What Is a Survivor’s Trust in California?
A survivor’s trust, also known as a bypass trust or a marital trust, is a legal tool used in estate planning to ensure that the surviving spouse is provided for after the death of the first spouse. In California, a survivor’s trust is typically established as part of a comprehensive estate plan to protect assets, minimize taxes, and provide for the surviving spouse.
A survivor’s trust is created when a married couple sets up a revocable living trust. This type of trust allows the couple to manage and control their assets while they are alive and well, and provides for the seamless transfer of those assets upon their death. The trust is usually divided into two parts: the A trust, also known as the survivor’s trust, and the B trust, also known as the bypass trust.
When the first spouse passes away, his or her assets are divided into two portions. The assets that are allocated to the A trust, also known as the marital trust, are meant to provide for the surviving spouse. These assets are held in trust and can be used by the surviving spouse for his or her health, education, maintenance, and support. The surviving spouse has access to the income generated by the trust assets, and in some cases, may also have the ability to invade the principal if necessary.
The assets that are allocated to the B trust, also known as the bypass trust, are intended to pass to the beneficiaries named by the deceased spouse, typically the couple’s children. These assets are also held in trust and are not subject to estate taxes upon the surviving spouse’s death. By utilizing a bypass trust, the couple can maximize the use of their federal estate tax exemption and potentially reduce the overall tax burden on their estate.
One of the main benefits of a survivor’s trust in California is the avoidance of probate. Probate is the legal process through which a deceased person’s assets are distributed to his or her beneficiaries. It can be a lengthy and costly process, often taking several months to complete and incurring significant legal fees. With a properly funded survivor’s trust, the assets held in the trust can pass directly to the named beneficiaries without the need for probate.
Additionally, a survivor’s trust provides privacy and flexibility. Unlike a will, which becomes a public record upon death, a trust is a private document that does not need to be filed with the court. This allows the couple to maintain the confidentiality of their assets and estate plan. Furthermore, a trust can be easily modified or revoked during the couple’s lifetime, providing them with the flexibility to make changes as their circumstances or wishes evolve.
Q: Who can create a survivor’s trust in California?
A: Any married couple can create a survivor’s trust in California. It is particularly beneficial for couples with significant assets or concerns about estate taxes.
Q: Do I need an attorney to create a survivor’s trust?
A: While it is possible to create a trust without an attorney, it is highly recommended to seek the assistance of an experienced estate planning attorney to ensure that the trust is properly drafted and funded.
Q: Can I be the trustee of my own survivor’s trust?
A: Yes, you can serve as the trustee of your own survivor’s trust. This allows you to maintain control over your assets and make decisions regarding their management and distribution.
Q: What happens to the survivor’s trust after the surviving spouse’s death?
A: After the surviving spouse’s death, the assets held in the survivor’s trust will be distributed according to the terms of the trust document. This typically involves passing the assets to the named beneficiaries, such as the couple’s children.
Q: Are there any downsides to creating a survivor’s trust?
A: While a survivor’s trust offers numerous benefits, it is important to consider the costs associated with establishing and maintaining the trust. Additionally, a trust requires ongoing management and administration, which may involve fees and additional complexities.
In conclusion, a survivor’s trust is a valuable tool in estate planning for married couples in California. It allows for the seamless transfer of assets, provides for the surviving spouse, minimizes taxes, and avoids probate. By working with an experienced estate planning attorney, couples can ensure that their assets are protected and their wishes are carried out after their death.