agreement.

For example, there might be questions about capacity if the person who creates or changes a trust:

  • Has an official diagnosis of Alzheimer’s disease or another form of dementia. It is often best to have a medical authority certify that the person has legal capacity at the time that he or she signed the original or amended trust.
  • Has a mental illness. A mental health practitioner may determine and certify whether the individual had legal capacity when he or she signed the papers.
  • Is quite aged. For example, if your great-aunt is 104 years old, it may help her in some cases to have a medical expert evaluate and certify her capacity. 

It is often better to memorialize the mental state of the person to avoid problems down the road.  But you should consult with an experienced estate planning attorney before taking any action concerning an elder’s trust or other estate planning documents.

Undue Influence or Coercion

Unfortunately, some people use others for their own benefit. If someone exerts undue influence on a vulnerable person who makes a trust, and obtains a benefit from that undue influence, a judge can later set aside the trust on the grounds of undue influence because, but for the improper conduct, the person would not have signed a document with those terms.

Coercion (sometimes referred to as duress or menace) happens when someone threatens, bullies, or intimidates another person to cut a beneficiary out of a trust, reduce the person’s share, or give assets to an individual through the trust. Similar to undue influence, coercion involves depriving the person signing the document of his or her unfettered free will.

Fraud or Forgery

It is fraud when someone deceives another person into signing a trust instrument. The signer might be misled to believe, for example, that the document is something other than a trust, like an insurance form. Also, fraud can happen when someone tricks the signer into changing the terms of a trust based on false or misleading information, such as misleading the signer to believe that his sole heir, such as a child, is dead, or by falsely asserting that the child abused or abandoned the signer. 

Fraud can be a crime, such as when a document is forged. Forgery is when someone fabricates or alters a document, for example, typing up a trust agreement and forging someone else’s signature on the papers. If you can prove fraud, a judge can void the trust.

A California estate planning attorney can explain your options for protecting your estate from a frivolous trust challenge. You set up your trust and estate planning documents to provide for your loved ones. Contact us today for a consultation. You do not want someone to be able to countermand your wishes and take away the assets you planned to give to your beneficiaries.

Understanding Fixed and Discretionary Trusts

Trust agreements offer a variety of benefits for both the settlor and the beneficiary. However, there are many different types of trusts. Knowing which type of trust is best for your situation may require assistance from a California estate planning attorney. For example, would you and your beneficiaries gain more advantage from fixed or discretionary trusts?

Fixed Trusts vs. Discretionary Trusts

Many people are familiar with the terms “revocable” and “irrevocable” when discussing trusts. You may not be familiar with the terms “fixed” and “discretionary” trusts as they relate to agreements. However, these two terms are very important because they control how much flexibility your trustee has when distributing funds from your trust.

In a fixed trust, the person creating the trust schedules distributions to specific heirs in specific amounts. The trustee has no control over the schedule, the amounts, or the beneficiaries. The trustee’s job is to manage the assets within the trust as the trust dictates and make distributions according to the terms set by the trust. The person creating the trust has complete control of when and how distributions from the trust will be made and to whom distributions will be made. 

However, a discretionary trust, which is more common, gives the trustee the authority to make distributions according to the trustee’s discretion. The trustee can follow the terms outlined in the trust or the trustee can make changes to the distribution schedule and the amount of distributions.  A discretionary trust places the control of distributions in the hands of the trustee instead of the person creating the trust. 

Benefits of a Fixed Trust vs. Discretionary Trust

A fixed trust decreases the chance of arguments between beneficiaries and trustees because the terms of the trust cannot be changed. Beneficiaries will receive the money they are scheduled to receive under the terms of the trust. However, this means that some beneficiaries who may not need the funds may receive the same amount or more money than other beneficiaries who might have a substantial need for those funds.

With discretionary trusts, the trustee can choose to pay a higher amount to some beneficiaries than other beneficiaries. The trustee can withhold distributions from some beneficiaries for certain reasons. For example, a trustee may choose not to disburse funds to a beneficiary who may be contemplating bankruptcy or who may be filing for divorce. Because the beneficiaries have no interest in a discretionary trust that can be transferred or attached by creditors unless the trustee makes a distribution, a discretionary trust can protect those assets. 

Discretionary trusts are frequently administered for the “health, education, maintenance, and support” of the trust beneficiaries.  Often, a discretionary trust will remain in place until the beneficiary reaches a certain age, when some or all of the trust assets may be distributed outright.  Discretionary trusts are useful when providing for minor children after the death of a parent, or for special needs adults who need to protect government benefits by receiving distributions only for limited purposes. 

Contact a California Estate Planning Attorney for More Information

Your estate plan may contain one or more trust agreements, depending on your needs and desires. Contact us today for a consultation. Our California estate planning attorneys can help you identify your estate planning goals, discuss options for meeting those goals, and develop an estate plan that protects you, your assets, and your family.